No pay rise? Blame the baby boomers' gilded pension pots

mystic_trev

We haven't had a Boomer thread for a while So I thought this might be of interest to some.

Incidentally, I don't have a Final Salary Pension so you can't blame me!

Workers expecting Britain’s economic recovery to fill out their pay packets are in for a nasty surprise.

While the UK’s collective national income is expected to grow by more than 2% a year until at least 2020, the share distributed in wages is going to be less than many hope. As much as one percentage point could continue to be knocked off annual pay rises because firms need to plug holes in the pension pots of retired staff, according to a report.

The blame lies with the retired baby boomer and their employers who failed to ensure enough funds went into their final salary schemes during their working lives. The deficit-ridden schemes must now be filled from company cashflows, denying today’s workers a proportion of the forecast wage rises.

http://www.theguardian.com/business/2015/sep/14/uk-pension-fund-shortfalls-blocking-pay-rises

mayonnaise

What really happened.

http://www.rosaltmann.com/whathashappened.htm

Summary of reasons why pension fund surpluses have disappeared and are no longer there now that we need them:

1. Nigel Lawson decision to tax pension fund surpluses
2. Successive extra mandatory costs - preservation, deferred pension revaluation
3. 1995 Pensions Act - MFR, priority order, limited price indexation
4. Removal of ACT relief
5. Employer contribution holidays
6. Employer use of surpluses for industrial restructuring
7. Trend to earlier retirement expectations
8. Increasing longevity
9. Actuaries investment and mortality assumptions too optimistic
10. Benefit enhancements which could not be removed
11. Maturing of schemes (i.e. more pensions needing to be paid as workers retire)
12. Over-reliance on equity investment
13. Trustees not questioning actuarial advice
14. Plunging stock markets
15. Sharply lower interest rates

Basically, the boomers did make provision for their old age, but it was squandered by regulation and taxation.

gadgetmind

I was born in the early 60s, so guess I count as a boomer, but have never had a "magic money tree" defined benefit pension, so please leave me out of things.

[Deleted User]

It seems to me that the fundamental problem with the pension system is that it's trying to contrive a save-in-advance solution to a pay-as-you-go problem. Today's pensioners live off goods and services produced by today's workers and tomorrow's pensioners will live off what's produced by tomorrow's workers, because you can't put goods and services into a pension fund. ALL retirement is pay as you go, and the pension system should be organised the same way.

ruggedtoast

I have lost count of the number of boomer taxi drivers I have been driven by who have semi retired and boast from the front seat as to their housing and pension wealth.

That seems to be the thing to do when you downsize in your 50s around here. Buy a Skoda Estate and drive people to and from Heathrow three days a week for pocket money and boast continually about how much money you have.

So far I have heard tales of the following:

Trips to celebrity restaurants Cruises Lavish holidays How selling their house in London enabled them to buy another house and a flat to rent out "down here" Final salary pensions that started in the 90s How everyone should buy a Skoda

Winds me right up. I literally sit in the back seat fuming. :mad:

michaels

mayonnaise wrote: »

What really happened.

http://www.rosaltmann.com/whathashappened.htm

Summary of reasons why pension fund surpluses have disappeared and are no longer there now that we need them:

1. Nigel Lawson decision to tax pension fund surpluses
2. Successive extra mandatory costs - preservation, deferred pension revaluation
3. 1995 Pensions Act - MFR, priority order, limited price indexation
4. Removal of ACT relief
5. Employer contribution holidays
6. Employer use of surpluses for industrial restructuring
7. Trend to earlier retirement expectations
8. Increasing longevity
9. Actuaries investment and mortality assumptions too optimistic
10. Benefit enhancements which could not be removed
11. Maturing of schemes (i.e. more pensions needing to be paid as workers retire)
12. Over-reliance on equity investment
13. Trustees not questioning actuarial advice
14. Plunging stock markets
15. Sharply lower interest rates

Basically, the boomers did make provision for their old age, but it was squandered by regulation and taxation.

Umm weren't the acturies supposed to be the domain experts not the trustees?

Presumably the same forces that eresulted in annuities tumbling in value hit defined benefits schemes but the solution rather than being lower pensions was higher contributions for those still working. British Airways for example turned out not to be a company owned by its investors but a pension scheme owned by its pilots.

jack_pott wrote: »

It seems to me that the fundamental problem with the pension system is that it's trying to contrive a save-in-advance solution to a pay-as-you-go problem. Today's pensioners live off goods and services produced by today's workers and tomorrow's pensioners will live off what's produced by tomorrow's workers, because you can't put goods and services into a pension fund. ALL retirement is pay as you go, and the pension system should be organised the same way.

Sure in a closed economy, but in an open economy in theory it is possible, forgo consumption now, run a balance of trade surplus and thus acrue claims against workers abroard....this should be very useful with an aging population structure....

Sapphire

For a start, please note that many 'baby boomers' do not have final salary pension schemes.:cool:

worried_jim

ruggedtoast wrote: »

I have lost count of the number of boomer taxi drivers I have been driven by who have semi retired and boast from the front seat as to their housing and pension wealth.

That seems to be the thing to do when you downsize in your 50s around here. Buy a Skoda Estate and drive people to and from Heathrow three days a week for pocket money and boast continually about how much money you have.

So far I have heard tales of the following:

Trips to celebrity restaurants Cruises Lavish holidays How selling their house in London enabled them to buy another house and a flat to rent out "down here" Final salary pensions that started in the 90s How everyone should buy a Skoda

Winds me right up. I literally sit in the back seat fuming. :mad:

I met one of these on Saturday in the pub! Huge pot from being a bus driver, retired early, has a taxi and spent all afternoon telling me about he is brand new Merc.

ruggedtoast

worried_jim wrote: »

I met one of these on Saturday in the pub! Huge pot from being a bus driver, retired early, has a taxi and spent all afternoon telling me about he is brand new Merc.

These boomers have made a mint from doing things that barely pay minimum wage these days.

Really grinds my gears.

Corbyn'll see to them.

ess0two

ruggedtoast wrote: »

These boomers have made a mint from doing things that barely pay minimum wage these days.

Really grinds my gears.

Corbyn'll see to them.

What's Corbyn, gonna do??


Next time walk, saves money and you won't get as wound up.

gadgetmind

ess0two wrote: »

What's Corbyn, gonna do??

Consign Labour to the unelectable political wastelands for many a year.

If I meet him, I'll shake his hand!