Bank of England Chief Economist: Nobody understands pensions, including me

uk1

dunstonh wrote: »

However, modern options are so much simpler than historic ones.

That I think is the problem for older people.

Normally older people might be expected to know more about things generally simply because of age but certainly pensions in particular than compared to younger people. But older people have gone through so many different rules and changes in state pensions, and re occupation from the time when DB was expected until they were trashed - and now all but gone - their heads are filled with all the variations and can be forgiven for being confused by what is the current flavours. That is certainly me anyway. Young people starting from nil knowledge only have to learn what the current options are and they are comparatively simple - as long as you aren't burdened with all that baggage.

Jeff

kidmugsy

xylophone wrote: »

Well, not entirely - substantially, shall we say....

http://www.bankofengland.co.uk/about/Documents/humanresources/pensionreport.pdf

Nah, you're looking at more recent years than my remark was referring to. Can you get the reports for 2011, 2012, 2013?

xylophone

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6646330/Bank-of-England-staff-pension-fund-shuns-Gilts.html

xylophone

http://www.ft.com/cms/s/0/d7464f76-064c-11e1-a079-00144feabdc0.html#axzz497i1d9Gq

might also be of interest.

kidmugsy

xylophone wrote: »

http://www.ft.com/cms/s/0/d7464f76-064c-11e1-a079-00144feabdc0.html#axzz497i1d9Gq

might also be of interest.

I can't read the FT one (though if you posted its headline I probably could). The 2009 one is probably from before their Peak ILG.

xylophone

I can't read the FT one (though if you posted its headline I probably could). The 2009 one is probably from before their Peak ILG.

Boots' bonds architect on the merits of switching.

kidmugsy

xylophone wrote: »

Boots' bonds architect on the merits of switching.

Thanks for that. "The only other pension scheme to have moved entirely to bonds (95 per cent in index-linked gilts) is that of the Bank of England": yup, 95% = "entirely" is good enough for government work.

On a separate note, I thought Ralfe's point about firms getting a large tax advantage by investing their pension funds in bonds was rather good. Since no other companies seem to have copied it, I suspect (I get more cynical with age) that it might not be good for executive bonuses, and public companies are run for the executives, not for the shareholders.

The case for the BoE doing it is rather mysterious unless you suspect insider dealing, or that their scheme is so well-funded that they have no need to gamble on equities.

xylophone

More a case of trying to match assets to liabilities I think.

The Bank's scheme (apart from the GMP element which is linked to CPI when GMP age is reached) is index linked to RPI.

jamesd

xylophone wrote: »

Boots' bonds architect on the merits of switching.

Switching out of equities between April 2000 and summer 2001 did initially avoid some significant equity drop so it was a good move for a while since the FTSE reached its low around the start of 2003. Switching back into equities in 2003-4 would have been rather better as followup, though.

Overall the move has probably cost Boots shareholders a lot of money.

kidmugsy

jamesd wrote: »

Overall the move has probably cost Boots shareholders a lot of money.

Only if they ignored the remainder of Ralfe's policy. His whole point was that it was foolish to look at the pension scheme in isolation.