Tata pension - change from RPI to CPI and maybe more

uk1

I never once suggested it is in trouble did I? We are talking about the potential domino effect of taking TATA into PPF compared with the option being floated.

I am not frustrated .... simply pointing out that it isn';t sensible to ignore and dismiss real risks as you have chose to do.

BA - an example I offered - see's themselves as a pension fund with a group of airlines as a subsidiary. There are dozens of others in an identical situation. And if the "remainers" are all correct then all these companies are doomed aren't they.

Anyway .... I must cook lunch.

Jeff

PensionTech

If they propose changing RPI to CPI and saving the scheme entering the PPF, does that mean that those with more the £30,000 are protected on their full pension less 15% whilst those below £30,000 lose out more then being in the PPF?

I believe the PPF does CPI as well so the change would happen regardless - but there are indeed some members who would be worse off under the proposed terms. This from the FT:

In the 40-page consultation document it emerged that not all members of the scheme would be better off under the proposals. Some 5,800 would be worse off, 70,000 would be in the same situation and 40,000 would be in a better situation.

Seabee42

The PPF does CPI for post 97 pensions. Sadly like a lot of pension legislation it favours pensioners who are the only people who have taken money out of a pension plan.


The usual argument of not letting a company dump its pension liabilities is due to competition as well as the pension promise. If the overall member benefits are largely the same as if it goes into the PPF it becomes harder to argue to loose a viable business when the pension members would not be better of.

jamesd

PensionTech wrote: »

The Daily Mail plastering "NOW THE GOVERNMENT CAN TAKE AWAY YOUR PENSION" or some such rubbish

Since that's been done in various places at various times I wouldn't say it's rubbish with a broad view. Just rubbish in this particular context.

As well as outright confiscation such as that done by Argentina or reduction in pensions as in Greece there are things like fiscal policy that can use inflation to devalue pensions after removing inflation linking where possible, or just inflate above any caps. Or that can devalue pensions by reducing long term interest rate expectations so annuities pay less. Or more prosaic things like raising the minimum pension age from 50 to 55 so those who planned in knowing they could get it at 50 find they can't now.

Malthusian

Seabee42 wrote: »

The PPF does CPI for post 97 pensions. Sadly like a lot of pension legislation it favours pensioners who are the only people who have taken money out of a pension plan.

I prefer the word 'inevitably' to 'sadly'. Although it may seem unfair to discriminate in favour of those already drawing their pensions, they have less ability to cope with any reduction in their pension benefits than those still in work. In other words they're less likely to be able to save more or work longer in order to compensate for lower than expected pensions.

If the issue is that by switching from RPI to CPI British Steel would be saved and thereby the members wouldn't end up in the PPF where they would suffer an even worse reduction, I don't get why the government has to impose a solution or write special legislation. Why not ask the scheme members to vote on a reduction to CPI?

If the reason is that they'll reject it (even if the consequence of doing so is an even worse reduction via the PPF), I would say a) if you explain the reasons properly people are more rational than politicians like to think b) there's no harm in trying, if they vote "no" we're in the position we are now.

jamesd

PensionTech wrote: »

there are indeed some members who would be worse off under the proposed terms.

Yes, there are some 5800 scheme members who will benefit from higher pensions if the scheme enters the PPF.

Many pension schemes provide those retiring the option instead of a level pension to take a pension that is higher until state pension age then lower. This helps by producing a higher income until state pension age, producing a more level income throughout retirement. Under PPF's current rules if the scheme entered the PPF that reduction at state pension age would be cancelled and people would receive the higher level for life.

Using today's numbers the increase until state pension age is £5,408 a year and those members would benefit by continuing to get that £5,408 after state pension age even though it's not what the BSPS provides for.

This is covered on page 36 of the consultation document.

I don't think that those who would get a windfall from a quirk of the PPF rules are much of an argument for not helping the scheme to stay out of the PPF, given that many more would suffer if it did.

Malthusian wrote: »

Why not ask the scheme members to vote on a reduction to CPI? ... If the reason is that they'll reject it (even if the consequence of doing so is an even worse reduction via the PPF)

For 5800 members a beggar thy neighbour approach would result in them getting higher pensions through a PPF loophole if the scheme entered the PPF. Presumably they would either vote against or not vote in an attempt to prevent a quorum.

PensionTech

I don't think that those who would get a windfall from a quirk of the PPF rules are much of an argument for not helping the scheme to stay out of the PPF, given that many more would suffer if it did.

No, neither do I. I didn't post those figures as part of the reason why I'm uncomfortable with the proposals; I put them up in response to wakeupalarm's question.

kidmugsy

uk1 wrote: »

Life is too short. I thought you'd ask that. Believe what you wish.

Jeff

A graceless way to concede defeat.

kidmugsy

Malthusian wrote: »

if it is essential for our national security that we have British plants producing steel for the Government even if they can't do it on commercially competitive terms - then it should be nationalised.

That's a non-sequitur. On that line you'd nationalise huge chunks of the economy starting with farming and fishing. Even socialists aren't usually that stupid.

kidmugsy

PensionTech wrote: »

I know it will be a better outcome for the Tata members. But I think it leaves the door open to cause real detriment to thousands - millions - of others, and to me, that's more significant.

Well said. Isn't it interesting that so few people seem to want to appreciate the context?