Robert Maxwell - 25 Years Ago

Turbinedave

After all the financial crisis since 2007/8 your belef in the system is awe inspiring Bowhead , only time will tell of course .

Malthusian

Which final salary pensions collapsed in 2007/08 and were not bailed out by the PPF?

Turbinedave

You miss the point if I may say so , when the system tells you nothing to worry about there usually is . My original point is true , the PPF has not been proven with 3/4 large pension failures , some deficits are larger then the market cap of these companies . We have seen massive financial failures in the system which are still on going . Like I said , we will only know when or if it happens , anything else is speculation .

dunstonh

Compensation schemes do have issues. For example, the FSCS was set up when there were over 200,000 advisers/intermediaries. Now there are little over 20,000. So, those 20,000 are carrying far more of the cost. There are continued calls to look at this as these costs hurt advisory firms and they then get passed to the end consumer.

Over time, there will be less defined benefit pensions to pay the PPF levy.

The PPF paid out £476 million in the last financial year. Up from 322million the year before. This was due to BHS being added in Q1 2016.

Deficits are running at £302 billion. However, that is artificially high due to the assumptions used to calculate a deficit requiring gilts yields to be used. The assumptions in the past assumed a better than likely outcome but nowadays they assume a worse than likely outcome. The PPF themselves expect that the number of DB schemes will reduce significantly in the coming years as schemes will buy out their liabilities or enter the PPF. They also expect the surviving schemes funding to improve due to funding changes and that the levy based system will no longer be suitable. So, there is going need to be change. This will likely be in part legislative where good schemes have to continue to be funded and kept in a funding/liability band and not allowed to creep into large deficits.

One thing to keep in mind is that liabilities/deficits are usually given as a total, the reality is that it is an annual cost. It becomes more affordable if you consider it over a 30-50 year timescale.

There are always risks in any option. No risk free option exists. However, in respect of this thread subject - could Maxwell happen again, the answer is no. Could other risk events occur that cause different types of losses then the answer is yes.

hyubh

Turbinedave wrote: »

You miss the point if I may say so , when the system tells you nothing to worry about there usually is .

You're the only one speaking in absolutes...

My original point is true , the PPF has not been proven with 3/4 large pension failures

That's not what the world of private sector DB actually looks like however. Compared to public sector DB, it's very fragmented (i.e. lots and lots of little single-employer schemes), with the exceptions including where participating employers are government funded (USS) or there is some sort of government guarantee for the whole scheme (e.g. BT). There's also the fact that PPF compensation levels are capped, so a scheme deficit doesn't just transform into an identical deficit for the PPF on entry to it.

Lastly... nearly all private sector schemes have 'stopped digging' and closed to further accrual. This isn't insignificant.

Malthusian

It is speculation to say that if a DB scheme or few fail the pensioners will not lose their money (beyond the 10% haircut and the cap on annual income) because they will be bailed out by the PPF. But it's speculation in the same category as "I speculate that the money in my bank account won't disappear (and if it does I will be refunded by the FSCS)" and "I speculate that the sun will rise tomorrow". There are certain assumptions you have to make in order to live life, otherwise you may as well crawl behind the sofa and wait for oblivion.

Turbinedave

Let's hope we never find out , good view on life there Malthusian .

Grumpy_Old_Duffer

I believe it's not just Company Pension funds where you could not get what you thought you were going to get .... take the Equitable Life fixed annuities pensions for example.

dunstonh

Grumpy_Old_Duffer wrote: »

I believe it's not just Company Pension funds where you could not get what you thought you were going to get .... take the Equitable Life fixed annuities pensions for example.

Eq Life was responsible for a range of changes. One of which effectively killed off with profits funds as a mainstream option. Providers now have to have funds to cover it's liabilities and cant use the term "guaranteed" unless there are actual funds in place to cover those guarantees. Eq Life promised rates it could not afford.

Personal pension funds now have 100% FSCS protection with no upper limit. Annuities also get 100% FSCS protection too. This is mainly because the risks of failures due to insufficient funds are now so low.