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Government ripping off peoples' Pensions again

mrBlue
Posts: 34 Forumite


I hope that all Moneysavers have noted that this government is trying to rip everyones' pensions off again with their recent refusal to accept some crucial parts of the Pensions Review Recommendations:
Are you all aware that the Work and Pensions Minister has tried to quietly slip in some changes to the legislation which will reduce your occupational pensions by up to 25% if you ever change jobs during your working life? And with retirement age being increased to 68, who's never going to change jobs? Even the pensions / insurance industry is unhappy with this!
Mr O'Brien is proposing that pension pots of employees who move jobs may be increased by no more than 2.5% pa until their pensionable age, rather than up to 5% (as now). This will save employers a few Millions but will cost most British people up to 25% of their pensions according to the insurance actuaries. This is potentially the biggest financial problem (allbeit a long term impact) facing the British people today. Isn't it time, Martin and the Moneysavers, for us to create a massive publicity blast against this minister and his proposals? After all, if we can get the banks on the run over bank charges, why not this which affects every one of us?
Are you all aware that the Work and Pensions Minister has tried to quietly slip in some changes to the legislation which will reduce your occupational pensions by up to 25% if you ever change jobs during your working life? And with retirement age being increased to 68, who's never going to change jobs? Even the pensions / insurance industry is unhappy with this!
Mr O'Brien is proposing that pension pots of employees who move jobs may be increased by no more than 2.5% pa until their pensionable age, rather than up to 5% (as now). This will save employers a few Millions but will cost most British people up to 25% of their pensions according to the insurance actuaries. This is potentially the biggest financial problem (allbeit a long term impact) facing the British people today. Isn't it time, Martin and the Moneysavers, for us to create a massive publicity blast against this minister and his proposals? After all, if we can get the banks on the run over bank charges, why not this which affects every one of us?
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It oinly applies to future deferred final salary pensions, which are now in a minority of company pensions: and it's not AFAIK a requirement. Members can push their companies to keep the existing rule.Trying to keep it simple...0
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It's only a Bill at the moment, not legislation. Ed's also right that this would only give Employer's the right, not the obligation, to reduce the cap on deferred pension revaluation, and even then only to pension accrued in the future.
Final salary pension provision has become increasingly expensive for Employers over time, so much so that most companies have closed access to final salary schemes. Surely anything that helps to make them more affordable should be considered and not immediately written off as a synical move by the government?If I had a pound for every time I didn't play the lottery...0 -
Thanks, Edinvestor. Sounds like you've been reading the details in the bill. The way it was reported was that there would be a cap at 2.5% instead of a previous cap of 5%. I know it was never compulsory to increase these benefits, but I couldn't understand why a labour government should be penalising its supporters like this.There are still lots of people with deferred benefits in these schemes though.0
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Thanks again MrChips. As I've said to Ed, you guys have obviously been reading the detail (don't know how you get hold of it). The way it was reported was that the 2.5% was a cap.
On the question of final salary pension schemes though, I have a hunch that the removal of tax relief by Greedy Gordon in 1997 coupled with the 2001 internet bubble and associated stock market crash caused so much damage to fund values that it gave everyone the excuse they needed to get out of these schemes, even though many big employers had had a few years' contribution holidays coutesy of great investment returns. It was noticeable that 6 months ago, most of the schemes were back in surplus again.0 -
I thought that tax relief was removed from dividends, not from capital gains.
It is then a matter of opinion as to whether this would affect long term pensions, as surely pension companies would go for growth companies rather than just letting them sit in high dividend companies? It effectively meant you had to pay more attention to your pension provider - I don't go with the wingers that it was necessarily a bad thing.
Also if you had a 6% dividend, then a 20% taxed person would still get a 4.8% dividend - obviously if you paid higher tax at 40% it would hit you more.0 -
Thanks again MrChips. As I've said to Ed, you guys have obviously been reading the detail (don't know how you get hold of it). The way it was reported was that the 2.5% was a cap.
On the question of final salary pension schemes though, I have a hunch that the removal of tax relief by Greedy Gordon in 1997 coupled with the 2001 internet bubble and associated stock market crash caused so much damage to fund values that it gave everyone the excuse they needed to get out of these schemes, even though many big employers had had a few years' contribution holidays coutesy of great investment returns. It was noticeable that 6 months ago, most of the schemes were back in surplus again.
DB pension provision has been steadily getting more expensive over the last couple of decades, it is just that while the stock market was doing so well in the 1990s it hid this fact as the extra return on equities was more than masking the extra costs due to steadily increasing life expectancy and lower interest rates.
A lot of Schemes are now in surplus (or at least not in big deficit) but this is in the main due to hefty contributions put in over the last 4/5 years (reasonable equity returns have helped but the stock market is still lower than it was in 1999!). As well as being expensive, the other reason DB schemes have been closed is they are just too risky for employers. There is always that chance that at some (unpredictable) point in the future they are going to have to put a massive funding injection.
I'd agree with Pjala that the effect of Gordon's removal of tax credits on dividends has been exaggerated. However I think he/she has got the wrong end of the stick - we are talking about DB rather than DC pensions here so personal tax rates don't come into it.If I had a pound for every time I didn't play the lottery...0
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