Success Stories - Pensions

barnstar2077

pterri said:

I’ve seen some talk in the FT for some DBs that are well in surplus. There’s an argument that as well as the employers/employees contribution being reduced that the some of the surplus could be returned to pensioners and employers. I doubt that would happen? The surplus would have to be so large before the risk of future underfunding was taken into account. 

I assume that once all the old DB people are dead, and all new employees are on a DC scheme, that the companies can withdraw what is left?  So it wouldn't make any sense to touch the money till then, as the employees would want a slice! :   )

FIREDreamer

barnstar2077 said:

pterri said:

I’ve seen some talk in the FT for some DBs that are well in surplus. There’s an argument that as well as the employers/employees contribution being reduced that the some of the surplus could be returned to pensioners and employers. I doubt that would happen? The surplus would have to be so large before the risk of future underfunding was taken into account. 

I assume that once all the old DB people are dead, and all new employees are on a DC scheme, that the companies can withdraw what is left?  So it wouldn't make any sense to touch the money till then, as the employees would want a slice! :   )

There used to be solvency limits which, if exceeded, meant contributions had to be decreased or benefits had to be increased.

From memory, late 1980’s, it was something like 105%. If assets exceeded liabilities by 5% then the above needed to happen. Of course, the assets were valued at an actuarial value (not the same as market value) and compared with the liabilities on the same basis for consistency.

This is over 35 years ago - I don’t know the triennial valuation requirements of DB schemes today.

Cobbler_tone

Sarahspangles said:

barnstar2077 said:

pterri said:

Disagree, one reason why DBs are so generous (guaranteed index linked for life) is because the DB fund is used to benefit those who paid in. Its insurance. Those who pop off early help pay for those who live to 100. If you were able to pass 9n your contributions to someone else not directly dependant  then the schemes would collapse. 

Yes, I have seen similar posts on the internet about how insurance companies should give you some of the money back if you don't make a claim.  Which would result in the insurance company putting the cost up in order to give it back to you later.  Effectively creating a cheap loan from you to the insurance company with no benefit to the individual at all.

Agree, OH and I have pensions in order to provide for our old age.  I’m already hearing that people are accessing their pension lump sums to fund Bank of Mum and Dad gifts/loans. 

That's exactly why the rules on DB pensions changed in 2016 to allow greater flexibility.

Phossy

@Cobbler_tone When you say "The DB scheme doesn't pay enough to retire now, so I could cash in and waiting for an imminent bridging option to be introduced", have you looked at taking a lump sum to bridge the next x number of years. That seems a far more standard way to use your DB pension than trying to 'transfer it'.

Sarahspangles

Cobbler_tone said:

Sarahspangles said:

barnstar2077 said:

pterri said:

Disagree, one reason why DBs are so generous (guaranteed index linked for life) is because the DB fund is used to benefit those who paid in. Its insurance. Those who pop off early help pay for those who live to 100. If you were able to pass 9n your contributions to someone else not directly dependant  then the schemes would collapse. 

Yes, I have seen similar posts on the internet about how insurance companies should give you some of the money back if you don't make a claim.  Which would result in the insurance company putting the cost up in order to give it back to you later.  Effectively creating a cheap loan from you to the insurance company with no benefit to the individual at all.

Agree, OH and I have pensions in order to provide for our old age.  I’m already hearing that people are accessing their pension lump sums to fund Bank of Mum and Dad gifts/loans. 

That's exactly why the rules on DB pensions changed in 2016 to allow greater flexibility.

That’s fine if people can afford it, but it wasn’t the plan when they started to contribute to the pension and it can’t become an expectation that every parent will use their pension for something else.

Cobbler_tone

Sarahspangles said:

Cobbler_tone said:

Sarahspangles said:

barnstar2077 said:

pterri said:

Disagree, one reason why DBs are so generous (guaranteed index linked for life) is because the DB fund is used to benefit those who paid in. Its insurance. Those who pop off early help pay for those who live to 100. If you were able to pass 9n your contributions to someone else not directly dependant  then the schemes would collapse. 

Yes, I have seen similar posts on the internet about how insurance companies should give you some of the money back if you don't make a claim.  Which would result in the insurance company putting the cost up in order to give it back to you later.  Effectively creating a cheap loan from you to the insurance company with no benefit to the individual at all.

Agree, OH and I have pensions in order to provide for our old age.  I’m already hearing that people are accessing their pension lump sums to fund Bank of Mum and Dad gifts/loans. 

That's exactly why the rules on DB pensions changed in 2016 to allow greater flexibility.

That’s fine if people can afford it, but it wasn’t the plan when they started to contribute to the pension and it can’t become an expectation that every parent will use their pension for something else.

That's the same as anything. Millions of people don't have any pension, many more won't have a DB pension. Personal choice what people do with their hard earned money.

pterri

FIREDreamer said:

barnstar2077 said:

pterri said:

I’ve seen some talk in the FT for some DBs that are well in surplus. There’s an argument that as well as the employers/employees contribution being reduced that the some of the surplus could be returned to pensioners and employers. I doubt that would happen? The surplus would have to be so large before the risk of future underfunding was taken into account. 

I assume that once all the old DB people are dead, and all new employees are on a DC scheme, that the companies can withdraw what is left?  So it wouldn't make any sense to touch the money till then, as the employees would want a slice! :   )

There used to be solvency limits which, if exceeded, meant contributions had to be decreased or benefits had to be increased.

From memory, late 1980’s, it was something like 105%. If assets exceeded liabilities by 5% then the above needed to happen. Of course, the assets were valued at an actuarial value (not the same as market value) and compared with the liabilities on the same basis for consistency.

This is over 35 years ago - I don’t know the triennial valuation requirements of DB schemes today.

Interesting, I think my scheme is over 100% but who knows what the future holds. 

MarkCarnage

Sorry, 'cash in' as transfer the DB value into a more accessible pot to allow flexibility. I know several people who have done this successfully. The transfer values are thanks to that infamous budget. My preference would be to access the DB scheme more flexibly, which will soon be the case. 

Transfer values had been rising for some months before the Truss Budget. It really just compressed the final normalisation of gilt yields from a period of months to hours! Don't expect a return to previous TV levels anytime soon. The period 2016-21 was an aberration based on artificially low gilt yields. As others have said, the benefits payable from the DB in form of pension haven't changed. 
You will also struggle to get a positive recommendation to transfer now which is needed. 

MarkCarnage

pterri said:

FIREDreamer said:

barnstar2077 said:

pterri said:

I’ve seen some talk in the FT for some DBs that are well in surplus. There’s an argument that as well as the employers/employees contribution being reduced that the some of the surplus could be returned to pensioners and employers. I doubt that would happen? The surplus would have to be so large before the risk of future underfunding was taken into account. 

I assume that once all the old DB people are dead, and all new employees are on a DC scheme, that the companies can withdraw what is left?  So it wouldn't make any sense to touch the money till then, as the employees would want a slice! :   )

There used to be solvency limits which, if exceeded, meant contributions had to be decreased or benefits had to be increased.

From memory, late 1980’s, it was something like 105%. If assets exceeded liabilities by 5% then the above needed to happen. Of course, the assets were valued at an actuarial value (not the same as market value) and compared with the liabilities on the same basis for consistency.

This is over 35 years ago - I don’t know the triennial valuation requirements of DB schemes today.

Interesting, I think my scheme is over 100% but who knows what the future holds. 

Most schemes with funding levels of > 100% (on a technical provisions/solvency basis) will be targeting buy out now. The Scheme rules will specify who has powers regarding use of surplus. Sometimes it may be used for member benefits, sometimes refund to sponsor. It may also be that where the scheme holds illiquid assets that it cannot achieve full value for these, so the surplus is theoretical only until they are realised. 

Secret2ndAccount

2024 in round numbers:

Bills + Food:  20k
Holidays + Fun: 12k
Tax: 5k
New TV: 5k    Install Air Conditioning: 5k     Home repairs/improvements: 5k

Total Outgoings: 52k      This was taken primarily from savings.

I did a small amount of work. Income: 10k      Tough year for the buy-to-let. Substantial repairs, so annual profit just 2k. First time in 20 years, so I am neither concerned nor complaining.
Interest on savings: 20k.     Moved 20k from savings to ISA.     Paid 10k into SIPP.

ISAs ended the year + 61k             SIPP ended the year + 58k

Total pot ended the year +89k

I’m going to have to spend faster than this if I’m going to get through the whole pot.