The Chancellor's Occupational Pension Surplus Thingy

hugheskevi

Grumpy_chap said:

hugheskevi said:

It has a notional £40.9bn deficit (slide 23 of the 2020 Valuation). 

Which is peanuts in the context of national finances.  In fact, probably not even a whole peanut considering the timeframe over which the deficit falls to be made good.

It leads to an employer contribution adjustment of 5.1 percentage points to repay the notional deficit. Participating private sector employers could buy quite a few peanuts with that.

zagfles

Here's the official press release, for those who think it's all media spin:
Pension reforms to go further to unlock billions to drive growth and boost working peoples’ pension pots - GOV.UK

Of course it's just full of government spin instead of media spin. Terms like "unlocking" and "trapped" and "tear down barriers" etc. The sort of "barriers" set up after Maxwell to stop companies accessing their employees' DB pension scheme seem to be amongst those being "torn down". 

But OP with a public sector scheme needn't worry. The "greater risk" will be taken by those of us with private sector schemes. 

Marcon

zagfles said:

Here's the official press release, for those who think it's all media spin:
Pension reforms to go further to unlock billions to drive growth and boost working peoples’ pension pots - GOV.UK

Of course it's just full of government spin instead of media spin. Terms like "unlocking" and "trapped" and "tear down barriers" etc. The sort of "barriers" set up after Maxwell to stop companies accessing their employees' DB pension scheme seem to be amongst those being "torn down". 

But OP with a public sector scheme needn't worry. The "greater risk" will be taken by those of us with private sector schemes. 

Maybe a much simpler answer would be to revert to the situation which used to prevail, where the sponsoring employer - who of course ultimately takes all the investment risk, provided they stay in business - could dictate the investment strategy (although possibly now with certain limitations to ensure 'risky' does not be come 'reckless').

hugheskevi

zagfles said:

Here's the official press release, for those who think it's all media spin:
Pension reforms to go further to unlock billions to drive growth and boost working peoples’ pension pots - GOV.UK

Of course it's just full of government spin instead of media spin. Terms like "unlocking" and "trapped" and "tear down barriers" etc. The sort of "barriers" set up after Maxwell to stop companies accessing their employees' DB pension scheme seem to be amongst those being "torn down". 

But OP with a public sector scheme needn't worry. The "greater risk" will be taken by those of us with private sector schemes. 

It would be interesting to know the source of the alleged £160bn surplus. It is regrettable that key statistics such as that do not have a reference as it significantly reduces the credibility of the assertion.

There are multiple ways to value Defined Benefit schemes - at the bottom end s179 is commonly cited, which is the value of the PPF protected benefits. At the top end there is cost of full buy-out, which is the cost of having an insurer become responsible for paying all member benefits. In-between there is SCAPE, IAS19, and gilts basis. They all give very different figures.

Using estimated cost of full buy-out as at 31st March 2024, there were £68.1bn of assets in schemes with a surplus (source: PPF Purple Book 2024). That is much lower than £160bn. I wonder how many trustees would be confident to agree to release funds if their scheme is funded below the value of full buy-out. I think they would require a strong employer covenant (ie the sponsoring employer has deep pockets and is not in any trouble) to voluntarily reduce member benefit security.

BrilliantButScary

The 'Government' has previous form for this, albeit one of a different colour 
https://www.gov.uk/government/news/government-ends-miners-pension-injustice

zagfles

BrilliantButScary said:

The 'Government' has previous form for this, albeit one of a different colour 
https://www.gov.uk/government/news/government-ends-miners-pension-injustice

Yeah what a great deal. I'll suggest that to my employer - they take all the risk and guarantee to step in to pay our benefits if the scheme does badly, but if the scheme does well we should get the surplus.

BrilliantButScary

zagfles said:

BrilliantButScary said:

The 'Government' has previous form for this, albeit one of a different colour 
https://www.gov.uk/government/news/government-ends-miners-pension-injustice

Yeah what a great deal. I'll suggest that to my employer - they take all the risk and guarantee to step in to pay our benefits if the scheme does badly, but if the scheme does well we should get the surplus.

The government made £4.8 billion out of the deal up until 2024 and are still getting 50% of the surplus.

JoeCrystal

King_Drax_I said:

In my case, I am a retired NHS medical professional and I am in receipt of the pension that I have contributed my own money towards for my entire career.

Hahahahaha, sorry, but taxpayers purely fund the NHS pensions. You have nothing to worry about that. 

pterri

My pension has just had its three yearly audit and is is rude health, so much so that it’s able to lower its risk exposure and lower the employers contribution to the minimum (I think? Or very much lower than it had been). In effect it allows the employer to spend more on capital projects, same thing kind off. To play devils advocate, it’s a fund that promises to pay me a pension. It’s not ‘my pot’, it’s a fund made up of members AND employers contributions so if it’s over funded then allowing some of that surplus to be used by the company is not outrageous, the chancellor will have to offer some VERY robust underpinning if sponsoring companies are allowed to use that buffer though. 

GunJack

JoeCrystal said:

King_Drax_I said:

In my case, I am a retired NHS medical professional and I am in receipt of the pension that I have contributed my own money towards for my entire career.

Hahahahaha, sorry, but taxpayers purely fund the NHS pensions. You have nothing to worry about that. 

So no NHS staff pay employee contributions???? I beg to differ, as would anyone seeing the deductions on their monthly payslip....

As stated earlier in the thread, it's funded by employee and employer conts, but ok the employer ones are effectively coming from central funding.