End of Final Salary Pensions

[AnOther]

An item on this evenings BBC news said that a number of major UK companies are planning to close their schemes for existing employees and transfer them to market based money purchase schemes, the reason being that they simply cannot afford the open ended commitment and expense.

Does this mean the the move will be echoed in the public sector I wonder or will pigs actually fly [:'(]

Just what will it take to redress this obscene disparity [:@]

[Bob T]

Ernie, I don't think that this is anything new, it has been happening for years.

As far as the public sector goes, it is easy to believe the press in that the public sector hangs on to these benefits and that they are a huge bonus. The raw facts are a little different though.

Before I moved to France I was a civil servant, an engineer working for the MOD. My annual salary was around £30k. I could have moved to British Aerospace and done a similar job for about £40 to £45k. The BAe people who I worked with found it amusing that were were happy to do similar jobs for much less money, but never looked at the pension scheme. At the end of the day I retired early and will not be on a huge pension when I get it at the age of 60, but there are swings and roundabouts

[AnOther]

I know it's been going on for a while Bob but when someone as authoritative as Ros Altmann says that this is the death knell for final salary pensions I tend to take notice. The point is that some of the larger companies now joining the rout are those who hitherto have been unaffected and although doubtless some of it will be down to opportunism the fact is that their funds are as exposed to the vagaries of the stock market as anyone's and with current accounting rules if a fund is not solvent then it must be brought to solvency or closed down. In these difficult times many will simply not be in a position to redress shortfalls and thus are left with no option but closure.

I don't question your situation but nor do I believe that it holds true for the vast majority of the burgeoning battalions of government pen pushers for whom the public purse is an ever open bottomless pit.

[woolybanana]

Middle and senior management in the Civil Service and local authorities have begun valuing and paying themselves as if they were in the private sector, so they should have the same pension provision. The indexed linked pension was in return for a lower salary throughout their careers. Now, they should contribute equally, work the same number of years and be sackable too.

I find this article quite alarming

http://www.independent.co.uk/news/uk/politics/council-middle-managers-up-20-in-year-1513627.html

[babcock]

[quote user="woolybanana"]

Middle and senior management in the Civil Service and local authorities have begun valuing and paying themselves as if they were in the private sector, so they should have the same pension provision. The indexed linked pension was in return for a lower salary throughout their careers. Now, they should contribute equally, work the same number of years and be sackable too.

I find this article quite alarming

http://www.independent.co.uk/news/uk/politics/council-middle-managers-up-20-in-year-1513627.html

[/quote]

For a moment I thought that I had written under a pseudonym. You echo my thought entirely. Mind you the number of very well paid executives in local council is outstripped by those in the NHS which had 160+ "chief executives" in the north west alone back in 2002 and many jobs paying over £90k. Their terms of employment, redundancy benefits and pensions were certainly to be envied by the mere workers in the NHS or the real world.

[woolybanana]

Yes, babcock, I think there is a huge difference between the hewers at the coalface and the management. Their pay has increased rapidly as have the senior levels of the Civil Service as they apply private sector norms, where it suits them.

[cooperlola]

My own experience reflects Bob T's.  OK, I was railway - not quite the same - but pre-privatisation.  I came into contact with loads of people in my profession (marketing) who worked for private companies.  Those who controlled budgets similar to mine (around a million a year) earned twice as much as I did, but I reckoned the perk of a solid final salary pension helped to make up for the difference. 

Post privatisation, when the trend was to employ people from outside the railway, this was done at huge cost to the industry as those who applied for the top jobs wanted far more than their predecessors had been paid.   One of the reasons why the industry costs so much more to run now than it used to.

[babcock]

The funny thing is that to be say an accountant in local government or the NHS you are or were required to have specialised knowledge of their procedures. This meant that outsiders were not considered - but their salaries were in arguing for the appropiate level of pay to match the private sector.

[Théière]

The problem with money purchase, defined contribution schemes is the amount you can contribute is set according to age. They will have to increase this limit by around 50% to make up for the very small growth in the fund that you would be experiencing now. Allied to that the risk factor of the market doing what it is now if you are trying to purchase your annuity.  Oh and don't forget to take up smoking before you retire that way you will get a better annuity as your not expected to live as long. You can of course quit smoking later [Www]

[AnOther]

Not any more teapot, the limit was abolished on 'A' day since when you can put 100% of earned income into your fund if you want to, but prior to that it was always a complete perverse nonsense that on the one hand government was urging you to save for your pension yet at the same time limiting you to what you could put in.

Probably too afraid of losing the tax, can't see any other logical reason.

[Thibault]

The death knell for final salary pension schemes was sounded when Gordon Brown changed the rules and took (and the govt continues to take) £5bn out by abandoning some sort of tax relief (I forget exactly what it was called) in 1997.

 

 

[AnOther]

'Tax relief on dividends' is what you're looking for and it's reckoned to have cost the pensions industry £100bn to date.

Thanks Moron [:@]

[AnOther]

To put it in sharp relief...................

[IMG]http://i127.photobucket.com/albums/p123/biskitboyo/Pensionplunge.jpg[/IMG]

[woolybanana]

well, that b uggered the middle classes then.

[Thibault]

[quote user="woolybanana"]well, that b uggered the middle classes then.[/quote]

 

So Wooly...you assume that only middle class people work (or worked in the ones which have now been converted into defined whatsits)   in jobs with final salary pension schemes?  Somewhat out of touch, I think......[:)]

[woolybanana]

Not quite, Thibault, though I probably missed out a few steps. When I was young, we were all advised to take out with profits endowment policys which matured in anything from ten years to 50. A pension fund is made up in a similar way, with added annual value which should be locked in etc (as I understand it). If the dividends on which these annual additions rely are taxed, then returns drop. I assume that most people were paying into a fund of this type, in some shape or form. The middle classes were probably the most likely to have a pension fund per se and endowment policies, hence a double whammy.

What I have never been able to work out is how far the endowments for endowment mortgages were clobbered by Brown's piece of nastiness.

But then, I always took care of myslef when it came to these things and would have been very angry if Brown's thieves had come afetr me for taxes. I was most surprised to find that I qualified for a pension in Belgium.

[Keni]

The OH has been on the railway (as it were) for 34 years and has been in the pension scheme (both of them) from the beginning. A while back, the government decided as the railway was not a public sector employer anymore, they could help themselves, so we were advised a 12.5 million hole had appeared and guess what, the OH and co. would have to shore it up.

Then they said it was the end of a final salary to new members, so no new blood helping pay through the years - more a case of last one in gets what left I suppose.

Then they closed one arm of the scheme and have said extra cash would not be put in by the employer to match payments.

So I want to know if it is legal to 'steal' from a pension fund under the guise of it being for the government? Or would that be another one of the Brownisms'? 

[dragonrouge]

ErnieY on a totally differing subject I have sent you a pm.

But to this question.

Before I went to the law and thank goodness I did it then as against today.  I spent a lot of time in banking and then Cable and Wireless Plc.  In the latter I bought every year AVC then 1/40ths 1/45ths and 1/50ths dependent upon the financial postion from a personal standpoint at the time.  The AVC went into Equitable and when C and W gave me the opportunity to leave on enhanced grounds I took it for the company was going nowhere.  Then to Equitable and just by days I was lucky to get out without too much damage.

In the private sector companies obviously have to keep the pot going as best they can and every so many years the actuaries get together to see what the shortfall is.  No doubt Gordon Brown dealt a death blow to such schemes.

However in the private sector say local government or Police if there is a shortfall in the pot then the way forward is to increase the Council Tax to fill up the pot.  In the private sector the proceeds come from profits.

C and W some time ago took out an insurance policy with Prudential as against stocks and shares and the only way that pensioners can be affected is if Prudential on High Holborn go down.  What chance that within realisation I say its possible.