Br Steel and the big Pension question

Br Steel and the big Pension question

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Welshbeef

Original Poster:

49,633 posts

197 months

Thursday 26th May 2016
quotequote all
sidicks said:
Welshbeef said:
Ok so ignoring my final salary and career average pensions banked... The DC's I've been paying in a combined 14% so id be looking between 33-50% range maybe 36-45% range of final salary investment performance dependant. If that's the case I'm pretty happy with that & add in a number of buy to let rents should = fairly decent all else being equal.
eh? If 25% combined contribution rate equates to a 50% pension then 14% would broadly equate to a 28% pension.

But there's a massive amount of guesswork and assumption that goes into the above - you need to think not only about the average pension that you might be able to achieve, but also the likely distribution of that amount under different scenarios. Taking more investment risk might increase the average pension achieved but might also increase the likelihood that the pension achieved is less than (say) 20% of final salary.
Sorry I mean that 14% + investment growth gets me to a net 25% input. Or did you mean 25%+ growth ?

FredClogs

14,041 posts

160 months

Thursday 26th May 2016
quotequote all
Oh, it's all about you and how successful you are now is it?

I'm so happy for you.

Viva la revolution.

sidicks

25,218 posts

220 months

Thursday 26th May 2016
quotequote all
Welshbeef said:
Sorry I mean that 14% + investment growth gets me to a net 25% input. Or did you mean 25%+ growth ?
25% contribution plus growth to get you to a pension of 50% of salary.

Jockman

17,912 posts

159 months

Thursday 26th May 2016
quotequote all
FredClogs said:
Oh, it's all about you and how successful you are now is it?

I'm so happy for you.

Viva la revolution.
hehe
Fred, didn't realise you spoke French and Spanish in the same sentence. Now that's talent!

Otispunkmeyer

12,558 posts

154 months

Thursday 26th May 2016
quotequote all
Foliage said:
sidicks said:
Foliage said:
And usually to be eligible for the pension you have to have paid in, so how much did employees pay in over the years and what percentage of the liability is that? surely the people that paid in signed a contract with the pension supplier? how can they just change the terms?
1. The employee contributions will have been a relatively small proportion of the total costs i.e. any sensible reduction to benefits is still likely to mean that employees will be taking out much more than they put in.

2. The contract for the pension is with the employer - they don't have the money!

Having said all that, this situation has existed in the past and will exist in the future - the fund should go to the PPF, pensioners will be unaffected and other members will inevitably see some reduction in their benefits.
1. Yep I get that, was just curious how much, under 1%? So where does the rest of the money come from? company profits + the profits from the investment of the money, why was the pension overstated, to who's benefit was it to overstate it. I don't believe that 'recession' can be a simple catch all answer for financial failings.

2. But surely when the employee authorised a contribution from his wages to go towards his pension he has some kind of recourse, he/she is paying money for goods or services. I wouldn't just hand someone money from my wages every month without something concrete in writing of my rights.

I really don't understand pensions, and personally I just wont touch them, they are goods/services that are paid for but the customer seems to have no recourse under any form of consumer protection...
This is why a lot of people my age seem to shrug their shoulders at having a pension. If you've got one at a good company then perhaps its worth having, but you're going to have to make serious provisions off your own back anyway because it won't be even nearly enough. Then there is stuff like this which just makes it seem that even if you have bothered to pay into a pension, there seems to be no guarantee it'll actually be there to use when you get there. Instead its been sold off, disappeared under a company collapse or retrospectively changed to claw money back. All adds to a feeling of why bother?

On top of that they're, in some cases, no where near as good as the public sector pensions and vastly worse than the kind of ones your old age relatives enjoyed. I know some who earn more now, from their final salary pension + state than they did when they actually worked.

sidicks

25,218 posts

220 months

Thursday 26th May 2016
quotequote all
Otispunkmeyer said:
This is why a lot of people my age seem to shrug their shoulders at having a pension. If you've got one at a good company then perhaps its worth having, but you're going to have to make serious provisions off your own back anyway because it won't be even nearly enough. Then there is stuff like this which just makes it seem that even if you have bothered to pay into a pension, there seems to be no guarantee it'll actually be there to use when you get there. Instead its been sold off, disappeared under a company collapse or retrospectively changed to claw money back. All adds to a feeling of why bother?
You're in danger of confusing DB and DC schemes, which are very different!

Otispunkmeyer

12,558 posts

154 months

Thursday 26th May 2016
quotequote all
sidicks said:
Otispunkmeyer said:
This is why a lot of people my age seem to shrug their shoulders at having a pension. If you've got one at a good company then perhaps its worth having, but you're going to have to make serious provisions off your own back anyway because it won't be even nearly enough. Then there is stuff like this which just makes it seem that even if you have bothered to pay into a pension, there seems to be no guarantee it'll actually be there to use when you get there. Instead its been sold off, disappeared under a company collapse or retrospectively changed to claw money back. All adds to a feeling of why bother?
You're in danger of confusing DB and DC schemes, which are very different!
Probably. I know what the acronyms stand for, but not what they actually mean.

sidicks

25,218 posts

220 months

Thursday 26th May 2016
quotequote all
Otispunkmeyer said:
Probably. I know what the acronyms stand for, but not what they actually mean.
See above.

Few private employers have DB schemes anymore, at least not open to new accrual or new members, which means that the majority of people will be contributing to DC schemes going forward.

The majority of your observations relate to DB rather than DC schemes.

Edited by sidicks on Thursday 26th May 18:08

Welshbeef

Original Poster:

49,633 posts

197 months

Thursday 26th May 2016
quotequote all
sidicks said:
See above.

Few private employer's have DB schemes anymore, at least not open to new accrual or new members, which means that the majority of people will be contributing to DC schemes going forward.

The majority of your observations relate to DB rather than DC schemes.
And sadly this will / can only impact the older or already retired, those in Public sector and the tiny number of schemes still live for prevailing contributing members.

An exceptionally high % of private sector are DC we have already adjusted to this change as painful as it is over the last 20-25 years. Now it will have to be those in the public sector which is going to be especially challenging as the unions negotiated to keep the gold plated pensions instead of higher base salary increases... That promise really cannot be met - it may well have been an honest view at the time but now and in the time the realisation of the rubicon has emerged.

We have plenty of TUPE out legacy civil sector staff they have 40.5% employer contributions - it's a farce you can have the total cost of employment of those individuals at such a rate that they will simply not move on to a different job and do just enough to be of acceptable performance. If they left we might be able to employ nearly 2x number of heads so increase employment and productivity. But we cannot and they know it so play the game. Add in lubricious flexitime where they can build up and extra 4 weeks a year --- when the route cause for the extra hours they are doing is turn up early for a long st then cannot complete their job within core hours. (Yes its performance mgt but a nightmare)

sidicks

25,218 posts

220 months

Thursday 26th May 2016
quotequote all
Welshbeef said:
sidicks said:
See above.

Few private employer's have DB schemes anymore, at least not open to new accrual or new members, which means that the majority of people will be contributing to DC schemes going forward.

The majority of your observations relate to DB rather than DC schemes.
And sadly this will / can only impact the older or already retired, those in Public sector and the tiny number of schemes still live for prevailing contributing members.

An exceptionally high % of private sector are DC we have already adjusted to this change as painful as it is over the last 20-25 years. Now it will have to be those in the public sector which is going to be especially challenging as the unions negotiated to keep the gold plated pensions instead of higher base salary increases... That promise really cannot be met - it may well have been an honest view at the time but now and in the time the realisation of the rubicon has emerged.

We have plenty of TUPE out legacy civil sector staff they have 40.5% employer contributions - it's a farce you can have the total cost of employment of those individuals at such a rate that they will simply not move on to a different job and do just enough to be of acceptable performance. If they left we might be able to employ nearly 2x number of heads so increase employment and productivity. But we cannot and they know it so play the game. Add in lubricious flexitime where they can build up and extra 4 weeks a year --- when the route cause for the extra hours they are doing is turn up early for a long st then cannot complete their job within core hours. (Yes its performance mgt but a nightmare)
If you compare private and public sector salaries in comparable jobs, it's fair to argue that many had both - pay rises AND retained the FS pension...,

Troubleatmill

10,210 posts

158 months

Thursday 26th May 2016
quotequote all
At the end of the day.... if Chinese Govt owned steel companies keep selling steel cheaper than raw material cost - a lot of companies are going to go bust.
And then.... the only players left are....


Steel making in the UK is only going to go one way.



richie99

1,116 posts

185 months

Thursday 26th May 2016
quotequote all
Welshbeef said:
What has changed is when these pensions were first offered 50 years ago people lived about 5 years tops in retirement that's now changed drastically due to improvements in healthcare so a man will on average live to 82yo 12 years longer. So the problem is no one picked up on that issue so the employees didn't pay in the necessary extra NOR did companies consult to reduce the annual pension payment nor did they push back the earliest start date of he pension.

Then came along Mr Gordon Brown and his stealth tax which removed the dividend tax credit from memory that tax in 1998/99 has to date taken out more than £400billion from pension funds. Oddly that's a similar value to the combined net deficit of all pension funds. Also at that time no employer said me employee due to nasty labour adding in this cost you need to pay in more to cover.

Then we have had a massive recession.
We have had 0.5% interest rates for what 7-8years. Pension funds have to be invested in govt bonds and equity mainly so the equity market has dropped 11% since 1999 and govt bond yeilds are 1% ish. So where are the returns required to meet the investment return.

Then we had the crazy situation which govt gave companies the option of pension payment holidays if they were in surplus - why to get more upfront taxes and the companies more profits.

So the country has had the "benefit" to the exchequer already so really we as tax payers should pay it back. ....

Then we have the BP collapse macondo well -- so many of our pension funds were heavily invested in it due to its great dividends. Well dividends stopped and market cap plummeted. Ditto the banks high holding in areas with massive losses RBS 96% loss.

Make sense now.

So who should pay and why?
Interesting stuff, thanks.

On pension holidays, L seem to remember the govt forced companies to take a pension holiday rather than gave them an option. My memory could easily be wrong on this.

For all those it's in my contract so I have a right brigade, none of hem seem to be happy that their side of the 'contract' was to die 5 years after retiring give or take, and stop drawing their pension. Probably not queueing up to stick to their side of the deal. Much more likely is the pension is not a contractual entitlement at all but an employee benefit.

CarlosFandango11

1,914 posts

185 months

Thursday 26th May 2016
quotequote all
richie99 said:
For all those it's in my contract so I have a right brigade, none of hem seem to be happy that their side of the 'contract' was to die 5 years after retiring give or take, and stop drawing their pension. Probably not queueing up to stick to their side of the deal. Much more likely is the pension is not a contractual entitlement at all but an employee benefit.
Their side of the 'contract' was not to die early, but to receive a define income once they get to their retirement age until their (or their spouses) death. Longevity risk (amongst others) remains with the scheme's sponsor.

lauda

3,446 posts

206 months

Friday 27th May 2016
quotequote all
I don't see a significant difference between the British Steel case and what happened to the Kodak Pension Plan in the UK. The Kodak members were offered lower benefits than originally promised or the PPF (which was lower than either). Funnily enough, almost all of them took the offer from the trustees and stayed out of the PPF.

Ok, so Kodak was insolvent at the time the offer was on the table but so will Tata's UK business be if there isn't a resolution to the current situation.

Clearly no one would actively seek a situation where they are worse off than they would otherwise have expected but it still looks like a fairly decent deal for the members and gives the existing employees some hope of keeping their jobs. I think the unions will be it and I think they'll be right to do so.

Welshbeef

Original Poster:

49,633 posts

197 months

Friday 27th May 2016
quotequote all
lauda said:
I don't see a significant difference between the British Steel case and what happened to the Kodak Pension Plan in the UK. The Kodak members were offered lower benefits than originally promised or the PPF (which was lower than either). Funnily enough, almost all of them took the offer from the trustees and stayed out of the PPF.

Ok, so Kodak was insolvent at the time the offer was on the table but so will Tata's UK business be if there isn't a resolution to the current situation.

Clearly no one would actively seek a situation where they are worse off than they would otherwise have expected but it still looks like a fairly decent deal for the members and gives the existing employees some hope of keeping their jobs. I think the unions will be it and I think they'll be right to do so.
Point well made - yes to the individuals sadly involved it is paramount for their future well being but they are no more of a special case than any other company or any other of our population they all need to be treated the same. Why should they receive special treatment while others have not been given such bend over handouts?

Should this be one where UK middle class start to speak up about fairness as it only seems it needs to be fair to the lower paid workers (and yes the highest paid) but the middle earners who make up the rump of tax receipts get humped time and time again they not once have been on the receiving end of handouts. They through good education and effort and learnt skills be they vocational or white collar they have managed to get there when do they get rewarded? Those who end up only marginally better off than the lowest earners will inevitably think why did I bother - purely from a money perspective pointless they could have had more time with their children growing up which they will never be able to do again.

anonymous-user

53 months

Friday 27th May 2016
quotequote all
lauda said:
I don't see a significant difference between the British Steel case and what happened to the Kodak Pension Plan in the UK. The Kodak members were offered lower benefits than originally promised or the PPF (which was lower than either). Funnily enough, almost all of them took the offer from the trustees and stayed out of the PPF.

Ok, so Kodak was insolvent at the time the offer was on the table but so will Tata's UK business be if there isn't a resolution to the current situation.

Clearly no one would actively seek a situation where they are worse off than they would otherwise have expected but it still looks like a fairly decent deal for the members and gives the existing employees some hope of keeping their jobs. I think the unions will be it and I think they'll be right to do so.
Pretty certain that Tata's UK steel business is already insolvent, by any rational measure.


FredClogs

14,041 posts

160 months

Friday 27th May 2016
quotequote all
Corporatism at its worst. Whilst the staff who dedicated a life for the likes of Tata and BHS are forced into poverty and tax payers forced to yet subsidise big businesses failure to live up to their contractual obligations.

I've decided that I'm going to divest all the loss making parts of my life, my mortgage and shopping bills and petrol bill into my kids names and all the profit making bits of my life I'm going to incorporate off shore - does that seem reasonable to everyone?

We're quite quickly sleep walking into a neo feudal age... It can't happen, the matrix will reset.

FredClogs

14,041 posts

160 months

Friday 27th May 2016
quotequote all
Corporatism at its worst. Whilst the staff who dedicated a life for the likes of Tata and BHS are forced into poverty and tax payers forced to yet subsidise big businesses failure to live up to their contractual obligations.

I've decided that I'm going to divest all the loss making parts of my life, my mortgage and shopping bills and petrol bill into my kids names and all the profit making bits of my life I'm going to incorporate off shore - does that seem reasonable to everyone?

We're quite quickly sleep walking into a neo feudal age... It can't happen, the matrix will reset.

lauda

3,446 posts

206 months

Friday 27th May 2016
quotequote all
FredClogs said:
Corporatism at its worst. Whilst the staff who dedicated a life for the likes of Tata and BHS are forced into poverty and tax payers forced to yet subsidise big businesses failure to live up to their contractual obligations.

I've decided that I'm going to divest all the loss making parts of my life, my mortgage and shopping bills and petrol bill into my kids names and all the profit making bits of my life I'm going to incorporate off shore - does that seem reasonable to everyone?

We're quite quickly sleep walking into a neo feudal age... It can't happen, the matrix will reset.
So the difference between CPI and RPI increases is going to force British steels workers into poverty in their retirement?

FredClogs

14,041 posts

160 months

Friday 27th May 2016
quotequote all
lauda said:
FredClogs said:
Corporatism at its worst. Whilst the staff who dedicated a life for the likes of Tata and BHS are forced into poverty and tax payers forced to yet subsidise big businesses failure to live up to their contractual obligations.

I've decided that I'm going to divest all the loss making parts of my life, my mortgage and shopping bills and petrol bill into my kids names and all the profit making bits of my life I'm going to incorporate off shore - does that seem reasonable to everyone?

We're quite quickly sleep walking into a neo feudal age... It can't happen, the matrix will reset.
So the difference between CPI and RPI increases is going to force British steels workers into poverty in their retirement?
I'm sure you can afford £20 a week to give to some corporation or other with a turnover of $107billion for nothing in return... Go ahead, put your money where you mouth is, better still why not give £20 a week to the Donkey sanctuary so the hard up execs and investment trusts behind Tata don't have to...

You fool.