Conservative Plans to reduce private pension by 25%
Discussion
Thanks Dave, you managed to go one better than Gordon to make my old age harder.
"Millions of people with private sector retirement schemes are likely to see their pensions reduced by as much as 25 per cent after the Government announced plans to change the way they are calculated.
Pensions minister Steve Webb said there were plans to link pension payments to a lower measure of inflation.
The existing system links pension increases to the Retail Prices Index which includes housing costs such as mortgage interest payments.
But the Government plans to link it to the Consumer Prices Index instead, which is typically lower.
The move would reduce the burden on pension schemes and is expected to be introduced next year.
It would be applied to all final salary pensions, as well as payments made by the Pension Protection Fund – a lifeboat fund for workers who have lost their pensions – and the Financial Assistance Scheme, a Government compensation scheme.
It follows the Chancellor’s announcement in the emergency Budget that most public sector pensions would be linked to CPI, which will also potentially save the Government millions of pounds.
Mr Webb said the same should be applied to occupational pension schemes.
“The Government believes the CPI provides a more appropriate measure of pension recipients’ inflation experiences and is also consistent with the measure of inflation used by the Bank of England,” he explained.
Pensions experts described the move as “crafty”, suggesting that millions of people will lose out.
Ros Altmann, a governor of the London School of Economics, said: “It is a crafty move and hugely significant. It will mean that British pensioners will end up with less money than they would have been expecting.”
Laith Khalaf, a pensions expert at financial firm Hargreaves Lansdown, said: “Final salary schemes just got a break, but at the expense of their members. Millions will be out of pocket as a result of this change. The government is conducting a delicate balancing act between easing pressure on these schemes and protecting the interests of their members.”
If a person starts drawing a pension at 60 and lives until they are 80, they would receive 25 per cent less in the weeks before they died, according to Mr Khalaf.
He calculated that – based on current levels of RPI at 5.1 per cent and CPI at 3.4 per cent - the average occupational pension of £1,600 a year would be worth £4,043 after 20 years if uprated in line with RPI and only £3,020 if uprated in line with CPI.
It means that the pensioners would have lost out on £8,120 worth of income."
http://www.telegraph.co.uk/finance/personalfinance...
Anyone remember the Conservatives mentioning that before being elected??
"Millions of people with private sector retirement schemes are likely to see their pensions reduced by as much as 25 per cent after the Government announced plans to change the way they are calculated.
Pensions minister Steve Webb said there were plans to link pension payments to a lower measure of inflation.
The existing system links pension increases to the Retail Prices Index which includes housing costs such as mortgage interest payments.
But the Government plans to link it to the Consumer Prices Index instead, which is typically lower.
The move would reduce the burden on pension schemes and is expected to be introduced next year.
It would be applied to all final salary pensions, as well as payments made by the Pension Protection Fund – a lifeboat fund for workers who have lost their pensions – and the Financial Assistance Scheme, a Government compensation scheme.
It follows the Chancellor’s announcement in the emergency Budget that most public sector pensions would be linked to CPI, which will also potentially save the Government millions of pounds.
Mr Webb said the same should be applied to occupational pension schemes.
“The Government believes the CPI provides a more appropriate measure of pension recipients’ inflation experiences and is also consistent with the measure of inflation used by the Bank of England,” he explained.
Pensions experts described the move as “crafty”, suggesting that millions of people will lose out.
Ros Altmann, a governor of the London School of Economics, said: “It is a crafty move and hugely significant. It will mean that British pensioners will end up with less money than they would have been expecting.”
Laith Khalaf, a pensions expert at financial firm Hargreaves Lansdown, said: “Final salary schemes just got a break, but at the expense of their members. Millions will be out of pocket as a result of this change. The government is conducting a delicate balancing act between easing pressure on these schemes and protecting the interests of their members.”
If a person starts drawing a pension at 60 and lives until they are 80, they would receive 25 per cent less in the weeks before they died, according to Mr Khalaf.
He calculated that – based on current levels of RPI at 5.1 per cent and CPI at 3.4 per cent - the average occupational pension of £1,600 a year would be worth £4,043 after 20 years if uprated in line with RPI and only £3,020 if uprated in line with CPI.
It means that the pensioners would have lost out on £8,120 worth of income."
http://www.telegraph.co.uk/finance/personalfinance...
Anyone remember the Conservatives mentioning that before being elected??
anonymous said:
[redacted]
According to the figures they have just thrown up on TV, the difference is noticeably lower. From memory £100 invested in 1988 would be worth £211 now under RPI and £188 under CPI, but missed pretty much all of what they were saying about it, just saw the figures, so don't know the context.But yep, just like Dirty Harry, CMD hates everybody.
So we have a government trying to get out of debt problems by inflating away debt but before really letting role it's going to ensure anyone trying to save is screwed by ensuring inflation eats away at their pensions.
Makes a mockery of the claim they want people to save for their retirement.
The wealthiest in society maybe able to make their own arrangements for their old age but for the huge majority of society there pension is going to be what they rely on in their dotage. Unless we are all going to rely on house prices going up forever.
"At the current rate of divergence, actuaries calculate that the lower rate of indexation would mean £800 less annual income in six years’ time for savers entering retirement on national average earnings.
While RPI includes housing, heating and council tax in its calculation of inflation, none of these costs is included in the CPI. That’s why RPI is currently rising by 5.1 per cent a year, or half as much again as CPI which is rising by only 3.4 per cent.
Actuarial consultants Towers Watson calculate that, based on Treasury inflation forecasts, by 2016, a pensioner currently receiving £10,000 a year will be more than £800 a year worse off as a result of the change. This is because their pension will have increased to around £11,400 whereas it would have grown to more than £12,200 under the old rules.
Whether this annual loss gets bigger or less in future will depend on whether RPI inflation remains higher than CPI inflation. At current levels, during the six years between April 2011 and March 2017, a pensioner currently receiving £10,000 a year would lose more than £2,500 in total.
Makes a mockery of the claim they want people to save for their retirement.
The wealthiest in society maybe able to make their own arrangements for their old age but for the huge majority of society there pension is going to be what they rely on in their dotage. Unless we are all going to rely on house prices going up forever.
"At the current rate of divergence, actuaries calculate that the lower rate of indexation would mean £800 less annual income in six years’ time for savers entering retirement on national average earnings.
While RPI includes housing, heating and council tax in its calculation of inflation, none of these costs is included in the CPI. That’s why RPI is currently rising by 5.1 per cent a year, or half as much again as CPI which is rising by only 3.4 per cent.
Actuarial consultants Towers Watson calculate that, based on Treasury inflation forecasts, by 2016, a pensioner currently receiving £10,000 a year will be more than £800 a year worse off as a result of the change. This is because their pension will have increased to around £11,400 whereas it would have grown to more than £12,200 under the old rules.
Whether this annual loss gets bigger or less in future will depend on whether RPI inflation remains higher than CPI inflation. At current levels, during the six years between April 2011 and March 2017, a pensioner currently receiving £10,000 a year would lose more than £2,500 in total.
anonymous said:
[redacted]
Haven't you confused final salary and definied contribution pension schemes?Under a defined contribution scheme, you accummulated pension pot is used to purchase an annuity for the rest of your life. All other things being equal, if that annuity is based on lower annual increases in the future, then the starting pension will be higher to compensate.
Under a defined benefit (final salary) scheme, the employer agrees to pay you a pension for life, based on a number of factors including the number of years working for the employer, the scheme's accural rate (typically 1/60), the member's salary at retirement etc. Legislation requires this pension to be inflation-linked. Therefore if the pension is now linked to a lower measure of inflation, the member loses out.
Sidicks
anonymous said:
[redacted]
Sure but I wonder, would my private pension payments decrease as they have to give us less? Or do we pay more for less? (Or am I confusing different pension plans?)Can someone explain why private pension plans have to match civil servant ones? "Just because it's fair" seems a bit... childish?
Its only for managed pension scheme's AFAIK.
Basically my understanding is because the Govt is relinking guaranteed growth to CPI and not RPI that the private sector will follow.
Not because they have to, but because pension schemes are expensive for employers anyway, so of course cutting costs by linking to CPI instead will save them money and no doubt save jobs and growth.
Why anyone pays into a (mis)managed scheme is beyond me. Get a SIPP transfer all your current holdlings. Most companies will pay the same amoutn into a SIPP as they do their own scheme's. Then you have full control over it. You can take as a drawdown and perhaps soon not even have to buy an annuity. Of course you have to manage the growth in the pension yourself. No Nanny is going to guarantee to link it to CPI for you.
Basically my understanding is because the Govt is relinking guaranteed growth to CPI and not RPI that the private sector will follow.
Not because they have to, but because pension schemes are expensive for employers anyway, so of course cutting costs by linking to CPI instead will save them money and no doubt save jobs and growth.
Why anyone pays into a (mis)managed scheme is beyond me. Get a SIPP transfer all your current holdlings. Most companies will pay the same amoutn into a SIPP as they do their own scheme's. Then you have full control over it. You can take as a drawdown and perhaps soon not even have to buy an annuity. Of course you have to manage the growth in the pension yourself. No Nanny is going to guarantee to link it to CPI for you.
Fittster said:
ringram said:
Most companies will pay the same amoutn into a SIPP as they do their own scheme's.
Any evidence to back that up?Does it really make that much of a difference in the long run?
Go back 10 years. RPIX was the official rate of inflation, the target was 2.5% and presumably had it been retained monetary policy would have been directed to meet that target. Thus index-linked pensions would rise by around 2.5% and the sums in 2001 would have allowed for this.
Then in 2003 CPI was brought in, the target was reduced to 2% and monetary policy now ignored RPIX. RPIX diverges from CPI, going above target. Thus any pension calculated from then on will show a higher figure than the 2001 sums. However, if pensions had been linked to CPI at the time, the rise would be around 2% - in other words pretty similar to rises under RPIX. Thus the 2001 figure would be roughly equal to the new figure.
Basically isn't this apparent "cut" only exist because you're comparing untargeted high inflation figures from the past few years with the new targeted low inflation figure? If you went back and compared it with the old pre-2003 targeted low inflation figures you wouldn't see much difference?
Go back 10 years. RPIX was the official rate of inflation, the target was 2.5% and presumably had it been retained monetary policy would have been directed to meet that target. Thus index-linked pensions would rise by around 2.5% and the sums in 2001 would have allowed for this.
Then in 2003 CPI was brought in, the target was reduced to 2% and monetary policy now ignored RPIX. RPIX diverges from CPI, going above target. Thus any pension calculated from then on will show a higher figure than the 2001 sums. However, if pensions had been linked to CPI at the time, the rise would be around 2% - in other words pretty similar to rises under RPIX. Thus the 2001 figure would be roughly equal to the new figure.
Basically isn't this apparent "cut" only exist because you're comparing untargeted high inflation figures from the past few years with the new targeted low inflation figure? If you went back and compared it with the old pre-2003 targeted low inflation figures you wouldn't see much difference?
ringram said:
Fittster said:
ringram said:
Most companies will pay the same amoutn into a SIPP as they do their own scheme's.
Any evidence to back that up?What does RPI and CPI include? If RPI factors Housing costs..then it is a reasonable assumption that a pensioner will not have that cost at 65. So what is the problem? Commonsense please!! Is it not better for all of us to factor all investments personal or public by the same costing rather than 2 different costing factors?
ringram said:
Why anyone pays into a (mis)managed scheme is beyond me. Get a SIPP transfer all your current holdlings. Most companies will pay the same amoutn into a SIPP as they do their own scheme's. Then you have full control over it. You can take as a drawdown and perhaps soon not even have to buy an annuity. Of course you have to manage the growth in the pension yourself. No Nanny is going to guarantee to link it to CPI for you.
Plenty of people make a lot of money out of traditional pensions and would have no idea how to manage a sipp - they are also quite able to use draw down and defer (never take) an annuity.ShadownINja said:
Can someone explain why private pension plans have to match civil servant ones? "Just because it's fair" seems a bit... childish?
You must have missed the message that Dave told you "We are all in this together" Yay Go davey go...Edited by HardToLove on Friday 9th July 12:17
The change does affect some private sector schemes, but only defined benefit or final salary schemes, so not the sort where you have a pension pot and have to use it to buy an annuity when you retire. The Govt. has said that it will change the statutory revaluation of deferred pensions (i.e. between leaving the scheme and retirement date) and the statutory pension increases from such schemes, to be linked to CPI rather than RPI. This is the same change as announced for public sector schemes in the Budget. It appears that this will affect accrued pension rights, not just those earned for future service.
The difference is more than academic. We can expect CPI to average about 0.5% pa less than RPI in future, even if both are subject to the same underlying price inflation, just because of a technical difference between the way the two indices are calculated (one is an arithmentic mean, the other is a geometric mean). 0.5% pa might not sound like much, but for someone aged 30 it's equivalent to a reduction in value of about 20%. Just imagine the reaction if the Govt had announced a 20% reduction in private sector pensions, rather than this much more sneaky change.
The difference is more than academic. We can expect CPI to average about 0.5% pa less than RPI in future, even if both are subject to the same underlying price inflation, just because of a technical difference between the way the two indices are calculated (one is an arithmentic mean, the other is a geometric mean). 0.5% pa might not sound like much, but for someone aged 30 it's equivalent to a reduction in value of about 20%. Just imagine the reaction if the Govt had announced a 20% reduction in private sector pensions, rather than this much more sneaky change.
The fact is certain things are unsustainable. EVERYONE will be affected. If you were on a gravy train, or had an unsustainable scheme previously you will be disadvantaged. Time to wise up and accept we have to own our own future and not commit the next generation to slavery for our benefit.
People will have to work harder for longer and stop mortgaging theirs and others futures for instant debt gratification.
Pure selfishness to do otherwise.
People will have to work harder for longer and stop mortgaging theirs and others futures for instant debt gratification.
Pure selfishness to do otherwise.
If this is the case can we change the title or everyone who can't be bothered to scroll through will get the wrong impression.
you can transfer from a public final salary scheme into a private arrangement and then go into drawdown if you wanted. I personally would if I left a final salary scheme but it depends on many factors.
a private sector pension you can choose what your annuity increases in line with - eg a fixed rate or rpi.
finally, it's for the state pension guys NOT private pensions
[/quote]
you can transfer from a public final salary scheme into a private arrangement and then go into drawdown if you wanted. I personally would if I left a final salary scheme but it depends on many factors.
a private sector pension you can choose what your annuity increases in line with - eg a fixed rate or rpi.
finally, it's for the state pension guys NOT private pensions
[/quote]
The DWP statement on the legislation changes is here:
http://www.dwp.gov.uk/newsroom/press-releases/2010...
From reading that, it is very clear that this does adversely impact members of final salary pension funds and indeed it is retrospective, reducing the value of benefits accrued to date.
it affects pensioners in payment
A is a pensioner member of a pension scheme. His pension has been in payment for three years, and he has been receiving increases related to RPI. From 2011 his future increases will be calculated in relation to CPI. This does not affect his previous increases.
it affects deferred pensioners
B is a deferred member of a pension scheme. She left pensionable service five years ago. When she reaches normal pension age, her rights will be revalued in relation to RPI in respect of the first five years after she left pensionable service, and then in relation to CPI until normal pension age. Once her pension has been put into payment, she will receive annual increases calculated in relation to CPI.
it affects active members
C is an active member of a pension scheme. He is continuing to accrue new rights. If he continues in pensionable service until he reaches normal pension age in (for example) 2015, revaluation will not apply. Once his pension is in payment, he will receive annual increases calculated in relation to CPI.
D is an active member of a pension scheme. She will leave pensionable service in 2013, and will reach her normal pension age in 2020 and begin to receive her pension at that time. From 2013 to 2020 her rights will be revalued in relation to CPI. Once her pension is put into payment, she will receive annual increases calculated in relation to CPI.
Sidicks
http://www.dwp.gov.uk/newsroom/press-releases/2010...
From reading that, it is very clear that this does adversely impact members of final salary pension funds and indeed it is retrospective, reducing the value of benefits accrued to date.
it affects pensioners in payment
A is a pensioner member of a pension scheme. His pension has been in payment for three years, and he has been receiving increases related to RPI. From 2011 his future increases will be calculated in relation to CPI. This does not affect his previous increases.
it affects deferred pensioners
B is a deferred member of a pension scheme. She left pensionable service five years ago. When she reaches normal pension age, her rights will be revalued in relation to RPI in respect of the first five years after she left pensionable service, and then in relation to CPI until normal pension age. Once her pension has been put into payment, she will receive annual increases calculated in relation to CPI.
it affects active members
C is an active member of a pension scheme. He is continuing to accrue new rights. If he continues in pensionable service until he reaches normal pension age in (for example) 2015, revaluation will not apply. Once his pension is in payment, he will receive annual increases calculated in relation to CPI.
D is an active member of a pension scheme. She will leave pensionable service in 2013, and will reach her normal pension age in 2020 and begin to receive her pension at that time. From 2013 to 2020 her rights will be revalued in relation to CPI. Once her pension is put into payment, she will receive annual increases calculated in relation to CPI.
Sidicks
Edited by sidicks on Monday 12th July 11:45
"Inflation is an insidious enemy of savers, stealthily eroding the real value or purchasing power of their prudence. But it is also the friend of desperate politicians, seeking weasel ways to wriggle out of delivering what they promised.
Now, nearly two months after I pointed out in this space how the Coalition Government’s plans to fiddle the inflation figures will rob pension savers on less than half national average incomes of £800 annual income by 2016, a group of pension experts have spoken out. Philip Read, chairman of British Coal pension trustees, and Andrew Swan, from M&G Investments, say the Government’s plans could be a “potential nightmare”.
That’s not the usual language of the sober souls whose job it is to nurture the retirement funds of millions of ordinary people. So you don’t need to be an actuary to realise that these guys are trying hard to make the rest of us wake up and pay attention to what is going on while there is still time to do something about it.
They oppose the proposal that company pensions should follow the government’s lead on public sector and State pensions and drop inflation-proofing from the retail prices index (RPI) to replace it with the much lower consumer prices index (CPI). Yes, I know there is a risk that such statistical sophistry might send some readers to sleep. So I joked here last month that the switch was a Marxist ploy, reminiscent not just of the communist Karl but of the comedian Groucho. He it was who said, when caught in a tight corner: “Those are my principles – and if you don’t like them, well, I have others.”
But there is nothing laughable about this slick substitution of statistics. Savers are being stripped of the security against inflation they thought they were buying with contributions into company and occupational pensions which had a legal obligation to match RPI. Now Steve Webb, pensions minister, proposes to water that down to CPI which is currently rising at a rate one third lower than RPI.
At the current rate of divergence, actuaries calculate that the lower rate of indexation would mean £800 less annual income in six years’ time for savers entering retirement on national average earnings, as I pointed out in this space when the change was announced for public sector and State pensions last month. That assumes RPI and CPI remain at constant levels, which might prove optimistic depending on what happens to the cost of living in the real world.
While RPI includes housing, heating and council tax in its calculation of inflation, none of these costs is included in the CPI. That’s why RPI is currently rising by 5.1 per cent a year, or half as much again as CPI which is rising by only 3.4 per cent.
Actuarial consultants Towers Watson calculate that, based on Treasury inflation forecasts, by 2016, a pensioner currently receiving £10,000 a year will be more than £800 a year worse off as a result of the change. This is because their pension will have increased to around £11,400 whereas it would have grown to more than £12,200 under the old rules.
Whether this annual loss gets bigger or less in future will depend on whether RPI inflation remains higher than CPI inflation. At current levels, during the six years between April 2011 and March 2017, a pensioner currently receiving £10,000 a year would lose more than £2,500 in total.
Of course, the real cost to pensioners of Mr Webb’s statistical substitution depends on whether RPI remains higher than CPI in future. But the past is not encouraging. Geoff Everett, private client tax director at accoutants Smith & Williamson calculated outcomes for two pensioners – one linked to RPI, the other to CPI – over more than the last decade. He said: “The person with the RPI linked pension has been better off in every year since 1996.
“If, for the sake of simplicity, we assume they both started on £100 a week, we see that this rose to £125.77 a week in 2009 for the individual with the CPI-linked pension, while the person with the RPI-linked pension was getting almost £140 a week. Based on this comparison, RPI looks to be preferable since the individual is better off by £14.18 a week, representing about £737 extra per year.”
So the experts who have written to the Government today have good reason to worry about how these apparently technical changes will hurt many pensioners. They are also right to point out the changes amount to retrospective legislation, breaking contractual promises issued many years ago, and are likely to be challenged in the courts.
Fortunately, they already have support from the official watchdog whose job it is to guard Britain’s beleaguered company pension schemes.
David Norgrove, chairman of The Pensions Regulator (TPR), has ruled that multi-million pound savings expected from lower inflation protection cannot be pocketed by employers or passed back to shareholders by final salary or defined benefit schemes which are in deficit. Instead, savings created by the switch from RPI to CPI must be directed into increasing the assets of these company or occupational pensions to improve the security of members’ benefits.
While that may sound technical, there is nothing theoretical about the danger to millions of people’s retirement hopes since stock market returns and interest rates began to fall more than 10 years ago and Gordon Brown’s £5bn a year tax raid began in 1997. The Pension Protection Fund (PPF), a statutory safety net for savers in insolvent company schemes, has already paid out more than £170m and taken 160 schemes with 47,000 members under its wing. Thousands of other company schemes are in deficit, with insufficient assets to pay benefits, while schemes that failed earlier are covered by the Financial Assistance Scheme.
Politicians have done incalculable and irreparable damage to our pensions over the last decade or so. How sad to see that a change of government does not look likely to change that fact."
http://blogs.telegraph.co.uk/finance/ianmcowie/100...
Now, nearly two months after I pointed out in this space how the Coalition Government’s plans to fiddle the inflation figures will rob pension savers on less than half national average incomes of £800 annual income by 2016, a group of pension experts have spoken out. Philip Read, chairman of British Coal pension trustees, and Andrew Swan, from M&G Investments, say the Government’s plans could be a “potential nightmare”.
That’s not the usual language of the sober souls whose job it is to nurture the retirement funds of millions of ordinary people. So you don’t need to be an actuary to realise that these guys are trying hard to make the rest of us wake up and pay attention to what is going on while there is still time to do something about it.
They oppose the proposal that company pensions should follow the government’s lead on public sector and State pensions and drop inflation-proofing from the retail prices index (RPI) to replace it with the much lower consumer prices index (CPI). Yes, I know there is a risk that such statistical sophistry might send some readers to sleep. So I joked here last month that the switch was a Marxist ploy, reminiscent not just of the communist Karl but of the comedian Groucho. He it was who said, when caught in a tight corner: “Those are my principles – and if you don’t like them, well, I have others.”
But there is nothing laughable about this slick substitution of statistics. Savers are being stripped of the security against inflation they thought they were buying with contributions into company and occupational pensions which had a legal obligation to match RPI. Now Steve Webb, pensions minister, proposes to water that down to CPI which is currently rising at a rate one third lower than RPI.
At the current rate of divergence, actuaries calculate that the lower rate of indexation would mean £800 less annual income in six years’ time for savers entering retirement on national average earnings, as I pointed out in this space when the change was announced for public sector and State pensions last month. That assumes RPI and CPI remain at constant levels, which might prove optimistic depending on what happens to the cost of living in the real world.
While RPI includes housing, heating and council tax in its calculation of inflation, none of these costs is included in the CPI. That’s why RPI is currently rising by 5.1 per cent a year, or half as much again as CPI which is rising by only 3.4 per cent.
Actuarial consultants Towers Watson calculate that, based on Treasury inflation forecasts, by 2016, a pensioner currently receiving £10,000 a year will be more than £800 a year worse off as a result of the change. This is because their pension will have increased to around £11,400 whereas it would have grown to more than £12,200 under the old rules.
Whether this annual loss gets bigger or less in future will depend on whether RPI inflation remains higher than CPI inflation. At current levels, during the six years between April 2011 and March 2017, a pensioner currently receiving £10,000 a year would lose more than £2,500 in total.
Of course, the real cost to pensioners of Mr Webb’s statistical substitution depends on whether RPI remains higher than CPI in future. But the past is not encouraging. Geoff Everett, private client tax director at accoutants Smith & Williamson calculated outcomes for two pensioners – one linked to RPI, the other to CPI – over more than the last decade. He said: “The person with the RPI linked pension has been better off in every year since 1996.
“If, for the sake of simplicity, we assume they both started on £100 a week, we see that this rose to £125.77 a week in 2009 for the individual with the CPI-linked pension, while the person with the RPI-linked pension was getting almost £140 a week. Based on this comparison, RPI looks to be preferable since the individual is better off by £14.18 a week, representing about £737 extra per year.”
So the experts who have written to the Government today have good reason to worry about how these apparently technical changes will hurt many pensioners. They are also right to point out the changes amount to retrospective legislation, breaking contractual promises issued many years ago, and are likely to be challenged in the courts.
Fortunately, they already have support from the official watchdog whose job it is to guard Britain’s beleaguered company pension schemes.
David Norgrove, chairman of The Pensions Regulator (TPR), has ruled that multi-million pound savings expected from lower inflation protection cannot be pocketed by employers or passed back to shareholders by final salary or defined benefit schemes which are in deficit. Instead, savings created by the switch from RPI to CPI must be directed into increasing the assets of these company or occupational pensions to improve the security of members’ benefits.
While that may sound technical, there is nothing theoretical about the danger to millions of people’s retirement hopes since stock market returns and interest rates began to fall more than 10 years ago and Gordon Brown’s £5bn a year tax raid began in 1997. The Pension Protection Fund (PPF), a statutory safety net for savers in insolvent company schemes, has already paid out more than £170m and taken 160 schemes with 47,000 members under its wing. Thousands of other company schemes are in deficit, with insufficient assets to pay benefits, while schemes that failed earlier are covered by the Financial Assistance Scheme.
Politicians have done incalculable and irreparable damage to our pensions over the last decade or so. How sad to see that a change of government does not look likely to change that fact."
http://blogs.telegraph.co.uk/finance/ianmcowie/100...
Fittster said:
Thanks Dave, you managed to go one better than Gordon to make my old age harder.
"Millions of people with private sector retirement schemes are likely to see their pensions reduced by as much as 25 per cent after the Government announced plans to change the way they are calculated.
Well Gordon managed to f**k up my private pensions, so I guess the same is now happening to you public sector guys. But realistically, the public sector pension fund was always going to have to be reduced at some stage, it is far, far too expensive."Millions of people with private sector retirement schemes are likely to see their pensions reduced by as much as 25 per cent after the Government announced plans to change the way they are calculated.
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