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??
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.
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?"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...
Jasandjules said:
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.
ked by the Blue tied politician after being fked by the red tied politician. In the Daily Mail now so it must be true:
"Plans to shake up final salary pension schemes will cut payouts by up to 25 per cent, it has been claimed.
Financial experts warn that the coalition government’s decision to change the way benefits are calculated will prove a ‘nightmare for millions’.
Under the coalition’s proposals - which are being imposed without consultation - pension scheme payments would no longer have to keep pace with the Retail Prices Index.
Instead firms would be allowed to use the Consumer Prices Index, which is usually lower.
Dawid Konotey-Ahulu, of the Mallowstreet group, said: ‘Pensions linked to CPI will be lower over time – some estimates put the drop as high as 25 per cent.’
The group, whose members include 200 pension funds managing £500 billion in assets, said the Government should hold a full consultation before the changes are introduced next year. It has written to Work and Pensions Secretary Iain Duncan Smith demanding a rethink
http://www.dailymail.co.uk/news/article-1301941/Mi...
"Plans to shake up final salary pension schemes will cut payouts by up to 25 per cent, it has been claimed.
Financial experts warn that the coalition government’s decision to change the way benefits are calculated will prove a ‘nightmare for millions’.
Under the coalition’s proposals - which are being imposed without consultation - pension scheme payments would no longer have to keep pace with the Retail Prices Index.
Instead firms would be allowed to use the Consumer Prices Index, which is usually lower.
Dawid Konotey-Ahulu, of the Mallowstreet group, said: ‘Pensions linked to CPI will be lower over time – some estimates put the drop as high as 25 per cent.’
The group, whose members include 200 pension funds managing £500 billion in assets, said the Government should hold a full consultation before the changes are introduced next year. It has written to Work and Pensions Secretary Iain Duncan Smith demanding a rethink
http://www.dailymail.co.uk/news/article-1301941/Mi...
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