Non-motoring > Pension proof future ? Tax / Insurance / Warranties
Thread Author: legacylad Replies: 15

 Pension proof future ? - legacylad
Several of my friends are older than me....late 60s, early 70s. Quite a few of them retired from the private sector with good pensions, and a few of them get a guaranteed 5% increase pa. That, together with their state pension, free bus pass etc, and retiring around the 60 mark, mortgage free, means they have no financial worries. Chatting with them recently over beers ( social distancing observed) they had no qualms about that status quo changing.
It got me thinking...what if the private sector companies they worked for went bust ? I anticipate a long lasting recession and am under no illusions about a speedy general economic recovery within the next few years. A pessimistic view perhaps, but best to plan for the worst and hope for the best.
If their previous employer has a large pension deficit and the company is unable to borrow funds, either because it is running at a loss, or has ceased trading, then how can they expect to continue receiving their private pensions? Obviously I’m no expert in this field, far from it, but in simple terms, how could the current scenario pan out paying retirees pension money a company doesn’t have?
 Pension proof future ? - bathtub tom
Isn't there a government guarantee to pay 80% if the pension fund goes TU?
 Pension proof future ? - tyrednemotional
...until and unless legislation is changed:

www.ppf.co.uk/
 Pension proof future ? - legacylad
Ooh thanks. I’d no idea such thing existed.
Showing my ignorance. Again.
 Pension proof future ? - Terry
In principle the pension fund of a company is independent of the company itsself. In theory if the company goes bust the pension fund carries on unaffected.

The value of a pension fund is reviewed regularly and matched to its future pension liabilities. The company funding the scheme can make up any shortfall over time. This obviously involves some complex assumptions to do with life expectancy, inflation, rate of return etc.

I use the words"in principle, or theory" as there have been exceptions to the rule - the most notable being "fell off his boat" Robert Maxwell and Philip Green.

The current dowturn means that the value of many pension funds have fallen significantly. Bear in mind that the liabilities of a pension fund are spread out over 40+ years. New current pensioners may have a life expectancy of (say) 25-30 years, and those contributing below retirement age may still be drawing a pension in 40-50 years time. Final salary pensions are a rarity now so few below the age of 40 are likely in such a scheme.

So a pension funding shortfall is not an immediate crisis but something that needs to be resolved in a reasonable timeframe. Unpleasant though it is to contemplate, the early passing of some elderly due to CV 19 will reduce future liabilities so the impacts are far from clear.

The government also has a scheme called the Pension Protection Fund which steps in if the assets of the fund prove insufficient. There are some complex rules attached to this - but broadly it makes up most of the pension that individual pensioners would have received.
 Pension proof future ? - Falkirk Bairn
My next door neighbours had a letter from their Pensions' people saying that despite volatility in the investments that back the payments there would be no affect on theirs.

I would suggest this is actually misleading in the longer term but truthful in the short term. If stock markets do not revive then all pensions are at risk.

Government Pensions are a Ponzi scheme where today's Civil Servants, Teachers, Nurses etc pay in to the "Pension Scheme" and their money goes to those who are retired. i.e. There is no Government pot of pension gold - just a promise to pay the pensions of today's workers with money put in by people in the future.

The Pensions Lifeboat makes up for Pensions being paid but the actual funds are not enough to keep going. BHS was a classic £600m short - many well known companies are still trading but with huge deficits in their pension schemes.

A brother has just turned 65 and is still working BUT last year his very small company, with some 20 people paying into the Pension Scheme, had to fork out some £30K to the "Pensions Lifeboat" to help support failing Pensions Schemes of other employers.

£30K might not sound a lot in business terms but that is £1500 less for each of his current employees when they retire... and that is in 1 year. Heaven knows how much they could bill him for next year.
 Pension proof future ? - sooty123
Government Pensions are a Ponzi scheme where today's Civil Servants, Teachers, Nurses etc pay in
>> to the "Pension Scheme" and their money goes to those who are retired. i.e. There
>> is no Government pot of pension gold - just a promise to pay the pensions
>> of today's workers with money put in by people in the future.

Some but not all. If teachers are employed by local government then they'll have an actual pension fund. Pretty sure all council employees have an actual pension fund. Central government is as you say, I'm not sure there are any pension schemes for those employees.
 Pension proof future ? - Bromptonaut
>> Some but not all. If teachers are employed by local government then they'll have an
>> actual pension fund. Pretty sure all council employees have an actual pension fund. Central government
>> is as you say, I'm not sure there are any pension schemes for those employees.

Local government pensions are funded (but with many probably in deficit). The Teacher's scheme is hosted by the Dept for Education and I think it's unfunded 'pay as you go' like the Police, Civil Service and Forces schemes etc.

Originally/historically the CS etc schemes were directly funded by central government after decisions made decades ago not to operate them on an investment basis. The move to them being paid for by current workers is of more recent origin and involves both increased contributions, more than double in some cases, and a payroll levy analogous to employer's NIC's.
 Pension proof future ? - Falkirk Bairn
SPPA, Scotland government pays police, fire, teachers ............ they have no funds in the bank other than the monies from serving police, firemen etc etc

Local authority - bin men, maintenance teams, clerks & Chief Exec etc have a fund for pension investment & payment
 Pension proof future ? - sooty123
Fair enough, I thought they were under local authority schemes.
 Pension proof future ? - Bromptonaut
>> Fair enough, I thought they were under local authority schemes.

Relatively few teachers are now directly employed by the council. Even before 'Academisation' hit post 2010 a lot of stuff was devolved to individual schools.
 Pension proof future ? - Falkirk Bairn
In the chat with the neighbour he asked what I would do if the company pension failed to turn up.

My reply was that I have a Plan B - to which he said "plead poverty to your 3 x sons?".

I replied NO! That's Plan C but Plan A & B are enough to see me out.

As the years go on the expenditure I had when working goes down, as the years roll on my expenditure NOW is less, allowing for inflation, than I spent 10 years ago when I retired.

If I live another 10 years I am sure even today's spending will fall further. Pleasures now are simpler & cheaper - you do not need the new xxx or yyy that my sons & their families throw money at.
 Pension proof future ? - smokie
"BHS was a classic £600m short" - true but in the interests of fairness, Green & family did eventually stump up in excess of £350m IIRC to reduce that.


There are quite a few people (myself included) who cashed in their pension in favour of a personal pension. I've made a couple of lucky investment decisions in the past month or so but I know a few who suddenly have significantly less in their pot than they did before Feb.

Some of the funds took a massive hit at the start due to the market volatility but have re-arranged their assets to reduce the risk of further falls. However this is also having the effect of making the upwards climb slower.

And the likelihood is that anyone who had pension investments over the past (say) 5 years has lost mainly the gains their pots had made over the period - which doesn't make it any easier but they are not destitute (usually).
 Pension proof future ? - Ambo
>>Several of my friends are older than me....late 60s, early 70s. Quite a few of them retired from the private sector with good pensions, and a few of them get a guaranteed 5% increase pa.

I never dreamed one could get a guaranteed 5% increase pa on a pension although I get the triple lock state pension increase (now under threat).




 Pension proof future ? - CGNorwich
Quite common in decent pension schemes in the seventies. At the time inflation was double that and it didn’t seem that generous when your salary was £1000 pa.

Over the last ten years it has proved to be quite a benefit though.
 Pension proof future ? - Falkirk Bairn
Some Pensions were written by Insurers that the guaranteed the rate paid on the pension pot.
Few & far between but anyone with a Pension Pot should check whether there is a guaranteed rate - numbers like 11% 12% - the going rate today is less than half that!
Last edited by: Falkirk Bairn on Fri 24 Apr 20 at 15:40
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