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cashinmattress

Pension Deficits Could Total £689bn

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Wel I know that there will be lots of old folks around, what I was asking was why is it inevitable that the younger folks will pay for them?

What are the old folks gonna do if they don't feel like paying? Dribble at them?

Ewww. My gran always had that dried spittle on the one side of her mouth and would pull me in for a big kiss when we visted.

You are giving me flashbacks dude. Argh!

There is always this solution: Soylent Green / Sol goes home

Edited by cashinmattress

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Pension deficits could total £689bn

Companies could be facing huge deficits in their pension schemes, totalling up to £689bn by the end of 2009.

UK broadcast company ITN was hit just days ago by going concern warnings from auditors KPMG when it was revealed it had a £40m deficit in a £240m pension fund.

Research by Xafinity, a consulting company, has found that companies with defined benefit pensions could face a 12-fold increase in their pension deficits by the end of the year.

‘At the end of 2008, although the assets in pension schemes dropped significantly they didn’t really show any deficit because they were able to use a high discount rate as corporate bonds were still at a high level,’ said Rob hunt, director of Xafinity’s corporate solutions practice. ‘Under new accounting standards any surplus or deficit goes straight on to the balance sheet and impacts it straight away at the full value.’

The company has created a Corporate UK Pensions Scheme model, which aims to provide companies with some understanding of their deficit and ‘to make sure the risks they have running their pension schemes aren't inconsistent with the risks they have running their company,’ Hunt told Accountancy.

‘Moving forward I think that more and more companies are going to all of a sudden find themselves in a little bit of difficulty - it may be something they’re aware of but it could be something that causes surprise so we’ve tried to show what the combined deficit would be of all the company pension schemes in the UK,’ he added.

Hmm. So, pensions to fail. House as a pension has failed (I never uderstood that one).

Doesn't bode well for the long term HPI predictions of the ramping numpties.

The worry is how to pay for all the soon to be penniless 'pensioners'? Does the working generation want to fork out huge sums of their earnings? They won't like it, but its an inevitability.

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stock market is up and down.

last time it was down, the pensions industry was about to collapse.

then it climbed, and all was well.

reporters.....please find some news!

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Pension deficits could total £689bn

Hmm. So, pensions to fail. House as a pension has failed (I never uderstood that one).

Doesn't bode well for the long term HPI predictions of the ramping numpties.

The worry is how to pay for all the soon to be penniless 'pensioners'? Does the working generation want to fork out huge sums of their earnings? They won't like it, but its an inevitability.

Why is it an inevitability?

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Why is it an inevitability?

Well, I prefer the Deathrace2000 solution to pensioners, but some would regard that as extreme.

Socialism, especially on the receding end of a hugely prosperous era, is bloody expensive.

Edited by cashinmattress

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Well, I perfer the Deathrace2000 solution to pensioners, but some would regard that as extreme.

Wel I know that there will be lots of old folks around, what I was asking was why is it inevitable that the younger folks will pay for them?

What are the old folks gonna do if they don't feel like paying? Dribble at them?

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Injin,

I never said that the solution was not to pay the pensions.

Putting back the retirement age is partial non payment.

However, people may have to wait longer to get their pensions, and end up getting less than they expect.

So the pensions don't get paid.

You need to think about the proportion of retirees to workers. If you were to imagine a ratio of nearly 100% retirees and no workers, you can see that the economy would be producing nothing. Under such circumstances, it would be a mathematical impossibility to pay any pension, whatever anyone had promised in yesteryear. Even if those retirees had saved diligently, if they all retired at the same time, with no one left to produce anything, their money would be worth diddly squat.

I know this, it;'s incredibly obvious - why are you telling me?

This is of course the extreme example, but thinking about it highlights the problem and the truth of the situation. You have a choice then with a growing number of retirees to workers.

1) Make people work for longer during their lives.

As you say, if you try to make people do things, they don't do them as far as possible.

2) Pay pensioners less.

Right.

3) Use draconian taxes to take huge amounts of money off of those working to pay for the pensions of others, because those of pensionable age made a promise, to themselves, to pay themselves a big pension when they retired.

As you see, I dont like 3 at all, as it is simply not fair. Solution 3 puts the burden of the unpayable pension promises made on the backs of those who were not even born when said promises were made. That is clearly unfair and wrong.

Option 1 appears to me to be the best option.

Option 1 is identical to option 3 as far as I can see.

What's the difference?

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Why is it an inevitability?

It is not inevitable.

Think big to understand the problem. The proportion of pensioners, compared to the proportion of those working, is growing. In order to finance those pensions, you have to take an ever higher proportion of production away from those working, and give it to the pensioners.

There are two main different ways you can do this. The most obvious is taxation. Trouble is if you tax too much, people dont pay it. They move into the untaxed black economy, or companies move abroad, or they simply stop work and claim benefits. Like all schemes to transfer money from those working to those not working, you run out of people to tax if you tax too much. The proportion of pensioners to those working becomes too great to pay via taxation if the proportion of pensioners to workers rises too high.

The other scheme for financing pensions is to make people buy assets during their working lives, such as property, land, shares in companies etc, which they then charge people to use when they are retired. So those working pay a rent on the assets acquired by pensioners which they use. Trouble with this is that if the proportion on pensioners rise, you have a big supply of assets, and fewer workers, or renters, paying to use those assets. With a big supply of assets, and low demand, income on those assets fall as does their total value, the result is that pensioners live in poverty. This is what would happen if the market were allowed to sort the problem out.

Seeing as neither the market, nor the government can stop pensioners living in poverty if the proportion of pensioners increases, you are left with one solution, change the proportions. You have to make a higher proportion of people work compared to pensioners. That means more in work at a younger age, and lets face it, educating everyone til the age of 18 is pointless. You also need to make people retire later. I suggest a more rapid raising of the state pension age til 70. And government policy should be to continually move that pensionable age around, to allow the proportion of pensioners to workers to remain more or less constant. So as life expectancy and the nations age profile changes, so does the pension age.

And lastly, all defined benefit pension plans should be liquidated. Those in them should be given the cash value of them, or their proportion of the assets in the scheme, and instead those pension plans need to be turned into defined contribution schemes. The risk of poorly peforming assets should remain with the individual. This would cause ructions, but best to get it over with, lest these schemes bankrupt perfectly good businesses, and worse, via the Pension Protection Fund (PPF), bankrupt our nation.

This policies would allow individuals to control their own pension destiny, and put the decision on when they retire on the individuals shoulders, without allowing daft promises made by ill informed politicians, to become an unbearable burden on those in this country who are actually doing the work and producing our wealth.

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It is not inevitable.

Think big to understand the problem. The proportion of pensioners, compared to the proportion of those working, is growing. In order to finance those pensions, you have to take an ever higher proportion of production away from those working, and give it to the pensioners.

While remembering that those whop are taking will be themselves young.

T

here are two main different ways you can do this. The most obvious is taxation. Trouble is if you tax too much, people dont pay it. They move into the untaxed black economy, or companies move abroad, or they simply stop work and claim benefits. Like all schemes to transfer money from those working to those not working, you run out of people to tax if you tax too much. The proportion of pensioners to those working becomes too great to pay via taxation if the proportion of pensioners to workers rises too high.

The other scheme for financing pensions is to make people buy assets during their working lives, such as property, land, shares in companies etc, which they then charge people to use when they are retired. So those working pay a rent on the assets acquired by pensioners which they use. Trouble with this is that if the proportion on pensioners rise, you have a big supply of assets, and fewer workers, or renters, paying to use those assets. With a big supply of assets, and low demand, income on those assets fall as does their total value, the result is that pensioners live in poverty. This is what would happen if the market were allowed to sort the problem out.

Seeing as neither the market, nor the government can stop pensioners living in poverty if the proportion of pensioners increases, you are left with one solution, change the proportions. You have to make a higher proportion of people work compared to pensioners. That means more in work at a younger age, and lets face it, educating everyone til the age of 18 is pointless. You also need to make people retire later. I suggest a more rapid raising of the state pension age til 70. And government policy should be to continually move that pensionable age around, to allow the proportion of pensioners to workers to remain more or less constant. So as life expectancy and the nations age profile changes, so does the pension age.

So the solution to pensions is to not pay the pensions. Righto.

And lastly, all defined benefit pension plans should be liquidated. Those in them should be given the cash value of them, or their proportion of the assets in the scheme, and instead those pension plans need to be turned into defined contribution schemes. The risk of poorly peforming assets should remain with the individual. This would cause ructions, but best to get it over with, lest these schemes bankrupt perfectly good businesses, and worse, via the Pension Protection Fund (PPF), bankrupt our nation.

This policies would allow individuals to control their own pension destiny, and put the decision on when they retire on the individuals shoulders, without allowing daft promises made by ill informed politicians, to become an unbearable burden on those in this country who are actually doing the work and producing our wealth.

No chance of that, such schemes aren' run for the pensioners, they are run so that the state can steal more right now in return for promises in the future it has no chance of coming good on.

So, to conclude, it's far from inevitable that the pensioners get anything at all.

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While remembering that those whop are taking will be themselves young.

T

So the solution to pensions is to not pay the pensions. Righto.

No chance of that, such schemes aren' run for the pensioners, they are run so that the state can steal more right now in return for promises in the future it has no chance of coming good on.

So, to conclude, it's far from inevitable that the pensioners get anything at all.

Injin,

I never said that the solution was not to pay the pensions.

However, people may have to wait longer to get their pensions, and end up getting less than they expect.

You need to think about the proportion of retirees to workers. If you were to imagine a ratio of nearly 100% retirees and no workers, you can see that the economy would be producing nothing. Under such circumstances, it would be a mathematical impossibility to pay any pension, whatever anyone had promised in yesteryear. Even if those retirees had saved diligently, if they all retired at the same time, with no one left to produce anything, their money would be worth diddly squat.

This is of course the extreme example, but thinking about it highlights the problem and the truth of the situation. You have a choice then with a growing number of retirees to workers.

1) Make people work for longer during their lives.

2) Pay pensioners less.

3) Use draconian taxes to take huge amounts of money off of those working to pay for the pensions of others, because those of pensionable age made a promise, to themselves, to pay themselves a big pension when they retired.

As you see, I dont like 3 at all, as it is simply not fair. Solution 3 puts the burden of the unpayable pension promises made on the backs of those who were not even born when said promises were made. That is clearly unfair and wrong.

Option 1 appears to me to be the best option.

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whoa...tax them? workers pay?

where the frack are the pensioners contributions?

in a nice safe pension fund earning gazillions one would hope, the fund itself helping the economy by financing productive projects.

thats where it is.

Gordon says so.

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Option 1 is identical to option 3 as far as I can see.

What's the difference?

Injin,

Option 3 is different. Under option 3, people still retire at a younger age, but you tax those working more heavily to pay for it. Under option 1, people retire later, and the level of tax is correspondingly reduced.

As for pension payments, yes, people will not get all they expect. But your first argument suggested that they wouldnt be getting anything at all. I think we agree that pensions will have to be less than people expect, and not received until people are older. Some of course will die before they reach that age, but then again, people have always died before they have been able to receive their pensions.

"I know this, it;'s incredibly obvious - why are you telling me?" - I gave this very simple to understand example because your first post suggested that you did not understand. Total pension commitments are simply unpayable if life expectancy keeps increasing and the number people working keeps falling. That which cant be paid, wont be paid, so I used this example to illustrate it.

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Injin,

Option 3 is different. Under option 3, people still retire at a younger age, but you tax those working more heavily to pay for it. Under option 1, people retire later, and the level of tax is correspondingly reduced.

Surely making people work more is exactly the same as taxing them more?

As for pension payments, yes, people will not get all they expect. But your first argument suggested that they wouldnt be getting anything at all. I think we agree that pensions will have to be less than people expect, and not received until people are older. Some of course will die before they reach that age, but then again, people have always died before they have been able to receive their pensions.

The pension viewed a s a total isn't getting paid in full. This is inevitable. it would be nice to think that this would be evenly allocated accross the board, but I am sure we both know better.

Some pensions will be getting paid 100% and other pensions are not going to be paid at all.

"I know this, it;'s incredibly obvious - why are you telling me?" - I gave this very simple to understand example because your first post suggested that you did not understand. Total pension commitments are simply unpayable if life expectancy keeps increasing and the number people working keeps falling. That which cant be paid, wont be paid, so I used this example to illustrate it.

Seee, you say that which can't be paid won't be paid, and then outline a way in which it can.

This is why i am confused. I can't hear one of your points properly becuse the other is drowning it out. I'm looking for the non obvious answer to your position - "can't be paid, won't be paid" versus "we can do this to pay."

Edited by Injin

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Surely making people work more is exactly the same as taxing them more?

The pension viewed a s a total isn't getting paid in full. This is inevitable. it would be nice to think that this would be evenly allocated accross the board, but I am sure we both know better.

Some pensions will be getting paid 100% and other pensions are not going to be paid at all.

Seee, you say that which can't be paid won't be paid, and then outline a way in which it can.

This is why i am confused. I can't hear one of your points properly becuse the other is drowning it out. I'm looking for the non obvious answer to your position - "can't be paid, won't be paid" versus "we can do this to pay."

Injin,

"Surely making people work more is exactly the same as taxing them more?"

Are you talking about the tax rate, or total tax? If people work more years, then if tax rates remain the same, then the total tax take from each person will be higher. Of course if pensions start at a later age, not so much tax money will be needed, allowing the tax rate to be lower. (talking about state pensions here not private ones). Total tax taken for pensions should be lower if the age at which you are eligible to draw your pension is higher.

"Seee, you say that which can't be paid won't be paid, and then outline a way in which it can."

No. I am saying that there is no way in which all pensions can be paid if we dont make some changes. If we make changes, then any pain that will inevitably be felt will be far less. But if we go on believing that we will all get very valuable pensions when we retire, most of us are going to be very disappointed and feel cheated when reality dawns on us that this isnt true. If we make those changes now, we will still get less in the way of pensions on average, but things wont be nearly so bad.

"This is why i am confused. I can't hear one of your points properly becuse the other is drowning it out. I'm looking for the non obvious answer to your position - "can't be paid, won't be paid" versus "we can do this to pay.""

The non-obvious answer is that is pretty much the same point as I made in my last paragraph. If no policy changes are made, then something very bad will happen, and people will not receive the pensions they expect to get. There could be huge pensioner poverty. However, if policy changes are made early enough, i.e. people are made to work longer, then they will be able to receive larger pensions.

Those larger pensions would be paid for by,

1) The extra work that people do as their working lives would be longer.

2) Some of the money will come from those who died between the old retirement age, and the now new higher one.

3) Those drawing pensions at an older age wont be able to for so many years as before.

Ultimately, every penny we have is only worth something because there is something to buy with it, and there is only something to buy with it if someone somewhere has done some work to produce something. More work means a bigger cake for us to share.

And paying less people pensions (as some have died) for a shorter time (because you start receiving your pension later) means that there are less able to share in the cake, which means a bit more for those who do share the cake.

Hope that helps.

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Injin,

"Surely making people work more is exactly the same as taxing them more?"

Are you talking about the tax rate, or total tax? If people work more years, then if tax rates remain the same, then the total tax take from each person will be higher. Of course if pensions start at a later age, not so much tax money will be needed, allowing the tax rate to be lower. (talking about state pensions here not private ones). Total tax taken for pensions should be lower if the age at which you are eligible to draw your pension is higher.

Not talking about either. i'm talking about the general principle - if you make people work more, they do less. if you tax them more, they do less. if you make them work more, they do less. It's the exact same thing.

"Seee, you say that which can't be paid won't be paid, and then outline a way in which it can."

No. I am saying that there is no way in which all pensions can be paid if we dont make some changes. If we make changes, then any pain that will inevitably be felt will be far less. But if we go on believing that we will all get very valuable pensions when we retire, most of us are going to be very disappointed and feel cheated when reality dawns on us that this isnt true. If we make those changes now, we will still get less in the way of pensions on average, but things wont be nearly so bad.

But you also acknowledge that they can't be paid for by making people work more OR by raising taxes. The two positions you hold are mutually exclusive, unless there is some other idea I am missing from what you have written (or you haven't written it yet.)

"This is why i am confused. I can't hear one of your points properly becuse the other is drowning it out. I'm looking for the non obvious answer to your position - "can't be paid, won't be paid" versus "we can do this to pay.""

The non-obvious answer is that is pretty much the same point as I made in my last paragraph. If no policy changes are made, then something very bad will happen, and people will not receive the pensions they expect to get. There could be huge pensioner poverty. However, if policy changes are made early enough, i.e. people are made to work longer, then they will be able to receive larger pensions.

But policy changes are the same mechanism as taxes. If you force people to do things, they resist and stop whereever they are able.

Those larger pensions would be paid for by,

1) The extra work that people do as their working lives would be longer.

But then they aren't getting pensions, they are working. We pay pensions by not paying pensions doesn't seem coherent to me, but you don't seem stupid so I must be missing something somewhere. (i.e. I'm the idiot. help a guy out?)

2) Some of the money will come from those who died between the old retirement age, and the now new higher one.

How?

3) Those drawing pensions at an older age wont be able to for so many years as before.

Then they won't invest in them the same as before, no?

If people invest £x to get £y return and the return £y falls, then they won't increase investment, they'll decrease, surely?

Ultimately, every penny we have is only worth something because there is something to buy with it, and there is only something to buy with it if someone somewhere has done some work to produce something. More work means a bigger cake for us to share.

And paying less people pensions (as some have died) for a shorter time (because you start receiving your pension later) means that there are less able to share in the cake, which means a bit more for those who do share the cake.

Hope that helps.

Not really, to be honest but thank you.

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stock market is up and down.

last time it was down, the pensions industry was about to collapse.

then it climbed, and all was well.

reporters.....please find some news!

Now that doesn't sound suspicious at all does it.

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Gordon Brown, his Cabinet, and all the other MPs don't have to worry as all their pensions are Gold Plated e.g guaranteed and funded by the taxpayer. Whatever pitfalls, irregularities regards pensions they don't have to worry about it as it doesn't affect them, hence the irregularities during Nulabour's term and joe average's pension being decimated . If they had similar pensions to the majority of the population then they may show interest and concern. Just look at all the bank executives payouts, pensions it just shows that this country is an absolute joke. You can screw up an economy, a bank and retire on ridiculous gold plated pensions whilst the general public goes broke and bancrupt.

The Government will just put more sneaky taxes on petrol, 4 p in the last month ( 2p last budget and 2 p that was deferred), workplace car parking taxes. The young with their student loans will be taxed more to support Gordon Brown, his colleagues, the bailed out bank executives in champagne style retirement.

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Gordon Brown, his Cabinet, and all the other MPs don't have to worry as all their pensions are Gold Plated e.g guaranteed and funded by the taxpayer. Whatever pitfalls, irregularities regards pensions they don't have to worry about it as it doesn't affect them, hence the irregularities during Nulabour's term and joe average's pension being decimated . If they had similar pensions to the majority of the population then they may show interest and concern. Just look at all the bank executives payouts, pensions it just shows that this country is an absolute joke. You can screw up an economy, a bank and retire on ridiculous gold plated pensions whilst the general public goes broke and bancrupt.

The Government will just put more sneaky taxes on petrol, 4 p in the last month ( 2p last budget and 2 p that was deferred), workplace car parking taxes. The young with their student loans will be taxed more to support Gordon Brown, his colleagues, the bailed out bank executives in champagne style retirement.

Stop making me feel angry.

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In order to solve the problem, you need to get back to fundamentals and consider the way people would act if they were living naturally, without a state. You might realistically have a chance of borrowing the model, i.e. gaining some metrics from it and applying it to those who are no longer able to work to sustain themselves.

Consider native American communities or South American native tribes, living in the rainforest. They support their elderly by continuing to feed and shelter them. They also look after other needs. This is a tradition and because they don't pay for the roof over their head, one complication is removed from the equation. The remaining needs (food, care etc.) are provided out of a sense of human gratitude (you were young once and needed the guidance of an elder, more experienced person) and respect.

Now take the way things are in the "civilised" world. You spend much of your working life paying for the roof over your head. A proportion of the population won't even attain this and will be dependent on social housing as a result. The rest of the community is forced to pay for something which should be easily affordable and for which it's possible to save a modest amount for ones working life to buy outright when one retires. The housing stock and the type of housing stock should only need to increase with the population (shifts in demographics taken into account).

So, it should only be necessary to pay for food and care for the elderly. Housing should already be a given. The fact that it is a vehicle for speculation and misguided notions of wealth, it becomes a lifelong burden for many. I believe this is a major factor in the entire pension "problem" - i.e. housing and the artificially inflated cost of owning one. Food and the occasional visit by social services are not the problem.

You could fix everything by raising the retirement age (most older people actually want to work until they are no longer able to do so) and ensuring that housing can never again be allowed to consume the best of ones resources for the best years of ones life.

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You could fix everything by raising the retirement age (most older people actually want to work until they are no longer able to do so) and ensuring that housing can never again be allowed to consume the best of ones resources for the best years of ones life.

Yes but what about all those people working in the public sector who deserve to retire early on a index linked pension for all their public service? :ph34r:

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Yes but what about all those people working in the public sector who deserve to retire early on a index linked pension for all their public service? :ph34r:

That was a marketing ploy used to attract people into the public sector when Britain still had a thriving private sector and hadn't sold out to globalisation. Times change.

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And lastly, all defined benefit pension plans should be liquidated. Those in them should be given the cash value of them, or their proportion of the assets in the scheme, and instead those pension plans need to be turned into defined contribution schemes.

Yes please - I calculate my share as 1.1m. and as I am over 50. I will take my lump sum and sod off ASAP.

But small problem, current value of just the public sector DB schemes is over 1 Trillion.

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