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Leading Uk Firms Carry £96bn In Pension Deficits

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Leading UK firms carry £96bn in pension deficits

The pension funds of the UK’s leading companies have seen a huge rise in deficits over the last 12 months.

A new report by consultants, Lane Clark & Peacock (LCP), based on the FTSE 100 stock index, concludes that the combined deficit rose to £96 billion last month, compared with total deficit of £41 billion a year earlier and a surplus of £12 billion in July 2007.

In addition LCP’s research reveals that only three of the FTSE top 100 companies still offer final-salary schemes to new members: Cadbury, Diageo and Tesco.

The firm warns that further closures of final salary schemes are only to be expected.

In related news, the Pension Protection Fund (PPF) recently reported that the aggregate funding position (total assets minus total liabilities) of the UK’s 7,400 defined benefit schemes had worsened.

At the end of June the deficit stood at £200.1 billion compared to £179.3 billion at the end of May.

The number of schemes in deficit in June 2009 stood at 6,461, up from 6,389 in May and representing 88% of total UK defined benefit schemes.

Mad money. That's £3,300 squids per person in the UK to cover the shortfall, and just now at the the time of writing! Imagine the world in 5-10 years, or however long it takes the true effects of the recession to filter off.

Sad thing is, that the real money thrown into the pensions has been stolen/inflated/traded/skimmed off away into the ether. Asset values are dropping, markets are rigged, and the economy is in cardiac arrest. The only option left for these pension funds is to take very risky gambles, using taxpayer money.

Those of you who think you will have a rosey retirment are going to be in for a hell of a shock.

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Guest absolutezero
Leading UK firms carry £96bn in pension deficits

Mad money. That's £3,300 squids per person in the UK to cover the shortfall, and just now at the the time of writing! Imagine the world in 5-10 years, or however long it takes the true effects of the recession to filter off.

Sad thing is, that the real money thrown into the pensions has been stolen/inflated/traded/skimmed off away into the ether. Asset values are dropping, markets are rigged, and the economy is in cardiac arrest. The only option left for these pension funds is to take very risky gambles, using taxpayer money.

Those of you who think you will have a rosey retirment are going to be in for a hell of a shock.

I wonder if these private sector "gold-plated" pensions will attract the same vitriol as public sector ones.

Don't forget you're paying for these as well.

Money is "stolen" from you when you buy your goods at Tesco or buy a Cadbury's chocolate bar.

These things would be much cheaper if these parasites didn't have a gold-plated, cushy final salary pension....

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The firm warns that further closures of final salary schemes are only to be expected

Then what f*ckwits?

Here's the law:- If you can't pay a final salary funded pension scheme - You can't trade here right?

That's the deal. If Tesco can't afford to trade here then they close down. Let them go to China and India - we don't want them.

It's them or us. I'm not eating a bowl of rice a day so the Chinese and the Indians can get rich.

F*ck off.

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Then what f*ckwits?

Here's the law:- If you can't pay a final salary funded pension scheme - You can't trade here right?

That's the deal. If Tesco can't afford to trade here then they close down. Let them go to China and India - we don't want them.

It's them or us. I'm not eating a bowl of rice a day so the Chinese and the Indians can get rich.

F*ck off.

+1 Too much is being looted.

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I wonder if these private sector "gold-plated" pensions will attract the same vitriol as public sector ones.

Don't forget you're paying for these as well.

Money is "stolen" from you when you buy your goods at Tesco or buy a Cadbury's chocolate bar.

These things would be much cheaper if these parasites didn't have a gold-plated, cushy final salary pension....

The difference is that there's no law compelling you to buy Cadbury products. Try not paying council tax or income tax and see how the system works.

You have to pay taxes; a proportion of which is spent on pension contributions for employment of dubious value - lesbian outreach workers etc.

Actually lesbian outreach could be a money spinner if the staff just carried video cameras while doing their work !

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Guest absolutezero
The difference is that there's no law compelling you to buy Cadbury products. Try not paying council tax or income tax and see how the system works.

You have to pay taxes; a proportion of which is spent on pension contributions for employment of dubious value - lesbian outreach workers etc.

Actually lesbian outreach could be a money spinner if the staff just carried video cameras while doing their work !

No, there is no law but the agreement is that if you choose to spend money to buy those products you choose to pay those pensions.

In the same way if you choose to live here and therefore pay tax (spend money) you pay public pensions.

There may be no law but that's the agreement. It's exactly the same.

Are you saying you have no problem paying doctors', teachers', nurses, etc pensions but you do have a problem paying for lesbian outreach workers', diversity managers' and 5 a day co-ordinators' pensions? :o

Edited by absolutezero

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Guest Parry aka GOD
Then what f*ckwits?

Here's the law:- If you can't pay a final salary funded pension scheme - You can't trade here right?

That's the deal. If Tesco can't afford to trade here then they close down. Let them go to China and India - we don't want them.

It's them or us. I'm not eating a bowl of rice a day so the Chinese and the Indians can get rich.

F*ck off.

Fair enough, but it's been the other way round for quite a while now.

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No, there is no law but the agreement is that if you choose to spend money to buy those products you choose to pay those pensions.

In the same way if you choose to live here and therefore pay tax (spend money) you pay public pensions.

There may be no law but that's the agreement. It's exactly the same.

All else being equal, lesser pensions should mean cheaper goods, which individuals can choose to buy. Or they might prefer to support firms with more of a social conscience (yeah, right ;) ).

Ultimately, we can also choose/change the laws we live under, and whether to pay previously agreed pensions. For that matter we also choose whether to take the long-term risk that any pension scheme will be able to meet its obligations, a few decades down the line...

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Unless you're brave enough, and can afford to fund and manage your own retirement investment, then forget it. All pensions, public or private will be consigned to history once the 'cut off' point has been established. From then on, the payments will cease. It's the biggest con of the last 500 years and people still don't see it.

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No, there is no law but the agreement is that if you choose to spend money to buy those products you choose to pay those pensions.

In the same way if you choose to live here and therefore pay tax (spend money) you pay public pensions.

There may be no law but that's the agreement. It's exactly the same.

Are you saying you have no problem paying doctors', teachers', nurses, etc pensions but you do have a problem paying for lesbian outreach workers', diversity managers' and 5 a day co-ordinators' pensions? :o

Yes, as a tax payer (rather than a receiver as you may be), I would prefer to pay for a pension for what I deem to be a useful job, rather than one which is frankly worse than useless.

Unfortunately as I'm not a leading politician I don't get to make those judgements!

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No, there is no law but the agreement is that if you choose to spend money to buy those products you choose to pay those pensions.

In the same way if you choose to live here and therefore pay tax (spend money) you pay public pensions.

There may be no law but that's the agreement. It's exactly the same.

if the products are overpriced to pay for these pensions, then they will open up opportunity in the marketplace for other companies to compete WITHOUT the pensions burden. In this case the pension fund will collapse and they won't be paid at all.

Alternatively, the larger company with the pension liabilies may still have sufficient economies of scale to sell competitively priced products, INCLUDING funding these pensions, in which case - thru the magic of the market economy - evryone's a winner - pensions get paid AND I get to buy my walnut whips/holiday flights/etc at a fair price.

Perhaps more importantly, the fact that the company MAY go bust and lose the whole pension pot is what motivates private companies to sort their deficits out - and what motivates employees to chip in with pay freezes etc.

The final salary pension deficit at my old employer sorted it out with a 3% paycut for everyrone on a final salary scheme, so customers didn't actually pay in the end.

By comparison, public sector orgnaisations hold the implicit threat of violence against the proletariat to pay up or else. Big difference.

Edited by Si1

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4 things.

1. Nigel Lawson is indirectly responsible for this; he forced companies to take pension fund contribution holidays by punative taxation of surpluses (however many would have taken the holiday anyway).

2. Gordon Brown is directly responsible for this; when he abolished ACT in 1997 cost pension funds £5bn in tax refunds per year. If you multiply that by the rate of inflation and reinvest it it comes to.....about £96bn.

3. This is the accountancy measure of the deficit I believe. Depending on who you talk to the "true" measure is a little bit lower (the longevity expectations are suspect to say the least) or far higher.

4. The impact of the withdrawal of these schemes is that far, far more pensioners will live and die in poverty in future. This will of course force many more pensioners to trade down from their large family home to release some capital which will increase the churn and therefore the supply of such houses and reduce their price. I expect that this will be the cause of the next HPC in about 20 years myself, and we will return to the situation in the 40's 50's and 60's where such houses were considered a millstone and a liability rather than an asset.

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I expect that this will be the cause of the next HPC in about 20 years myself, and we will return to the situation in the 40's 50's and 60's where such houses were considered a millstone and a liability rather than an asset.

imho, allied to the difference in occupancy ratio between old and young home owners, this will contribute to a long term downward pressure lasting 2 or 3 decades on house prices

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The govt has already said theyll cover them, so why bother being responsible and put any profits into pensions.

link?

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£96bn is CHICKENFEED!

The Civil Service pension black hole is more than £2 TRILLION!!!

Work THAT out per person.... optimistically assuming half the poplation is gainfully employed, it's £66,666 per person.

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£96bn is CHICKENFEED!

The Civil Service pension black hole is more than £2 TRILLION!!!

Work THAT out per person.... optimistically assuming half the poplation is gainfully employed, it's £66,666 per person.

That will be one of the first things Cameron tackles if he wins; if he is going to pick a fight with the public sector over pay and numbers, which he has pretty much said he is, then he may as well go the whole hog.

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This is another reason why they want a stock market rally.

There is too much resting on this casino.

True

But maybe higher interest rates (and thus a higher discount rate) would also help valuations because they would reduce the net deficit on all final salary schemes, not just those that are funded.

Notice how for private sector schemes, nobody puts forward the TUC's amusing argument that a large deficit is irrelevant because it's not falling due at once. Everyone knows that employees and pensioners (or whatever's left of the protection fund :lol: ) are on the hook for the deficit if a company goes bust...

Edited by Toilet-Currency

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A precedent has been set

There are also plenty of precedents for private sector schemes not being bailed out, leaving employees with absolutely nothing for their lifetime contributions (retirees get paid first)

The Pensions Protection Fund is now pretty low on cash too.

Layering bailout upon bailout will feed back negatively to the private sector final salary schemes that remain. The PPF levies will be spread between fewer schemes and the gilts they own will suffer a fall in value (in real terms).

Edited by Toilet-Currency

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Guest UK Debt Slave
Leading UK firms carry £96bn in pension deficits

Mad money. That's £3,300 squids per person in the UK to cover the shortfall, and just now at the the time of writing! Imagine the world in 5-10 years, or however long it takes the true effects of the recession to filter off.

Sad thing is, that the real money thrown into the pensions has been stolen/inflated/traded/skimmed off away into the ether. Asset values are dropping, markets are rigged, and the economy is in cardiac arrest. The only option left for these pension funds is to take very risky gambles, using taxpayer money.

Those of you who think you will have a rosey retirment are going to be in for a hell of a shock.

Hardly surprising though is it?

Where is the wealth creation that'll provide millions with a comfortable retirement?

It doesn't exist

No big surprises as far as I'm concerned.

I don't even pay into a pension. No point. The bankers and the politicians will steal it to pay for themselves and the state.

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Nice piece in the Observer on final salary schemes:

Nice piece but the reasons given wouldnt be the top of my list to close them

Take a company like BT or BA. The biggest number each quarter is the movement in the pension deficit. How good a quarter their business has had is secondary to this.

For something so routine, so commonplace, final salary schemes are too complex and have too many moving parts. Many of these are risks that are really tough to mitigate (e.g. longevity, investment returns vs wage growth and discount rates) without cutting staff. Why would companies choose to be exposed to such risks (which fall way beyond their core competences) when the past is littered with so many dreadful failures? Offering such a scheme will be appreciated by employees only for as long as everything is ok. Where else have we recently seen this kind of overconfidence in financial models / assumptions?

I'm with UK Debt Slave. If unreformed, final salary schemes to become the next sub-prime

Edited by Toilet-Currency

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I don't even pay into a pension. No point. The bankers and the politicians will steal it to pay for themselves and the state.

+1. Its a Ponzi scheme. You do not need to be a rocket scientist to understand it, just basic financial knowledge would suffice. Unfortunately, not many people get it. I would be surprised if any of the assured payments will be met by any of the pension schemes in about 30 or 40 years time. Times will be tough. I do not have any doubt about it.

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