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Uk's Biggest Firms 'cannot Afford Pensions'

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UK's Biggest Firms 'Cannot Afford Pensions'

Nearly one in four FTSE 100 firms will not be able to afford their pension deficits and many will be forced to close defined benefit schemes, says a new report.

Accountancy firm KPMG says 22% of the UK's biggest companies will not have enough spare cash to clear their funding shortfall.

And many big firms will be forced to close final-salary schemes as they can no longer afford them.

The group says that pensions finances have reached a "tipping point".

Many companies are now paying as much on their past pension obligations as they are for current staff.

Historically, major companies set aside twice as much cash to meet future pension costs as they have for past liabilities.

But Mike Smedley, KPMG pensions partner, predicts that within five years, £4 out of every £5 being paid in would be to clear legacy pension funds.

"It is unprecedented for companies to be spending as much or more on their defined-benefit pension benefits for previous employees than for current staff," Mr Smedley said.

"This is likely to result in more and more companies opting to close defined-benefit schemes altogether," he added.

Several high-profile companies such as Barclays and American Express have announced plans to shut or suspend their final-salary schemes in recent months.

Pension funds have suffered from a struggling stock market, while increased life expectancy means that commitments are soaring.

KPMG said as many as 14 of the Footsie companies could close their defined benefit schemes altogether this year.

It estimates the total funding shortfall for all schemes now stands at £80bn, twice the level at the end of last year.

So just how do you think the 20-50 somethings will receive the reality of this? Only those now retired or retiring will enjoy a higher quality of life, while the rest struggle to maintain the status quo for the non-productive and aging segment of society.

A lot of noses will get bent out of shape, and the wolves will start to surround the property and cash rich pensioners.

It will get ugly.

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UK's Biggest Firms 'Cannot Afford Pensions'

So just how do you think the 20-50 somethings will receive the reality of this? Only those now retired or retiring will enjoy a higher quality of life, while the rest struggle to maintain the status quo for the non-productive and aging segment of society.

A lot of noses will get bent out of shape, and the wolves will start to surround the property and cash rich pensioners.

It will get ugly.

My father in law retired at 53 with a very nice index linked pension, the 1970s inflation having taken care or the mortgage.

If I don't have to extend the mortgage or take payment holidays, then I may get it paid off when I'm 53. Having finished paying tuition fees for uni when I'm 55, I can start on proper retirement saving... all assuming I can keep a decent paying job.

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The pension timebomb is slowly being revealed, the entire system is flawed.

The system cannot afford to keep paying out to current retirees when that's admitted there will be huge fireworks.

Edited by interestrateripoff

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The pension timebomb is slowly being revealed, the entire system is flawed.

They system cannot afford to keep paying out to current retirees when that's admitted there will be huge fireworks.

My company has a big pension deficit of about $200 million. Three years ago they paid their old CEO a whopping $125 million golden handshake into his pension fund. Go figure. We are being @rse raped by the bankers and the bosses...welcome to the post Regan/thatcher anglo-saxon world.

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Guest KingCharles1st

Yes, this whole pensions thing is very worrying. Many people I know are grateful they do not have to consider MEWing or a second job or whatever, because the feeling of security their F.S.P. gives them makes them feel all warm and snuggly inside.

For a long time I had been wondering just how investment portfolios in the name of FSPs were going to work out in an imploding economy with precious little + wealth creation. Personally, in many cases I consider them to be as much of a con as the 90's endowment promises.

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