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The National Association Of Pension Funds (napf)

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http://today.reuters.co.uk/news/newsArticl...NSIONS-NAPF.xml

The UK is BUST!

Under current rules, a proportion of workers' National Insurance contributions goes towards the state second pension scheme. If people "contract out" of S2P, the government pays a rebate into their private or work-based pension scheme instead. The NAPF had proposed using S2P funds, to help pay for its Citizen's Pension.

Fuk the future generations - why not give it all to our parents/grandparents?

"It would lead to a shortfall at a time when schemes are already struggling with deficits and would be counterproductive," Sheth said.

He also said it was short-sighted of the NAPF to take money that would have been used to fund FUTURE pensions in order to pay the current tranche of Citizen's Pension schemes.

He said the real squeeze on funds would arise in 20 or 30 years time when the proportion of those in work funding those in retirement was set to shrink.

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Apologies for going off=topic regarding citizens pensions but, I have never had it adequately explained to me why final salary pensions are so unaffordable for employers (these are the plans they refer to when they talk of deficits).

The situation we have in this country is that most large companies have closed their final salary schemes to new entrants. This has meant that in order to pay their liabilities ie pensions and life cover, they have had to sell assets (often at rock bottom prices between 2000-2004).

Had they allowed new entrants, then a large portion of the liabilities would have been met by the new-entrants contributions. The funds would therefore not be so much in deficit.

These funds have missed out on a huge recovery potential as the stock market has seen 20-30% growth over the last 12-18 months. To address this, employers are throwing many extra millions into these funds that they regard as expensive. My point is they wouldn't be so expensive if they hadn't bloody closed them!

Am I missing something? I'd be grateful if someone familiar with this could comment.

NDL

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The only reason there is a problem with final salary schemes is because the national body who regulates accounting services decided in their infinite wisdom that all of the future liabilities of the schemes should be shown as current liabilities of the company. The result was that the liability to pay a pension for a 22 year old was brought forward 38 years. Even at their lowest level most pension schemes had sufficient monies to pay all current liabilities.

Blame it on the bean counters.

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Apologies for going off=topic regarding citizens pensions but, I have never had it adequately explained to me why final salary pensions are so unaffordable for employers (these are the plans they refer to when they talk of deficits).

The situation we have in this country is that most large companies have closed their final salary schemes to new entrants. This has meant that in order to pay their liabilities ie pensions and life cover, they have had to sell assets (often at rock bottom prices between 2000-2004).

Had they allowed new entrants, then a large portion of the liabilities would have been met by the new-entrants contributions. The funds would therefore not be so much in deficit.

The new entrants would have to be paid pensions eventually, so the deficit would only shrink if their contributions were unfairly high. Costs of final salary pensions rose in recent years due to low interest rates and longer life expectancy. Add the withdrawal of dividend tax credit, the new 'protection' scheme, and the ban on contributions to 'overfunded' schemes applied during the stock market bubble. Also add the need to slash costs in order to pay higher taxes as wells as higher wages. It so happens the wages are driven up by the state using said higher taxes to compete for the available workers :angry:

Thanks,

MoD

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Thanks for the replies guys.

Over the years I have often read journos and the likes criticising companies for taking contribution holidays and now finding themselves in underfunded positions. Of course, there were rules that prevented these companies contributing to fully funded funds as a way to avoid corporation tax.

It now becomes apparent that if they had been allowed to contribute (in what was very healthy years for the stock market and their profits) this current deficit wouldn't be the worry it is and many younger people would still have the opportunity to enjoy a final salary pension when they retire.

I feel if the stock market returns to it's long term average of 12% annual returns, these funds are still viable, but not without new blood.

You do have to question some of the decisions taken by these pension schemes though. One large retailer moved out of equities altogether a few years ago (at the bottom) and moved into bonds. They have since missed out on a huge upside.

NDL

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The only reason there is a problem with final salary schemes is because the national body who regulates accounting services decided in their infinite wisdom that all of the future liabilities of the schemes should be shown as current liabilities of the company. The result was that the liability to pay a pension for a 22 year old was brought forward 38 years. Even at their lowest level most pension schemes had sufficient monies to pay all current liabilities.

Blame it on the bean counters.

I think you misunderstand. If the companies are not supposed to abandon their promise to pay pensions then the cost of that promise is as real as any other debt.

Sufficient money to pay 'current' liabilities would allow the schemes in deficit to carry on for a bit longer but in the absence of additional contributions they would sooner or later collapse. There would still be losers, and then ones with an even more justifiable complaint: "why did no-one stop the company promising us pensions when it was blatantly obvious they would not be able to pay for them"?

You do have to question some of the decisions taken by these pension schemes though. One large retailer moved out of equities altogether a few years ago (at the bottom) and moved into bonds. They have since missed out on a huge upside.

Which company do you mean?

If it is Boots then they sold at FTSE=6000, so have not yet missed out on anything even before the recent bull market in bonds is taken into account. I don't think I am comfortable with the suggestion that companies should expose pension funds to a high-risk investment strategy for there may be no way of salvaging the situation if the risk results in large losses.

BTW, 12% yield on equities is entirely unsustainable in an environment where the GDP grows by less than 4% even in good years.

Thanks,

MoD

Edited by MongerOfDoom

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Thanks for the replies guys.

Over the years I have often read journos and the likes criticising companies for taking contribution holidays and now finding themselves in underfunded positions. Of course, there were rules that prevented these companies contributing to fully funded funds as a way to avoid corporation tax.

It now becomes apparent that if they had been allowed to contribute (in what was very healthy years for the stock market and their profits) this current deficit wouldn't be the worry it is and many younger people would still have the opportunity to enjoy a final salary pension when they retire.

I feel if the stock market returns to it's long term average of 12% annual returns, these funds are still viable, but not without new blood.

You do have to question some of the decisions taken by these pension schemes though. One large retailer moved out of equities altogether a few years ago (at the bottom) and moved into bonds. They have since missed out on a huge upside.

NDL

For the record, Thatcher's government introduced the rules that prevented companies from other contributing to pension funds.

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Anything to do with pensions is a complete rip-off.

No legislation to protect the public, total freedom to

All the sharks out there conning and swindling people

Out of hard earned money.

A friend was told a few years ago that his pension would

Be reduced by 90% because the firm he worked for

Had closed, and the scheme wound-up.

All the directors and people that have reached retirement

Were now living off the fund. He still has 20 years to go.

And by then nothing will be left.

Perfectly legal.

He is pursuing the case with his MP he is not the only one.

Everyone (young people) that joined the scheme were

Given incentives, something like an extra 15% paid by

the company to top up their pension fund.

What they wasn’t told was whose pension the company

Had in mind. :angry:

It was all thought out well in advanced by the directors.

And no one can touch them, just like Robert Maxwell (crook.)

So it’s no surprise to me ‘they’ are going to link pensions (sipps) to

Houses. No legislation no protection. More crooked deals.:angry: :angry:

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If it is Boots then they sold at FTSE=6000, so have not yet missed out on anything even before the recent bull market in bonds is taken into account. I don't think I am comfortable with the suggestion that companies should expose pension funds to a high-risk investment strategy for there may be no way of salvaging the situation if the risk results in large losses.

BTW, 12% yield on equities is entirely unsustainable in an environment where the GDP grows by less than 4% even in good years.

Thanks,

MoD

It was Boots I was thinking about. Just shows you how fallible our memories can be. I am wrong and you are of course correct. In hindsight it looks like a masterstroke. However, there has been considerable upside in equites recently. Not to say that will continue!

NDL

For the record, Thatcher's government introduced the rules that prevented companies from other contributing to pension funds.

Yep, I am well aware of that.

I don't really see the relevance as to which Government introduced it. Unless I have made another mistake Nu-Labour haven't removed the restrictions even if it is academic in the current climate.

NDL

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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