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Pensions Of State-Backed Banks Most Exposed To Stock Market Losses

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8699948/Pensions-of-state-backed-banks-most-exposed-to-stock-market-losses.html

Britain's state-backed banks are among the FTSE 100 companies most exposed to stock market losses through their pension schemes, leading to concerns that the potential risk could have contributed to the recent collapse in the banks' share prices.

Royal Bank of Scotland and Lloyds Banking Group are fourth and fifth on a list ranking the country's largest companies by their relative exposure to equities in their defined benefit or "final salary" employee pension schemes, according to industry consultants.

Shares in the two banks have lost 37pc of their value since the end of June, as financial sector shares have led the downturn in equity markets around the world. Banking shares have been hit hard by investors' fears over the impact the eurozone sovereign debt crisis could have on their businesses, in particular the potential for new write-downs.

"It is becoming increasingly evident that the asset allocation of the UK's largest companies' pension schemes is affecting the attitude and actions of investors and analysts," said Charles Cowling, managing director of JLT Pension Capital Strategies, which drew up the list.

"As deficits have rocketed in recent weeks, so too have investors taken heed of the potential drag that a large, risky pension scheme could have if equity markets continue to be unstable."

The entire economy is geared for perpetual expansion, the system simply cannot deal with deflation. Too many promises have been made on expansionary b0110cks which was an impossibility. We appear to be at the end game.

The debt death spiral looms.

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The entire economy is geared for perpetual expansion, the system simply cannot deal with deflation. Too many promises have been made on expansionary b0110cks which was an impossibility. We appear to be at the end game.

The end game for pension promises is demographics. Right now we have 1946's baby-boomers retiring. Behind them come another 20 years of demographic bulge, whose pensions are inevitably vanishing.

That's why I didn't invest in a pension back in the 1980s: the demographic inevitability of pension promises of that era collapsing before I could qualify to cash in. Well, OK, it's one of several reasons, others including the big hit a pension would take any time I moved job (what use a final salary scheme when my final salary in my first job was £8.5k?), and the fact that when I gave up the dream of being able to afford, if not a house then at least some tiny shoebox flat of my own, was when I got out of the country ....

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If I had a keyboard I would do a long post here. But cos I don't I will say this.

All defined benefits pension schemes should be closed by the government. They are dangerous. Monies in the schemes should be distributed to members in proportion to their contributions. If there are deficits in the schemes, existing pensioners should not get enough to continue getting their pensions in full. Their 100% protection at the expense of others must end.

Then let members invest their own cash.

Do this and we might save a few industries that would otherwise go bust.

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If I had a keyboard I would do a long post here.

I can help you.

leicestersq Posted 14 May 2011 - 04:06 PM

Pensions, what a mess. Yet another great example of how meddling makes things worse.

Here is the problem. A company is worth £100. The pension fund attached to it is worth -£200. You are not allowed to dump your pension scheme, or cut the benefits, so the pension scheme busts a profitable company, one that is actually making something and doing something and generating wealth.

It seems to me that all the private equity company is doing here is buying the company on the condition that it doesn't take the full pension liability. Why on earth would it make an offer on any other condition?

Bust pension schemes like this one should be closed down. The assets should be divided up in accordance with payments made into the scheme. At the moment those drawing a pension are preferred creditors, that is wrong. Those working can find they have lost their pension, all of it. I bet those pensioners drawing a pension could cope with a small reduction in their pensions. Doing this would work, and be fair.

Instead, we have more meddling. Pensioners are protected creditors, the rest get scraps. The Pension Protection fund will takeover this scheme now. It doesn't have access to taxpayer funds (praise the lord), but it does raise a levy on other defined benefit pension schemes, which in turns puts more strain on them and their parent companies. The working people are slaving away, paying in to these schemes, and so many are going to wake up one day to find that pension gone. And that money will not be taken just by rich bankers, overpaid financial advisors and troughing actuaries, but by pensioners unaware they are spending other people's savings and a law that fails to protect the rights of those unlucky enough to be doing work.

http://www.housepricecrash.co.uk/forum/index.php?showtopic=163681

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I can help you.

Great find redhat, what a find.

These stupid pension rules are all about sticking the losses on the tab of the young.

I bet there will be a battle now to stick the losses of these pension funds on to the taxpayer.

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I work for a pension fund that has a sideline as an airline, and I suspect the only reason that it is still final salary is that the wind-down costs would bankrupt the company. We have a situation where the company is pumping so much extra cash into the fund to meet the funding requirements that it is constraining the ability to invest in new aircraft/products.

The 2 biggest costs are fuel and employee costs and since fuel is driven by external forces, employee costs are being aggressively targetted. Indeed many of us have just received a kind offer to take our skills elsewhere (25% in my department). Until recently I looked upon the final salary scheme as a great incentive to remain but I tend to agree with the earlier post that might be better to take my little pot and look after it myself. It's a daunting thought but it's becoming more attractive.

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The other point that I wanted to make is that unless the stockmarket really does remain in the doldrums then the pension fund will not bring down the company but it will have a huge influence on how that company is managed. As we are currently experiencing new employees are on significantly poorer terms and existing employees are being replaced by on-shore and off-shore contractors. The contractors are Indian based so a great chunk of that cash leaves the UK economy forever.

I fear that whilst pension trustees are arguing about whether future benefits are linked to RPI or CPI, current and future employees are being sacrificed.

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if it was me I'd get as much cash out as poss.one dya they'll go t1ts up and the kids'll be too busy looting to bother sending cheques to their victims.

Hi Bob, yes that the conclusion that I'm slowly getting to.

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The other point that I wanted to make is that unless the stockmarket really does remain in the doldrums then the pension fund will not bring down the company but it will have a huge influence on how that company is managed. As we are currently experiencing new employees are on significantly poorer terms and existing employees are being replaced by on-shore and off-shore contractors. The contractors are Indian based so a great chunk of that cash leaves the UK economy forever.

I fear that whilst pension trustees are arguing about whether future benefits are linked to RPI or CPI, current and future employees are being sacrificed.

You work for Airbus by any chance? Similar situation for JLR and Bentley/Volkswagon group i suspect? Big OEM's dwarfed by their pension obligations?

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Pensions of State-Backed Banks Most Exposed to Stock Market Losses?

Hmmm, what about Frank Goodwin's pension then?

..he's anything but Frank ...he's Fred the Shred.... :D

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Pensions of State-Backed Banks Most Exposed to Stock Market Losses?

Hmmm, what about Frank Goodwin's pension then?

What !

You mean Fred's brother's got a massive pension as well ?

:P

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The other point that I wanted to make is that unless the stockmarket really does remain in the doldrums then the pension fund will not bring down the company but it will have a huge influence on how that company is managed. As we are currently experiencing new employees are on significantly poorer terms and existing employees are being replaced by on-shore and off-shore contractors. The contractors are Indian based so a great chunk of that cash leaves the UK economy forever.

I fear that whilst pension trustees are arguing about whether future benefits are linked to RPI or CPI, current and future employees are being sacrificed.

Yes, this is happening too. It is bad for the UK. If the law took these schemes down, then companies could grow in the UK. Put the losses on to the pensioners instead, they would still be ok. But the anion will be better off, because if you free the company from these liabilities, it generates more wealth, making us all better off.

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Yes, this is happening too. It is bad for the UK. If the law took these schemes down, then companies could grow in the UK. Put the losses on to the pensioners instead, they would still be ok. But the anion will be better off, because if you free the company from these liabilities, it generates more wealth, making us all better off.

Any company so over-encumbered it can't compete in the market should just go down, leaving the field open to the efficient. Legislators have no business getting involved in which businesses are winners and which are losers, provided only they operate within the law.

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  • 336 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% +
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      • up 5%



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