OnlyMe Posted October 11, 2011 Share Posted October 11, 2011 (edited) Maybe they really have dine it this time, together with baking in the cake what could have been previously unsustainable inflation in basics - noticed the sticky petrol prices - they are not going down at the pump. http://ftalphaville.ft.com/blog/2011/10/11/699171/qe2-collateral-damage/ Edited October 11, 2011 by OnlyMe Quote Link to comment Share on other sites More sharing options...
leicestersq Posted October 12, 2011 Share Posted October 12, 2011 cheers for posting only me. earlier this year Uniq-or more pertinently,what's left of it- was 95% handed over to the trustees of it#'s pension fund.Heaven forbid the stock market tanks some more,but if I was a BT/BA pensioner,I wouldn't be banking on the pay out. funnily enough,had a BT worker tell me he'd no need to worry about his pension as it was govt backed...........I laughed...backed by what I asked?the fiscal deficit? some people are in for a hefty dissappointment pension wise. the zanu works until it doesn't. Zanu Bob, The bt fund may actually have taxpayer backing. Wasn't there a court case about some sort of crown guarantee. With most funds, the pensioners are fine, those still working take all the losses should a scheme fail. Defined benefit schemes are the worst case of the pensioners robbing the workers that I know of. Most working won't know pensioners are robbing them through state legislation of pension funds until one day they are told all their money is gone and the ppf can only pay a fraction of what they were originally promised. Quote Link to comment Share on other sites More sharing options...
right_freds_dead Posted October 12, 2011 Share Posted October 12, 2011 Zanu Bob, The bt fund may actually have taxpayer backing. Wasn't there a court case about some sort of crown guarantee. With most funds, the pensioners are fine, those still working take all the losses should a scheme fail. Defined benefit schemes are the worst case of the pensioners robbing the workers that I know of. Most working won't know pensioners are robbing them through state legislation of pension funds until one day they are told all their money is gone and the ppf can only pay a fraction of what they were originally promised. they will have to pay it, but by that time in the uk equiv of zimbabwian dollars. the pensions will be worthless. Quote Link to comment Share on other sites More sharing options...
kilroy Posted October 12, 2011 Share Posted October 12, 2011 they will have to pay it, but by that time in the uk equiv of zimbabwian dollars. the pensions will be worthless. Who was it who said " we can guarantee the value if your pension, but we cannot guarantee what you can buy with it" Quote Link to comment Share on other sites More sharing options...
vin rouge Posted October 12, 2011 Share Posted October 12, 2011 Zanu Bob, The bt fund may actually have taxpayer backing. Wasn't there a court case about some sort of crown guarantee. With most funds, the pensioners are fine, those still working take all the losses should a scheme fail. Defined benefit schemes are the worst case of the pensioners robbing the workers that I know of. Most working won't know pensioners are robbing them through state legislation of pension funds until one day they are told all their money is gone and the ppf can only pay a fraction of what they were originally promised. It is true that many government pensions are index linked.........but the government will always choose or manipulate the index. I suspect that MP's pensions will be treated differently though. Quote Link to comment Share on other sites More sharing options...
leicestersq Posted October 12, 2011 Share Posted October 12, 2011 (edited) Who was it who said " we can guarantee the value if your pension, but we cannot guarantee what you can buy with it" Most private defined benefit schemes don't have government guarantees, bt is an exception (if it does). They all have a legal obligation though to link payout rises to inflation. If the economy produces less due to negative growth, this would cause most schemes to become insolvent, and take down their sponsor in the process. Edited October 12, 2011 by leicestersq Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted October 12, 2011 Share Posted October 12, 2011 http://www.dailymail.co.uk/news/article-2047988/Pensions-risk-200bn-black-hole-deficit-grows-80bn-4-weeks.html The country’s biggest private sector pension funds are £200billion in the red, a report warned yesterday.In just four weeks, the deficit has grown by £80billion, fuelled by the stock market plunge and collapsing returns on government bonds. Nice, Merv didn't add this into his spiel about saving the recovery...... Quote Link to comment Share on other sites More sharing options...
leicestersq Posted October 12, 2011 Share Posted October 12, 2011 http://www.dailymail.co.uk/news/article-2047988/Pensions-risk-200bn-black-hole-deficit-grows-80bn-4-weeks.html Nice, Merv didn't add this into his spiel about saving the recovery...... IRRO, with all due respect, I don't see how the Bank of England is responsible for these problems in any major way. The companies that introduced them and legislators are where you need to look for the causes of this problem. Quote Link to comment Share on other sites More sharing options...
BalancedBear Posted October 12, 2011 Share Posted October 12, 2011 Yes- and with the next few years being record for years for the number of people retiring - they will end up with much less income than expected, and be spending much less than forecast. It will not be good news for "consumer spending" The BOE MPC members are totally clueless and are failing to look past their own noses. Quote Link to comment Share on other sites More sharing options...
leicestersq Posted October 12, 2011 Share Posted October 12, 2011 Yes- and with the next few years being record for years for the number of people retiring - they will end up with much less income than expected, and be spending much less than forecast. It will not be good news for "consumer spending" The BOE MPC members are totally clueless and are failing to look past their own noses. BalancedBear, for those that retire whilst their scheme is still solvent, they will be protected by the absurd rules governing pension schemes. They may be good for a few more years. At some point they will break though, and those still working will suddenly find all their pensions gone. Those retired though, wont have that problem. So I disagree, pensioners in defined benefit schemes will not have less income than they are expecting. Quote Link to comment Share on other sites More sharing options...
Game_Over Posted October 12, 2011 Share Posted October 12, 2011 IRRO, with all due respect, I don't see how the Bank of England is responsible for these problems in any major way. The companies that introduced them and legislators are where you need to look for the causes of this problem. I think they are responsible by deliberately engineering inflation by holding interest rates so low for so long and by QE both policies effectively steal wealth from savers and transfer it to pay off the debts of those who over borrowed Quote Link to comment Share on other sites More sharing options...
interestrateripoff Posted October 12, 2011 Share Posted October 12, 2011 IRRO, with all due respect, I don't see how the Bank of England is responsible for these problems in any major way. The companies that introduced them and legislators are where you need to look for the causes of this problem. http://ftalphaville.ft.com/blog/2011/10/11/699171/ Here are the culprits.Falling equity markets = low asset values. Lower gilt yields = higher liabilities (as they are calculated with reference to a cough, cough, risk free rate). Now, Citigroup economist Michael Saunders says there’s a very high correlation (over 90 per cent) between the month-on-month change in forward gilt yields and the month-on-month percentage change in pension fund liabilities. Hence, the squeals of anguish from the NAPF. The recent gilt rally lifted aggregate pension liabilities by 6.3% MoM in September, the sixth biggest MoM rise in recent years. This is an unfortunate side-effect of the runup to the QE programme. Unfortunate indeed. Although in theory equities should benefit as investors are forced out of gilts into risky assets. And what of UK PLC. How will they react to rising pension fund deficits? Back to Saunders. If sustained, rising corporate pension deficits will put pressure on companies to lift pension contributions. Effects on investment and jobs are not definite, but probably adverse. Marvellous. BoE research from 2005 found little link between pension contributions and investment in individual firms during 83-02. But that study largely predates the much tougher pension regulations of recent years. The CBI and British Chambers of Commerce have regularly stressed in recent years that pressure to cut pension deficits hampers investment and jobs. For example, when pension deficits soared in 2009, the CBI warned that “businesses facing yawning gaps in their own pension scheme funding risk being asked to divert much-needed cash from their business to the PPF”. Any such adverse effects may be particularly painful at present, given the economic slowdown plus cashflow weakness of many firms (evident in the BCC survey) – and especially since the MPC are using QE to push down gilt yields to try and boost the economy. The law of unintended consequences strikes again. Clearly nothing to do with the BoE. http://lynncoins.com/fiat-money-france4.htm The question will naturally be asked, _On whom did this vast depreciation mainly fall at last_? When this currency had sunk to about one three-hundredth part of its nominal value and, after that, to nothing, in whose hands was the bulk of it? The answer is simple. I shall give it in the exact words of that thoughtful historian from whom I have already quoted: “Before the end of the year 1795 the paper money was almost exclusively in the hands of the working classes, employees and men of small means, whose property was not large enough to invest in stores of goods or national lands.[69] Financiers and men of large means were shrewd enough to put as much of their property as possible into objects of permanent value. The working classes had no such foresight or skill or means. On them finally came the great crushing weight of the loss. After the first collapse came up the cries of the starving. Roads and bridges were neglected; many manufactures were given up in utter helplessness.” To continue, in the words of the historian already cited: “None felt any confidence in the future in any respect; few dared to make a business investment for any length of time and it was accounted a folly to curtail the pleasures of the moment, to accumulate or save for so uncertain a future.”[70] Quote Link to comment Share on other sites More sharing options...
Democorruptcy Posted October 12, 2011 Share Posted October 12, 2011 Meanwhile the pension pots of those on the MPC are escalating Charles "savers should stop moaning and spend their savings" Bean 2011 £2,520,400 2010 £1,972,600 2009 £1,435,700 Up £1,084,700 or 75% in 2 years Paul Tucker 2011 £3,656,600 2010 £3,017,100 2009 £2,300,900 Up £1,355,700 or 59% in 2 years Bean became Deputy Governor on July 1st 2008. Tucker became Deputy Governor March 2009. Mervyn King has a fully paid up inflation linked £198,000 annual pension In Feb 2009 his pension pot to pay that was £5,356,500 so by now it must be £7m or £8m http://www.bankofengland.co.uk/publications/annualreport/index.htm Quote Link to comment Share on other sites More sharing options...
leicestersq Posted October 12, 2011 Share Posted October 12, 2011 http://ftalphaville.ft.com/blog/2011/10/11/699171/ Clearly nothing to do with the BoE. http://lynncoins.com/fiat-money-france4.htm IRRO, Pension funds though, tend to invest in real assets, unlike the common or garden saver, and should benefit from that way from inflation. They invest in gilts, shares and property. QE has a pretty mixed affect on those asset types. Gilts rise in value as the BofE purchases them, but then fall as inflationary expectations leads the market to demand higher interest rates, shares should rise as inflation reduces their debt obligations and property is always good against inflation. What they dont do is keep all of their money in cash. The really big issue that they do face, is that because their obligations become legally index linked, there is no way that they can pare down those obligations to what can be afforded, except through insolvency, and there they have this special process for pension funds that emaciate the obligations due to those not retired. Quote Link to comment Share on other sites More sharing options...
ccc Posted October 12, 2011 Share Posted October 12, 2011 Meanwhile the pension pots of those on the MPC are escalating Charles "savers should stop moaning and spend their savings" Bean 2011 £2,520,400 2010 £1,972,600 2009 £1,435,700 Up £1,084,700 or 75% in 2 years Paul Tucker 2011 £3,656,600 2010 £3,017,100 2009 £2,300,900 Up £1,355,700 or 59% in 2 years Bean became Deputy Governor on July 1st 2008. Tucker became Deputy Governor March 2009. Mervyn King has a fully paid up inflation linked £198,000 annual pension In Feb 2009 his pension pot to pay that was £5,356,500 so by now it must be £7m or £8m http://www.bankofeng...eport/index.htm That is scandalous. Why are the newspapers not running stories about this... Quote Link to comment Share on other sites More sharing options...
R K Posted October 12, 2011 Share Posted October 12, 2011 Corporates, flush with cash, spent a good decade underfunding their schemes, taking pension holidays and increasing benefits. Osborne wants to cut their taxes. His favourite model being the Celtic Tiger. Quote Link to comment Share on other sites More sharing options...
leicestersq Posted October 12, 2011 Share Posted October 12, 2011 Corporates, flush with cash, spent a good decade underfunding their schemes, taking pension holidays and increasing benefits. Osborne wants to cut their taxes. His favourite model being the Celtic Tiger. Isnt there an accounting rule now which means that any deficit of any sponsored pension fund must now appear on the balance sheet of the company? There is also a danger of a circularity. Who are the shareholders who benefitted from pension holidays when they occurred? Ah, in many cases the true beneficiaries, are pension scheme members, shareholders because they are in a pension scheme. Quote Link to comment Share on other sites More sharing options...
scottbeard Posted October 12, 2011 Share Posted October 12, 2011 Meanwhile the pension pots of those on the MPC are escalating Charles "savers should stop moaning and spend their savings" Bean 2011 £2,520,400 2010 £1,972,600 2009 £1,435,700 Up £1,084,700 or 75% in 2 years Paul Tucker 2011 £3,656,600 2010 £3,017,100 2009 £2,300,900 Up £1,355,700 or 59% in 2 years Bean became Deputy Governor on July 1st 2008. Tucker became Deputy Governor March 2009. That is scandalous. Why are the newspapers not running stories about this... Just be careful with those figures - they are an actuarial estimate of the value of the pensions, not an actual fund. If you look at the actual £ pa figure for their pensions, these have risen about 20% over the last year BUT most of that is the pay rises in 2008/9 for their promotions feeding through into their final salary pension. So great increases all the same, but not quite scandalous I think. Quote Link to comment Share on other sites More sharing options...
19 year mortgage 8itch Posted October 12, 2011 Share Posted October 12, 2011 Meanwhile the pension pots of those on the MPC are escalating Charles "savers should stop moaning and spend their savings" Bean 2011 £2,520,400 2010 £1,972,600 2009 £1,435,700 Up £1,084,700 or 75% in 2 years Paul Tucker 2011 £3,656,600 2010 £3,017,100 2009 £2,300,900 Up £1,355,700 or 59% in 2 years Bean became Deputy Governor on July 1st 2008. Tucker became Deputy Governor March 2009. Mervyn King has a fully paid up inflation linked £198,000 annual pension In Feb 2009 his pension pot to pay that was £5,356,500 so by now it must be £7m or £8m http://www.bankofengland.co.uk/publications/annualreport/index.htm Under the tax rules for pensions, who's paying the tax on those healthy increases? Quote Link to comment Share on other sites More sharing options...
campervanman Posted October 12, 2011 Share Posted October 12, 2011 (edited) Most private defined benefit schemes don't have government guarantees, bt is an exception (if it does). They all have a legal obligation though to link payout rises to inflation. If the economy produces less due to negative growth, this would cause most schemes to become insolvent, and take down their sponsor in the process. BT employees who were employed before privatisatiom have a government guaranteed pension Edited October 12, 2011 by campervanman Quote Link to comment Share on other sites More sharing options...
Georgia O'Keeffe Posted October 12, 2011 Share Posted October 12, 2011 (edited) IRRO, Pension funds though, tend to invest in real assets, unlike the common or garden saver, and should benefit from that way from inflation. They invest in gilts, shares and property. QE has a pretty mixed affect on those asset types. Gilts rise in value as the BofE purchases them, but then fall as inflationary expectations leads the market to demand higher interest rates, shares should rise as inflation reduces their debt obligations and property is always good against inflation. What they dont do is keep all of their money in cash. The really big issue that they do face, is that because their obligations become legally index linked, there is no way that they can pare down those obligations to what can be afforded, except through insolvency, and there they have this special process for pension funds that emaciate the obligations due to those not retired. Thats not correct certainly for private sector db schemes, the govt implemented law changes about 5 years ago that allows companies to cap index link on paid/deferred pensions to inflation or 2.5% whichever is lowest, some companies have put this in place others havent (yet) but it is there and available to all Edited October 12, 2011 by Tamara De Lempicka Quote Link to comment Share on other sites More sharing options...
Democorruptcy Posted October 12, 2011 Share Posted October 12, 2011 Just be careful with those figures - they are an actuarial estimate of the value of the pensions, not an actual fund. If you look at the actual £ pa figure for their pensions, these have risen about 20% over the last year BUT most of that is the pay rises in 2008/9 for their promotions feeding through into their final salary pension. So great increases all the same, but not quite scandalous I think. I did mention when they became deputy governors. Whichever way you look at it their pension scheme seems very generous and means that the inflation remit they choose to ignore is not decimating their pensions in the same way it is for others. They are laughing all the way to their pensions while other people are crying on the way to theirs. Bean accrued pension Feb 2009 £70,700 Feb 2010 £89,200 Tucker accrued pension Feb 2009 £110,800 Feb 2010 £132,600 Quote Link to comment Share on other sites More sharing options...
leicestersq Posted October 12, 2011 Share Posted October 12, 2011 Thats not correct certainly for private sector db schemes, the govt implemented law changes about 5 years ago that allows companies to cap index link on paid/deferred pensions to inflation or 2.5% whichever is lowest, some companies have put this in place others havent (yet) but it is there and available to all Tamara, Is this correct? For deferred pensions, your understanding tallies with mine. But I thought that pensions being paid had to be increased each year by inflation. CPI I think, but it might be RPI. Quote Link to comment Share on other sites More sharing options...
scottbeard Posted October 12, 2011 Share Posted October 12, 2011 Tamara, Is this correct? For deferred pensions, your understanding tallies with mine. But I thought that pensions being paid had to be increased each year by inflation. CPI I think, but it might be RPI. The statutory minimum for pension increases in payment is: Pension accrued prior to 6 April 1997 does not have to be increased. Pension accrued from 6 April 1997 to 5 April 2005 has to be increased in line with RPI up to 5% pa. Pension accrued from 6 April 2005 has to be increased in line with RPI up to 2.5% pa. The statutory minimum for pension increases in deferment is broadly: Pension accrued up to 5 April 2009 has to be increased in line with CPI up to 5% pa. Pension accrued from 6 April 2009 has to be increased in line with CPI up to 2.5% pa. However, many private sector schemes and most public sector schemes are more generous than this. Quote Link to comment Share on other sites More sharing options...
leicestersq Posted October 12, 2011 Share Posted October 12, 2011 The statutory minimum for pension increases in payment is: Pension accrued prior to 6 April 1997 does not have to be increased. Pension accrued from 6 April 1997 to 5 April 2005 has to be increased in line with RPI up to 5% pa. Pension accrued from 6 April 2005 has to be increased in line with RPI up to 2.5% pa. The statutory minimum for pension increases in deferment is broadly: Pension accrued up to 5 April 2009 has to be increased in line with CPI up to 5% pa. Pension accrued from 6 April 2009 has to be increased in line with CPI up to 2.5% pa. However, many private sector schemes and most public sector schemes are more generous than this. That sounds official Scottbeard. So I was mistaken then, high inflation, can reduce the real liabilities owed to those drawing pensions. So there is a way out. Quote Link to comment Share on other sites More sharing options...
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