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Brexit’S Biggest Fans Face New 115 Billion-Pound Pension Hole


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The £ just now is at 1.19 Euros. It was last at this exchange rate in March 2014. So if this causes pension problems this must've been true then as well as now. What was said about this in March 2014?

Versus USD the picture isn't as straightforward, but the current dip is as nothing compared to the plunge in late 2008, where we nosedived from nearly 2USD/£ to 1.38USD/£ (only marginally above where we are now) in about half a year. That must've caused a more massive pension crisis than now. Again, was this our major concern at the time?

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Just for discussion but do you think in hindsight defined benefit (db) pension schemes may have been a bad idea? Or were the actuaries at 'fault'?

I'm just expecting that some of these 'recovery plans' in the private sector Db's must run into the long, long term! (else they'd collapse the companies involved)

Then there's the public sector db's!

I wouldn't say they were a bad idea Per Se but definitely companies were too slow to update them to reflect increasing life spans and declining investment returns. Also the final salary aspect is grossly unfair to most staff, current moves to career average basis are fairer and more sustainable. Re the actuaries: some did warn about increasing lifespans 20-30 years ago, but for a long time the consensus was this was a blip that would peter out.

Recovery plans are already a massive drag on many companies, some of which will be brought down by the impossibility of servicing this debt. Especially as the Pension Regulator is being encouraged by government to be more aggressive in requiring firms to produce and adhere to credible recovery plan - BHS scandal will no doubt ratchet this up further

As for the public sector, all I can say is it is a good job the government has a printing press.

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I don't see any fluctuation in GBP as automatically either good or bad. A fall in GBP makes imports more expensive and exports more competitive. There are winners and losers.

Have a look at what happened to bond yields while we were in the EU. look at a long term chart, and it's like a drunk falling down a flight of stairs.

We weren't discussing the merits of devaluation, just whether the drop that occurred immediately after the referendum was anything to do with the vote to Leave.

Same thing happened all over the world, so not really anything to do with being in or out of the EU. Brexit vote just sent us down another flight, which will have some additional real world impact.

I don't really understand the reluctance to accept the obvious. Brexit will have negative and positive impacts, the balance of which will with lots of hindsight help us understand whether it was overall a good or bad decision.

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I wouldn't say they were a bad idea Per Se but definitely companies were too slow to update them to reflect increasing life spans and declining investment returns. Also the final salary aspect is grossly unfair to most staff, current moves to career average basis are fairer and more sustainable. Re the actuaries: some did warn about increasing lifespans 20-30 years ago, but for a long time the consensus was this was a blip that would peter out.

Considering all the stories about an unhealthy younger generation it may indeed peter out.

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I wouldn't say they were a bad idea Per Se but definitely companies were too slow to update them to reflect increasing life spans and declining investment returns. Also the final salary aspect is grossly unfair to most staff, current moves to career average basis are fairer and more sustainable. Re the actuaries: some did warn about increasing lifespans 20-30 years ago, but for a long time the consensus was this was a blip that would peter out.

Recovery plans are already a massive drag on many companies, some of which will be brought down by the impossibility of servicing this debt. Especially as the Pension Regulator is being encouraged by government to be more aggressive in requiring firms to produce and adhere to credible recovery plan - BHS scandal will no doubt ratchet this up further

As for the public sector, all I can say is it is a good job the government has a printing press.

Ah yes, the "totally unexpected increase in longevity which threw a spanner into our otherwise perfect actuarial calculations." The excuse trotted out time and again. Actuaries and mortality bureaux are supposed to have brains the size of golf courses but they could not predict what everyone knows - people's lifespans have been progressively getting longer/better since Ugg died of old age at 25 during the stone age.

When defined benefit pensions were introduced they were a godsend to employers. They could run a massive fund which was available for free borrowing whenever they needed it. There was no possibility of it going into deficit (ha) and indeed was much more likely to be in surplus, at which time the employer (but not the members) could take a contributions holiday. What's not to like!

Maxwell put a stop to that and with a little extra help from Gordon Brown the DB plan suddenly looked much more like an albatross round the employer's neck and continues to be so.

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Ah yes, the "totally unexpected increase in longevity which threw a spanner into our otherwise perfect actuarial calculations." The excuse trotted out time and again. Actuaries and mortality bureaux are supposed to have brains the size of golf courses but they could not predict what everyone knows - people's lifespans have been progressively getting longer/better since Ugg died of old age at 25 during the stone age.

When defined benefit pensions were introduced they were a godsend to employers. They could run a massive fund which was available for free borrowing whenever they needed it. There was no possibility of it going into deficit (ha) and indeed was much more likely to be in surplus, at which time the employer (but not the members) could take a contributions holiday. What's not to like!

Maxwell put a stop to that and with a little extra help from Gordon Brown the DB plan suddenly looked much more like an albatross round the employer's neck and continues to be so.

To be fair to the actuaries, many did point out the rising lifespans albeit in an actuarial way (probability, central case, caveats etc. etc) this allowed there decision makers the freedom to ignore the central case and take a punt on "its just a blip".

Probably the brightest actuary I know believes that 100+ lifespan will be normal for people born today and that the first people who will live for ever are already walking around. I would love to see how he presents that to the FD.

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We weren't discussing the merits of devaluation, just whether the drop that occurred immediately after the referendum was anything to do with the vote to Leave.

Same thing happened all over the world, so not really anything to do with being in or out of the EU. Brexit vote just sent us down another flight, which will have some additional real world impact.

I don't really understand the reluctance to accept the obvious. Brexit will have negative and positive impacts, the balance of which will with lots of hindsight help us understand whether it was overall a good or bad decision.

That's essentially my position. :)

I thought that you were arguing the Brexit is bad Because it's Brexit and Brexit is bad line. My apologies if I got the wrong end of the stick.

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Confusion of VIs:

Per cent of working age population over state pension age (taking into account planned increases in SPA):

2015......30%

2016......31%

2020......28% (a decrease !)

2030......32%

2040......37%

I'm struggling to see what pensions disaster should be caused by these rather stable figures up to and including 2030.

After 2030, my prediction is that life expectancy will be in full scale reverse, and the projected figure of 37% by 2040 will not materialise. Even if it does, economic growth and technological advancement should be able to provide. Unless we are being systematically lied to of course.

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Confusion of VIs:

Per cent of working age population over state pension age (taking into account planned increases in SPA):

2015......30%

2016......31%

2020......28% (a decrease !)

2030......32%

2040......37%

I'm struggling to see what pensions disaster should be caused by these rather stable figures up to and including 2030.

After 2030, my prediction is that life expectancy will be in full scale reverse, and the projected figure of 37% by 2040 will not materialise. Even if it does, economic growth and technological advancement should be able to provide. Unless we are being systematically lied to of course.

kzb

My comments were confined to the pension deficit arising from existing DB schemes (retire at 60, final salary linked, index linked annual rises). I have no particular knowledge of life expectancy, beyond what I picked up listening to actuaries I worked with.

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To be fair to the actuaries, many did point out the rising lifespans albeit in an actuarial way (probability, central case, caveats etc. etc) this allowed there decision makers the freedom to ignore the central case and take a punt on "its just a blip".

Probably the brightest actuary I know believes that 100+ lifespan will be normal for people born today and that the first people who will live for ever are already walking around. I would love to see how he presents that to the FD.

My friends mum just got her telegram from the queen......she looks and acts younger than someone 20 years younger than her......nature and nurture both come into play here.......very many will die before their time due to nothing more than the lifestyles they lead.....having said that, quality is more important than quantity, both quality and quantity is best of all. ;)

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The classic howler.

It's annuities that are principally backed by government debt. Not pension funds. You buy the government debt (annuity) when you retire.

Taking out the life expectancy and indexing, you can translate directly from the yield to the annuity. If yield is 10%, then a £10k annuity costs £100k. If yield is 1% then the same annuity costs a million.

That's why a £200k fund would've been in surplus for a £10k+indexing pension promise 20 years ago, yet a £500k pot is in deficit for that same income promise today.

Which in turns only feeds into more saving and less spending in the real economy.

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Correct, have to try and make the losses up......or carry on working for longer if you can......thousands can't. ;)

So the answer? Helicopter money, but only for chavs :) You know if they get any money, they will spend it.

Go long shares in Bargain Booze, Burbury and Iceland.

Edited by NuBrit
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You cannot retire from a DB (or CARE) scheme at 60 and get full pension any more. That in any case applied to females only.

If you retire before state pension age the DB (or CARE) pension will be reduced accordingly. Bear in mind the SPA will be 68 quite soon. You will also find the index-linking is capped to a certain low figure, and will be CPI not RPI.

Winkie I'm very happy for your friend's mum. However let us not pretend this is the norm. A very large proportion of people will not live to see their state pension or employers pension when the SPA is 68.

One relative (a teacher) died in service with no dependants. Certain relatives for some reason thought they could get his DB pension, because he'd paid into it for all those years. I kept telling them there's no chance. All those contributions for nothing.

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So the answer? Helicopter money, but only for chavs :) You know if they get any money, they will spend it.

Go long shares in Bargain Booze, Burbury and Iceland.

Used to be consequences of own actions or personal responsibility.......but like so many things nowadays, there is a social safety net, bailouts are there for high risk actions or non actions, both rich and poor benefit, bankers and beggars.........that is the risk they take, many still though have no other choice, they will cross that bridge when or if they get to it......the risk is the bridge will no longer be there, it will be washed down the river. ;)

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So the answer? Helicopter money, but only for chavs :) You know if they get any money, they will spend it.

Go long shares in Bargain Booze, Burbury and Iceland.

....not just here ....Primark are opening in France ... :rolleyes:

Edited by South Lorne
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You cannot retire from a DB (or CARE) scheme at 60 and get full pension any more. That in any case applied to females only.

If you retire before state pension age the DB (or CARE) pension will be reduced accordingly. Bear in mind the SPA will be 68 quite soon. You will also find the index-linking is capped to a certain low figure, and will be CPI not RPI.

Winkie I'm very happy for your friend's mum. However let us not pretend this is the norm. A very large proportion of people will not live to see their state pension or employers pension when the SPA is 68.

One relative (a teacher) died in service with no dependants. Certain relatives for some reason thought they could get his DB pension, because he'd paid into it for all those years. I kept telling them there's no chance. All those contributions for nothing.

In the schemes that I'm in (I've accumulated 3 DB pensions over the years) the reduction in benefits for early retirement only applies to the service that accrued after they formally changed the schemes retirement date.

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Ah Brexit - is there NOTHING that it's not responsible for?

I can see it being a scapegoat for every economic problem that emerges for the next decade at least.

Oh Well. At least it will mean that the EU stops being the scapegoat for everything that goes wrong.

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