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Are Most Defined Benefit Pension Schemes In Private Sector Closed Even To Existing Members, Ie Are Many Of Them Still Taking Any Contributions At


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Looks like no one is offering DB to new members then.

There are other combinations too. Some employees allow existing members to accrue benefits but have capped the salary increases. So pay awards are not pensionable and the employee needs to pay those into DC scheme.

DB offered security. But with the goalpost changing by employers then if that security is coming under threat I can see more taking a transfer value rather than the pension and moving to a SIPP at 55. Then using draw down.

Wonder how the DB schemes will hold up as more transfer out?

The Times today is reporting that the Government is thinking of banning DB scheme members from converting to cash rather than taking the pension. Something to do with making the Pension Protection Fund less generous, and they want to close the gates on people exiting DB schemes as a result.

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The return for Chinese investors for Hinckley point is alleged to be 10% p.a. -even if there are delays it should still be 8%.

Question: why don't we build another 10 stations like this, but funded by pension schemes? 8-10% p.a. guaranteed return would make DB schemes pretty viable I think.

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The return for Chinese investors for Hinckley point is alleged to be 10% p.a. -even if there are delays it should still be 8%.

Question: why don't we build another 10 stations like this, but funded by pension schemes? 8-10% p.a. guaranteed return would make DB schemes pretty viable I think.

Because those aren't the actual returns?

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Habeas Domus: unfortunately I think you are right. I remember myself in my twenties becoming highly annoyed with colleagues banging on about pensions. When you are looking to buy your own home, get married, have kids etc contributing to a pension is the last thing you wan to think about. (Also when you're 22 you don't want to face the reality that one day you are going to be over 50 !)

On the other hand, it is the middle-aged staff who are the ones holding it all together, and at that age they are becoming more pension-aware. Having a more generous pension scheme than your competitor businesses is becoming more important in the jobs market.

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No-one is offering DB schemes - what about the public sector?

According to a Guardian article published in March there are 5.4 million public sector workers in final salary schemes. Only 1.3 million private sector employees have DB schemes still.

Thank goodness all these promises are fully funded - not !

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No-one is offering DB schemes - what about the public sector?

According to a Guardian article published in March there are 5.4 million public sector workers in final salary schemes. Only 1.3 million private sector employees have DB schemes still.

Thank goodness all these promises are fully funded - not !

Most public schemes have gone from Final Salary to Career Average Salary. Does anybody know which ones are still Final Salary?

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No-one is offering DB schemes - what about the public sector?

According to a Guardian article published in March there are 5.4 million public sector workers in final salary schemes. Only 1.3 million private sector employees have DB schemes still.

Thank goodness all these promises are fully funded - not !

They are supposedly going to be funded by future tax payers. It's just as well then that today's under 45's are in such good financial shape then what with growing wages and the reasonable cost of living (sic). Not to mention having to pay for the millions of defaulted on student loans which they are going to be liable for.

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When I took my current job in 2001, the company that I was previously working for had just closed their DB scheme. The new employer's scheme was 1/60th of final salary with zero contribution (inflation protection of up to 5% per annum). Probably about 2010 it went to 1/60ths of career average with a 3% contribution (or 1/80th for no contribution) with maybe 2.5% inflation protection. A couple of years later it was 1/80th for 7% contribution (ramped up over a number of years). The scheme is closing completely at the end of the year although the company will pay up to 12% of salary into a DC scheme (minimum employee contribution to achieve this is 3%). For someone continuing to pay 7% in, that equates to 19% of salary which whilst still not as good as the DB (based upon current gilts yields), it's not bad and it will actually give a better protection against inflation so it could be seen as a beneficial hedge.

The pay cut that I have had since joining my current company is however significant.

The glory days of pensions are behind us and I really feel for the youth of today starting with student debts, ridiculous house prices and poor pensions on offer. They are on a treadmill that is going to bleed them dry.

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  • 2 weeks later...

http://www.ftadviser.com/2016/08/11/pensions/personal-pensions/royal-mail-defined-benefit-scheme-faces-deep-cuts-oJPrbf09eVDUCF9JK2gMwM/article.html

Interesting read regarding one of Royal Mail's defined benefit schemes. I guess they have a difficult balancing act with the unions but clearly the expected increase in employer contribution is unsustainable. The share price looks ok though! (at the moment)

see here too:-

https://www.theguardian.com/business/2016/aug/11/unions-threaten-battle-with-royal-mail-over-pension-scheme-change

Royal Mail is facing a battle with its 140,000 workers after unions threatened a campaign of action against plans to slash pension benefits.
Royal Mail’s plan to switch 90,000 workers out of their current pension arrangements into a new scheme that will pay out lower benefits emerged on Wednesday. If the cuts are similar to plans at the Post Office’s near-identical pension scheme, it could see some workers lose up to half their projected pension.
Edited by Ash4781
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If you haven't yet secured a house then contributing to a pension just makes that harder. With house prices rising 10% a year you need every penny just to stay in the game.

Being able to remove my expenditure on rent with a paid off house seems to me to be a prerequisite for a decent retirement. Otherwise what prevents all my careful savings from being handed over to the landlord?

I do currently pay a large chunk (over 10%) of my salary into a pension but even that is looking like it will provide me with the square root of ****** all. And what happens when I get older and my wages start to fall?

You need wealth on the order of millions to both but a house and retire. To think a generation treated those two things as normal!

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When I took my current job in 2001, the company that I was previously working for had just closed their DB scheme. The new employer's scheme was 1/60th of final salary with zero contribution (inflation protection of up to 5% per annum). Probably about 2010 it went to 1/60ths of career average with a 3% contribution (or 1/80th for no contribution) with maybe 2.5% inflation protection. A couple of years later it was 1/80th for 7% contribution (ramped up over a number of years). The scheme is closing completely at the end of the year although the company will pay up to 12% of salary into a DC scheme (minimum employee contribution to achieve this is 3%). For someone continuing to pay 7% in, that equates to 19% of salary which whilst still not as good as the DB (based upon current gilts yields), it's not bad and it will actually give a better protection against inflation so it could be seen as a beneficial hedge.

The pay cut that I have had since joining my current company is however significant.

The glory days of pensions are behind us and I really feel for the youth of today starting with student debts, ridiculous house prices and poor pensions on offer. They are on a treadmill that is going to bleed them dry.

This^^^^^

If you haven't yet secured a house then contributing to a pension just makes that harder. With house prices rising 10% a year you need every penny just to stay in the game.

Being able to remove my expenditure on rent with a paid off house seems to me to be a prerequisite for a decent retirement. Otherwise what prevents all my careful savings from being handed over to the landlord?

I do currently pay a large chunk (over 10%) of my salary into a pension but even that is looking like it will provide me with the square root of ****** all. And what happens when I get older and my wages start to fall?

You need wealth on the order of millions to both but a house and retire. To think a generation treated those two things as normal!

One consolation there will be millions like that, no paid for home or pension worth bragging about....all in it together, unless things change fast... ;)

Edited by winkie
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...

I do currently pay a large chunk (over 10%) of my salary into a pension but even that is looking like it will provide me with the square root of ****** all. ...

10% is not a large chunk and that's why it's going to give you the square root of ***** all. It's just maths with a couple of variables. Have you sat down with an Excel spreadsheet and worked out what you actually need to contribute to retire when you want to?

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10% is not a large chunk and that's why it's going to give you the square root of ***** all. It's just maths with a couple of variables. Have you sat down with an Excel spreadsheet and worked out what you actually need to contribute to retire when you want to?

Thanks for the advice, but it is definitely a large chunk. I just have to look at the contributions other people seem to be making. When I set it up the human resources department actually came and asked me if I'd made a typo. For comparison, my employer contributes something like 2%. I feel pretty lucky (or maybe it was hard work) that I'm in a job that pays enough that I can contribute as much to a private pension as I do.

My priority is to save enough money to buy a house. Then money will be freed up to contribute more to a pension. If I run out of working lifetime to do both then there is something very wrong with the economy.

But then I guess I knew that.

I can't imagine ever having a job with a defined benefit pension. The workplace really has changed beyond all recognition over the last 30 years - and not to my benefit.

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Thanks for the advice, but it is definitely a large chunk. I just have to look at the contributions other people seem to be making. When I set it up the human resources department actually came and asked me if I'd made a typo. For comparison, my employer contributes something like 2%. I feel pretty lucky (or maybe it was hard work) that I'm in a job that pays enough that I can contribute as much to a private pension as I do.

My priority is to save enough money to buy a house. Then money will be freed up to contribute more to a pension. If I run out of working lifetime to do both then there is something very wrong with the economy.

But then I guess I knew that.

I can't imagine ever having a job with a defined benefit pension. The workplace really has changed beyond all recognition over the last 30 years - and not to my benefit.

Definitely not advice and I'll reiterate it's not a large chunk if you want retirement living expenses to be anywhere near pre-retirement living expenses. The important question is not do you think it's a large chunk or is it larger chunk than my peers but more is it enough. For that you need a cup of tea, some assumptions and an Excel spreadsheet. Have you done that so that you are consciously aware of the journey you are on?

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Definitely not advice and I'll reiterate it's not a large chunk if you want retirement living expenses to be anywhere near pre-retirement living expenses. The important question is not do you think it's a large chunk or is it larger chunk than my peers but more is it enough. For that you need a cup of tea, some assumptions and an Excel spreadsheet. Have you done that so that you are consciously aware of the journey you are on?

Unfortunately you are correct. I paid 40% last year. Someone told me they couldn't afford that....I said I couldn't not afford it.

However if your on £18k a year household income then 40% is not achievable. But if you are on £40k a year household....then assume you are on £18k.

This sets aside the fact I depise pensions and the fact the goalposts keep moving. I have 2 years to go so I hope at least I should still see the goalposts. If I was in my 20's I think they will have dismantled the goalposts and burnt them.

Still you can only do what you can do. And for me that was save and save.

Let you know if it was enough when I get there.

Edited by Phil321
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... If you're 20 and contributing 10%, that's good

...

Is it?

Quick fag packet with some random numbers. Assume real £40k salary for whole working life saving 10% which leaves £27.6k after tax and NI and real annualised investment returns of 4%. Keep that up for 40 years, so age 60 and that's about £415k. Withdraw from that pot at 3% (an annuity will be significantly less) and you have 45% of your pre-retirement spending. Is that good?

Not trying to be provocative but just trying to show using historic data (which of course is no predictor of the future, it could be worse) that unless you have a gold plated DB pension or an inheritance on it's way most people are saving nowhere near enough.

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Not trying to be provocative but just trying to show using historic data (which of course is no predictor of the future, it could be worse) that unless you have a gold plated DB pension or an inheritance on it's way most people are saving nowhere near enough.

This is what scares me as under are current political system it will be too tempting for pension pots to be raided for the benefit of those who have made no provisions.

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Thanks for the advice, but it is definitely a large chunk. I just have to look at the contributions other people seem to be making. When I set it up the human resources department actually came and asked me if I'd made a typo. For comparison, my employer contributes something like 2%. I feel pretty lucky (or maybe it was hard work) that I'm in a job that pays enough that I can contribute as much to a private pension as I do.

2% employer contribution isn't unknown, but it's a bit stingey. I know quite a few DC schemes where the employer contribution, even for new joiners to the scheme, is 6-8%, and where a company has closed a DB scheme their new DC contributions to prior DB members can be quite a bit higher than that.

As a very rough rule of thumb you should aim to have total saving (employee plus employer contribution) in the region of 12-15%, so you're doing pretty well. Easy enough to talk percentages I know, ignoring rent/mortgages and uni fees, but the fact remains that's about the shape of it.

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Being able to remove my expenditure on rent with a paid off house seems to me to be a prerequisite for a decent retirement. Otherwise what prevents all my careful savings from being handed over to the landlord?

No

Yield (risk adjusted) is everything

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  • 1 month later...

John Lewis interims. http://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/financials/interim-reports/john-lewis-plc-interim-report-2016.pdf

Accounting pension deficit of £1,453.7m, £512.1m (54.4%) higher than January 2016, reflecting a significant decrease in the real discount rate used to value the liabilities due to historically low bond yields. Net of deferred tax, the deficit was £1,209.1m

Aside from the tbh not great numbers (seem to have written off £25mn on 9 Waitrose stores due) in the actual business side of things all action on the pension side. There's more detail in there -

However, the accounting valuation of pension fund liabilities increased by £1,064.0m (20.7%) to £6,204.0m, mainly reflecting a decrease in the real discount rate used to value the liabilities to -0.25% at July 2016 compared to 0.70% at January 2016, due to historically low bond yields. If this market driven rate persists at these levels to the end of January 2017, it will result in a significant increase in our pension operating costs for the next financial year, the year ending 27 January 2018.

edit: - I wonder what the BOE's view is.

Edited by Ash4781
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  • 3 weeks later...

https://www.theguardian.com/business/2016/oct/05/tesco-supermarket-sales-rise-profits-tumble

Quote

 

Tesco said that since February its pension deficit had ballooned from £3.2bn to £5.9bn due to the collapse in bond yields after Britain voted to leave the European Union. Its finance director Alan Stewart said it did not have to increase its contributions to the scheme but pensions experts suggested the problem could hinder the resumption of dividend payments to investors.

Similar % increase in Tesco's pension deficit.

Edited by Ash4781
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IIRC a bond yield collapse means the price of them shooting up. So after the Brexit vote there was apparently a mad clamour for UK Bonds that sent the price soaring ? I know we buy a lot of them ourselves due to QE - but this seems strange.

Is this all down to Carneys' knee jerk reaction pointless 'injection' days after the vote ?

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On 6 October 2016 at 11:21 AM, ccc said:

IIRC a bond yield collapse means the price of them shooting up. So after the Brexit vote there was apparently a mad clamour for UK Bonds that sent the price soaring ? I know we buy a lot of them ourselves due to QE - but this seems strange.

Is this all down to Carneys' knee jerk reaction pointless 'injection' days after the vote ?

Starting to see employees in DB schemes taking the transfer values because they are 30 x athe pension. 

If you need a calculator to work

eberything out then take the pension. But £600k at 55 or £20k from 62 is like comparing apples and oranges. And increasingly people are considering taking the cash...,as the safer option. Ie who knows how long these pensions will continue to pay out. 

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1 hour ago, Phil321 said:

Starting to see employees in DB schemes taking the transfer values because they are 30 x athe pension. 

If you need a calculator to work

eberything out then take the pension. But £600k at 55 or £20k from 62 is like comparing apples and oranges. And increasingly people are considering taking the cash...,as the safer option. Ie who knows how long these pensions will continue to pay out. 

Isn't that a bit like a bank run. Pension schemes are struggling with deficits, which in turns means people fear insolvency, so they pull their money. More people pulling their money increases the level of insolvency which in turn will push even more people to pull their money. 

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