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A Really Vicious Circle Is Threatening U.k. Pension Pots

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Bloomberg: A Really Vicious Circle Is Threatening U.K. Pension Pots

Link: http://www.bloomberg.com/news/articles/2016-08-11/the-lucrative-bond-trade-pension-managers-can-t-afford-to-make

As the Bank of England seeks to ease Brexit angst by injecting money into the U.K. economy, pension managers and insurers are finding themselves caught up in a vicious circle.

Britains new quantitative-easing program, combined with monetary easing around the world, is crushing yields, leaving these long-term investors ever more desperate to hold on to their 20-, 30- and 50-year bonds to meet return targets and liabilities. That forces protagonists like the BOE, which is buying 60 billion pounds ($78 billion) of government debt over six months, to bid higher prices -- driving yields down even further.

Edited by Fairyland

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Pensions were always going to fail.

A large retired population was never going to be able to live off of the backs of the workers for long.

Period.

The rest is just detail.

Those unfundable liabilities have blown up a great deal sooner than the Keynesian dummies were expecting though. Which is good. :)

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Pensions were always going to fail.

A large retired population was never going to be able to live off of the backs of the workers for long.

Period.

The rest is just detail.

Looks that way

I remember Injin predicted this years ago

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Pensions were always going to fail.

A large retired population was never going to be able to live off of the backs of the workers for long.

Period.

The rest is just detail.

You note the word "pot" in the title? To me this implies a sum of money built up by a prudent saver. Not sure how that gets translated into living off the backs of the workers.

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Why/how is it good?

The shorter you live a lie the sooner you can adjust to relality.

At the mo there are millions of public sector workers in unfunded pensions expecting to retire and live on the hog for 30 odd years.

Its not going to happen.

A PAYG pension with a stable workforce can manage about 10-15 years at about 50% of takehome.

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What good is a retirement without health......so many have so much money they can't spend. ;)

Better than a retirement with no money or stable accommodation which is whats coming for the under 45 generation.

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Better than a retirement with no money or stable accommodation which is whats coming for the under 45 generation.

Agree......no man is an island.......strength in numbers, but one thing is very necessary for groups that is trust.....no trust, go it alone...being alone is far harder. ;)

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As long as I can remember annuity rates have been falling and MSM financial "advice" on personal financial pages is not to cash in the pot but to wait for annuity rates to recover (although I haven't seen that recently to be fair). What a joke! They aren't going to recover. Anyone coming up to retirement and wanting to buy an annuity better do it quick before they fall any further. In the end they will be a big fat zero!

I would say get your money out of any pension scheme as soon as you're allowed to.

I suppose if we get a black swan event and interest rates suddenly leap upwards then they could come good again. I wouldn't bank on it though.

(I'm not an IFA so do your own research etc)

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You note the word "pot" in the title? To me this implies a sum of money built up by a prudent saver. Not sure how that gets translated into living off the backs of the workers.

I am no expert but I cannot remember any pensioners "pot" running out in their life time....as would be quite common if all pensioners did was to draw off a sum of money every month from a finite amount.

Perhaps you know better, I am happy to be corrected.

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Pensions were always going to fail.

A large retired population was never going to be able to live off of the backs of the workers for long.

Period.

The rest is just detail.

Though the normal UK pension isn't the issue - the real issue is all the Public Sector Pensions.

Perhaps I should start a parliamentary petition calling for a prepackage bankruptcy style arrangement.

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I remember some talk of individuals being limited to two government pensions...one being the old age pension.

This is relevant to ex-servicemen or ex-policemen (or women) who leave their respective services at a relatively young age and then become civil servants.

At the time (2003ish) they were all up in arms over this.

Has anything come of it???

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As long as I can remember annuity rates have been falling and MSM financial "advice" on personal financial pages is not to cash in the pot but to wait for annuity rates to recover (although I haven't seen that recently to be fair). What a joke! They aren't going to recover. Anyone coming up to retirement and wanting to buy an annuity better do it quick before they fall any further. In the end they will be a big fat zero!

I would say get your money out of any pension scheme as soon as you're allowed to.

I suppose if we get a black swan event and interest rates suddenly leap upwards then they could come good again. I wouldn't bank on it though.

(I'm not an IFA so do your own research etc)

'get your money out of any pension scheme as soon as you're allowed to' and stick it in a juicy BTL and make your own anuity.

All you need is a net yield of 3.5% and you've got your very own DIY annuity and have theoretically secured the pot.

This is what drives BTL, after all 'there's nowt as secure as bricks 'n' mortar' and I've been hearing this for decades.

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'get your money out of any pension scheme as soon as you're allowed to' and stick it in a juicy BTL and make your own anuity.

All you need is a net yield of 3.5% and you've got your very own DIY annuity and have theoretically secured the pot.

This is what drives BTL, after all 'there's nowt as secure as bricks 'n' mortar' and I've been hearing this for decades.

How very true

I went to one of the property auctions earlier this year in London (auctioning properties all over the country), the week after pension withdrawal came into force (april 2015) and there was a collective gasp in the room after the very first lot was hammered out.

it was a very average one bedroom flat in a terrace in Kilburn required complete refurb, I can't remember the exact price, but it was fcking mental (and that's putting it mildly). All the seasoned speculators knew the game was up and the room pretty much began to empty leaving a load of 55 year olds to outbid each other on cr@p properties

Edited by knock out johnny

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The real failure though is that our governments of all flavours are cow-towing to the 1%ers, ie the offshoring non tax payers, the bankers and their bonuses, the vampire corporations with offshored proffits etc etc. This is the key to everything, job security, housing, pensions and ulimatatly education and health all being finacialised for the benefit of these parasites. Cure this issue and the rest falls into place.

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The shorter you live a lie the sooner you can adjust to relality.

At the mo there are millions of public sector workers in unfunded pensions expecting to retire and live on the hog for 30 odd years.

Its not going to happen.

A PAYG pension with a stable workforce can manage about 10-15 years at about 50% of takehome.

Thanks. Yes, better to come out of a lie ASAP.

I was thinking how relevant are Keynesian policies in present day world. Economics and policies should change with time.

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Pensions were always going to fail.

A large retired population was never going to be able to live off of the backs of the workers for long.

Period.

The rest is just detail.

Well, they could have done if they had tangible, income producing assets in their pensions rather than just promises made in the hope that future generations don't ever spot the flaw in the plan.

There will be a massive breaking of those promises in the private sector, done with government connivance. It's already happened with TATA, where the scheme's promises are being scaled back under the guise of commercial pragmatism to help sweeten a sale. The scheme is not in default. When they get away with this, hundreds of others will follow. They have to; the pension liabilities of some of our best know companies could drag them down.

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As the Bank of England seeks to ease delays in Brexit angst by injecting money into the U.K. economy, pension managers and insurers are finding themselves caught up in a vicious circle.

Corrected.

Edited by billybong

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Well, they could have done if they had tangible, income producing assets in their pensions rather than just promises made in the hope that future generations don't ever spot the flaw in the plan.

I think this is the great deceit. Ultimately you have a pile of people working (paying effort into the system, buying effort from others) and a pile of people not working (just buying effort from others). The idea is you bank effort during your working life, and claim it during your pensioned years. Of course, we name the abstract quantity of effort 'money'.

But it doesn't help how much you 'save' or 'invest' during your working years - it all requires actual generation of effort by others during your pension years*.

When the number of claimants (inc. pensioners) was low relative to the working population then this all worked well - but now you've got a fifth of the population retired, as well as all those people not working (I'll ignore that they're also claiming effort - it isn't as much 'money' as pensioners get) - in the UK you've now got two people working to support every pensioner, and this is only getting worse.

*Actually there is a way out - if you spend your working years buying slaves, who then work for you in retirement, then the 'effort' comes for 'free'. But we're not there, yet. Maybe we're trying when it comes to housing.

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It's already happened with TATA, where the scheme's promises are being scaled back under the guise of commercial pragmatism to help sweeten a sale. The scheme is not in default. When they get away with this, hundreds of others will follow.

Will that really go ahead though

http://www.thisismoney.co.uk/money/markets/article-3737066/Sajid-Javid-s-Controversial-steel-pension-plan-ditched-ministers-deem-politically-difficult.html

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