The difference between private sector and public sector pension arrangements?
The release of Lord Hutton's report into public sector pension schemes perfectly illustrates how an explosion in the number of public-sector workers in the UK has contributed to an ever-growing liability for UK taxpayers. The vast majority of public-sector pension arrangements are based on an employee's final salary which can often bear little or no resemblance to the potential investment return on the pension funds in question. So why is there such a big difference between the private sector and the public sector pension setup?
The truth is that the public sector is guaranteed by the UK taxpayer and boom and bust periods in the UK economy have no impact upon funding arrangements. However, boom and bust scenarios have a major impact upon private companies which can in many cases lead to pension fund deficits and cash flow problems. When you also take into account the fact that private pension funds are invested in the stock market in the UK and worldwide assets for the future, thereby exposing them to the varying rates of return, this can and does have a major impact upon the final funding available to each and every pension scheme member.
Final salary pension schemes are few and far between in the private sector today despite the fact they are commonplace in the public sector. The UK government needs to reduce the difference between public sector pension payments and private sector pension payments otherwise more and more UK taxpayers will be funding public sector arrangements while they struggle to arrange their own funding for the future.
When should you start your pension arrangements?
Even though the UK economy is struggling at the moment many millions of people throughout the country are still paying regular contributions into their pension arrangements. However, those who are only starting on the employment ladder often ask the question as to when you should start their pension arrangements and what kind of premium level they should start at.
The one thing to r...
Boots announces changes to company pension scheme
Boots, now part of the Alliance Boots group, has this weekend set out plans to reorganise the company's pension scheme which will see employees transferred from the final salary scheme to a "less generous" scheme. It would appear that despite the company pension scheme having a surplus of around £188 million there is concern about the future liabilities that final salary pension schemes can bring...Read More
Should the state look after us in later life?
There has been much mention of the UK pensions industry over the last few weeks, in both the public and private sectors, with many changes forecast in the future. However, it is becoming more and more apparent that many people in the UK are unwilling or unable to put aside savings for their retirement and will become more dependent upon the state to fund their later life. But should the state look...Read More
Pension protection fund under pressure
The UK government is under serious pressure to make large-scale changes to the U.K.'s pension protection fund which has revealed a deficit of £1.23 billion for the current year. This is a massive increase on the £517 million deficit last year and calls into account the way the system has been set up and whether it is a long-term viable option for the UK government and UK regulators.
Is This The End Of Final Salary Pension Schemes?
News that the UK's top 100 companies have seen a massive fall in their pension funds values has led to suggestions that the end of the final salary pension scheme is nearing. In total the top 100 companies in the UK saw pension fund values fall from a surplus of £12 billion this time last year to a deficit of £41 billion today. The trend is being replicated across the board in the final salary...Read More