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.
NAPF ask 101 questions about new pension regulations
07/11/2014 The National Association of Pension Funds (NAPF) has called the new pension regulations into disrepute by releasing 101 questions about “unresolved issues” the pension reforms have posed. The questions are based around the new pension regulations, which will be implemented in April and aim to increase savers flexibility. NAPF believe the Government has not given enough inform...Read More
Private-sector final salary pension schemes may hit record deficit
It is believed that the largest 200 pension schemes in the UK, all final salary schemes, could hit a combined deficit of around £140 billion within the next 12 months. This comes at a time when the UK final salary pension scheme, at least in the private sector, is under serious scrutiny with many companies looking to close their schemes to new entrants and also, where possible, transfer to money...Read More
Government targets UK pensioners in advertising program
The UK government has recently instigated a £400,000 publicity drive aimed at alerting UK pensioners to the £4.9 billion in pension credits which go unclaimed each and every year. It is estimated that 1.8 million people in the UK are eligible for pension credits but have never claimed them and are losing out on the financial front. At a time when the cost of living in the UK seems to be rising y...Read More
Insurers: Government should slow down on pension reforms
26/06/2015 Insurers have urged the government not to rush through plans to allow pensioners to sell their annuities for cash. The extension of the pension overhaul in April 2016 could put older people more at risk of scams, according to The Association of British Insurers (ABI). The latest changes would allow five million pensioners who have already bought an annuity with their pension pot t...Read More
Are we nearing the end of final salary pension schemes?
It has been revealed that 80% of company directors in the UK believe that final salary pension schemes will close their doors to new members in the short term. The ongoing recession coupled with the performance of investment markets over the last decade has seen more and more final salary pension schemes slip into deficit which has resulted in a very heavy burden for sponsoring companies. While...Read More