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.
Are you happy with your pension arrangements?
If there is one sector of the financial industry which has suffered more than most over the last 10 years it has to be pensions. We have seen the demise, and almost extinction, of the final salary pension scheme in the private sector and investment returns reduced significantly over the last decade. As a consequence more and more people are now becoming more and more concerned about their prospect...Read More
One in seven to retire without a pension
09/04/2014 One in seven people in the UK who are planning to retire this year do not have any kind of personal pension, meaning they will be heavily dependant on the State Pension. The figures were uncovered by the Prudential in their annual ‘Class of’ study, which examines the future plans of people who are planning to retire this year. Vince Smith-Hughes, a retirement expert from th...Read More
Peers to vote on pensions 'lifeboat'
A key vote on whether the government should compensate thousands of people whose pension schemes collapsed will be held in the House of Lords tonight.More than 125,000 people lost millions of pounds worth of retirement savings when their companies went bust between 1997 and 2005.The government intends to compensate affected people with 80 per cent of their expected basic pensions under the Financi...Read More
Tax Relief – 216,000 missing out
It has been revealed that individuals paying higher rates of tax are failing to pay into pension schemes, and are subsequently missing out on free money in the form of tax relief. According to a survey from Prudential, the total amount per year that higher rate tax payers are missing out on is around £438m, as a quarter are failing to take advantage by using a pension scheme. Anyone who opts...Read More
Brits invest more in property than pensions
Britons invest an average £34 in home improvements per week while the weekly pension contribution is 89 per cent less at just £18, according to new research.A study carried out by the Rated Tradesmen website revealed that while nine in ten UK adults say they are 'very conscious' of the need to save up for retirement, 48 per cent have no pension plan. Seventy-three per cent of respondents said in...Read More