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.
Why did nobody see the pensions disaster approaching?
As we hear about more and more multibillion pound deficits across a variety of private sector final salary pension schemes, many people are now starting to wonder why nobody saw this potentially fatal problem emerging. Not only have we seen a reduction in the amount of tax which pension funds are allowed to reclaim with regards to expenses and income, but we've also seen the UK stock market fall a...Read More
Will your pension be hit by the BP collapse?
As problems at BP continue to grow there are fears that many people in the UK could be hit by the collapse in share price. This is a company which has for some time been one of the largest components of the FTSE 100 and therefore a main component of many tracker funds and pension arrangements. As a consequence, it is highly likely that any stock market-based pension arrangement will have some expo...Read More
BT looks to clarify crown guarantee
This week will see a very important case come to court in a move instigated by the trustees of the BT pension scheme who are looking to clarify the extent to which the UK government would underwrite the pension scheme via its "crown guarantee". Both BT and the trustees of the BT pension scheme have been in talks for some time about reducing the £9 billion deficit which has built up over the last...Read More
Will you need to sell your home to fund your retirement?
A report by LV has thrown a very dark shadow over the UK retirement sector with a suggestion that 1.2 million people will in the future need to sell their homes to fund their retirement. It would appear that more and more people over 50 are now dependent upon their homes as an asset for the future and will be forced to downsize in due course. Those who are looking to retire in the short term ma...Read More
IMF highlights UK pension and healthcare systems as concerns
The International Monetary Fund (IMF) has this evening highlighted the UK pension and healthcare systems as potential concerns for the future. The IMF believes that these two issues need to be resolved as soon as possible to pave the way for a recovery in UK finances at a time when other countries appear to be in recovery mode, while the UK is consolidating at best.
It is no secret...