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
Pension ‘predators’ websites suspended
25/07/2014 Regulators have suspended the websites of 18 ‘predators’ who run schemes aimed at getting people to try and gain early access to their pension. A person can only access their pension without having to pay heavy tax fees once they turn 55 years old, with the exception that a person is in serious ill-health. However, there are a growing number of schemes that aim to work around...Read More
Ageing population good for businesses
21/08/2015 Retirees in the UK now have more income than ever before, thanks to housing wealth and the introductions of the new pension freedoms. The so called “grey pound” is now worth over £320 billion a year, according to retirement specialist Saga. Businesses have now attempted to cash in on this, with activity holiday companies, cinemas, gyms and even online dating services tailorin...Read More
FCA Quizzed on Post-RDR Advice Gap
The FCA is facing new questions about the availability of financial advice to the regular consumer, after an MP enquired about what the regulator plans to do to plug the advice gap. Questions were asked during a Treasury select committee related to the Heath Report, as well as the increasing number of people who say that they do not have access to financial advice since the RDR. Within the m...Read More
Are you saving enough for your retirement?
While the recent economic downturn has hit many people in the UK there are concerns that it has exposed a lack of preparation for the future and for retirement. It is believed that almost half of those over 55 do not have any monthly savings plans in place and indeed 20% are estimated to owe at least £75,000 on their mortgages. The very fact that the situation for those over 55, and struggling...Read More