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.
Annuity rates 'increasing due to credit crisis'
Annuity rates are on the up as a direct result of the credit crunch, the Observer reports.Figures from stockbroker Hargreaves Lansdown cited by the newspaper show that average rates have increased from around seven per cent early last year to 7.85 per cent for male retirees.This is due in part to rises in yields from corporate bonds - which has in turn been caused by their increased popularity in...Read More
Life expectancy 'poses pension problems'
The increasing life expectancy of UK citizens is a major challenge for the pension industry in the future, it has been claimed.Life insurance and pensions organisation, AEGON Group, has warned that the UK pension pot is already facing significant pressure because of the increasing longevity of Britons and this situation is only going to get worse in the future.Rachel Vahey, head of pensions develo...Read More
Why do you need a pension?
More and more each year we seem to be hearing about the need to start your own private pension plan, to put money aside for your older years and basically ensure that you have enough money to look after yourself if later years. But do you really need a private pension? What is wrong with the state pension?
As we have covered in a number of articles recently the real value of the st...
Businesses urged to promote pensions
Employers are being called on to do more to promote pensions among staff and make people recognise how important a pension plan is to their future.Des Hamilton, technical director for The Pensions Advisory Service (TPAS), said that there is an onus to "make people understand that they cannot afford not to join" a pension scheme.He said that there exists a "lack of understanding" when it comes to p...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