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.
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State pension age to rise to 70 by 2050
03/09/2015 The state pension age may rise to age 70 by 2050 as the Office for National Statistics (ONS) revealed a sharp rise in life expectancy. Over the past century the average UK life expectancy has increased over the past century from 51 years to 79 years for men and 55 years to 83 years for women. Around 20% of men aged 60, and 31% of women, are expected to live until at least 90 year...Read More
What affect will the credit crunch have on pension funds?
There has been an awful lot of debate about pensions over the last couple of weeks as the stock markets around the world continue to struggle. Talk of bailouts for the banks is all well and good but what about those on the verge of retiring, where do they stand?
There have been some real tear jerk stories over the last few weeks with many people coming up to retirement and seeing t...
Will the UK government reinvigorate the pension fund industry?
There is no doubt that the UK government has a number of specific ideas and tasks in mind for the UK pension fund industry. We have seen George Osborne and David Cameron attempt to tackle the monumental problem of public sector final salary pension schemes as well as various taxation changes with regards to the purchase of annuities and the ability to transfer assets upon death. Will this reinvigo...Read More
Is the government's pension policy working?
With 9 out of 10 final salary pension schemes now closed to new members there are serious concerns that the UK government's pension policy is not working. More employers than ever before are also complaining about the cost of enrolling their members in pension schemes and indeed the introduction of new pension regulations has not helped the situation. The pension situation in the UK is now at a cr...Read More