Public firms could be allowed to extract £ 50bn from staff pension schemes in bid to boost investment

[posted]

https://www.cityam.com/public-firms-cou ... nvestment/
Public firms could be allowed to extract £50bn from staff pension schemes in bid to boost investment

Could RM go down that route, if rules allowed it? Which schemes would be open to this?

[NWpostie]

We would have another Maxwell situation albeit by a board of director rather than one individual.

This has got disaster written in big red letters all over it.

[richietns]

Thats what Jimmy Hoffa done

[RobertT]

Could RM go down that route, if rules allowed it?

Potentially, yes.

Which schemes would be open to this?

The RMPP is the only RM scheme it could affect. So that would be Age65 benefits accrued between 2012-2018, plus possibly the DBBS too.

I don't think it has the potential to be another Maxwell, as there were laws put in place to stop that happening again. Plus, it's important to realise that only money over the 105% funding level would be available.

However, I see this as short termism!
The value of many DB schemes have seen a hike in the last 12-24 months due to what's happened in the bond markets, which makes them a potential source of cash. But there seems to be no concern in these plans, about what might happen over the longer term.
What happens if the reverse occurs to bond markets in a few years time and those pensions then fall into deficit?

Pension surpluses are clearly a potential target for the employer or the tax man, etc. But the dust needs to settle on the markets and what effect they have on the long term funding of DB schemes, before any rash decisions are made!

It also conflicts with another recent plan for DB pension funds to invest more heavily in equities and venture capital:
https://www.pensionsage.com/pa/Govt-urg ... everse.php
https://www.actuarialpost.co.uk/article ... -22382.htm

The last RMPP report and accounts(2022) stated the pension element of the RMPP had a funding level of 106%, while the DBCBS was 103%.

It'll be interesting to see how things stand for 2023(not sure when it's due) and future years.

[milly]

I posted a thread about this, and as usual got loads of grief about it.
The Government is skint and their mouths are watering over the prospect of stealing our Pension Pots.
Either by forcing Pensions to buy their worthless debt or letting their mates extract money from our Pension scheme to invest in their high risk business ideas.
Remember "you will own nothing and be happy"
It's about time people started asking questions instead of swallowing the propaganda from the kleptocrats.

[RobertT]

I posted a thread about this, and as usual got loads of grief about it.

You mean you posted about the potential for pension schemes being able to invest in start ups: viewtopic.php?f=27&t=110639

Which is clearly different to what this thread is about - the proposed ability for companies to take out excess pension cash for themselves.

[milly]

I posted a thread about this, and as usual got loads of grief about it.

You mean you posted about the potential for pension schemes being able to invest in start ups: viewtopic.php?f=27&t=110639

Which is clearly different to what this thread is about - the proposed ability for companies to take out excess pension cash for themselves.

Attacks on our Pension Pots are coming thick and fast.
I keep telling people they ain't safe .

[RobertT]

Attacks on our Pension Pots are coming thick and fast.
I keep telling people they ain't safe .

You kept telling people that our pensions had been devalued by the recent upheavels in the bond markets, when the opposite was true!

[milly]

Attacks on our Pension Pots are coming thick and fast.
I keep telling people they ain't safe .

You kept telling people that our pensions had been devalued by the recent upheavels in the bond markets, when the opposite was true!

What are Bond yields doing at the moment?

[RobertT]

Attacks on our Pension Pots are coming thick and fast.
I keep telling people they ain't safe .

You kept telling people that our pensions had been devalued by the recent upheavels in the bond markets, when the opposite was true!

What are Bond yields doing at the moment?

They've risen, and in general that has meant a reduction in DB pension scheme assets. But in turn those high yields have also meant a reduction in scheme liabilities.

The overall effect is that many DB schemes now have surpluses, and they have become a potential target.

[NWpostie]

Attacks on our Pension Pots are coming thick and fast.
I keep telling people they ain't safe .

You kept telling people that our pensions had been devalued by the recent upheavels in the bond markets, when the opposite was true!

What are Bond yields doing at the moment?

They've risen, and in general that has meant a reduction in DB pension scheme assets. But in turn those high yields have also meant a reduction in scheme liabilities.

The overall effect is that many DB schemes now have surpluses, and they have become a potential target.

I read about how the bond yield is going up, I wonder how this will affect the AVCs,.

It's important and financially prudent to maintain a cushion against any unexpected dip in returns, if those surplus are creamed off we may not see it again.

[milly]

Attacks on our Pension Pots are coming thick and fast.
I keep telling people they ain't safe .

You kept telling people that our pensions had been devalued by the recent upheavels in the bond markets, when the opposite was true!

What are Bond yields doing at the moment?

They've risen, and in general that has meant a reduction in DB pension scheme assets. But in turn those high yields have also meant a reduction in scheme liabilities.

The overall effect is that many DB schemes now have surpluses, and they have become a potential target.

I read about how the bond yield is going up, I wonder how this will affect the AVCs,.

It's important and financially prudent to maintain a cushion against any unexpected dip in returns, if those surplus are creamed off we may not see it again.

The Bond Market is enormous, far bigger than the equity markets, when the Bond market implodes it will take everything down with it.
In this situation cash would be king.

[RobertT]

I read about how the bond yield is going up, I wonder how this will affect the AVCs,.

AVC's are DC pensions, and they have taken the full force of the increase in bond yields. If you have AVC's, SIPP's or ISA's invested in bonds, they will probably have reduced in value.
Although equity markets haven't performed particularly well either!

High bond yields have affected DB and DC pensions in different ways. DB pensions have actually done quite well out of it(at least in the short term).This explains things in easy terms:
https://www.pensions-expert.com/Special ... n-pensions

It's important and financially prudent to maintain a cushion against any unexpected dip in returns, if those surplus are creamed off we may not see it again.

The benchmark is for DB schemes to have a 105% funding. Meaning there's enough in the pot, plus a bit more, to pay out everyone's benefits.

Personally I think a higher percentage would be more prudent. But creaming off anything over 105% when the going is unexpectedly good, without knowing with any degree of certainty what the future holds, is fool hardy.

[milly]

Looks like next years state pension will rise to around £11500, if this keeps compounding with inflation it is going to outstrip workplace pensions massively over the next few years.
At this rate the state pension will double in 10 years, we are living in clown world.
This is totally unsustainable, but I await people telling me how wrong I am.

[RobertT]

It's important to remember that everyone's state pension entitlement will increase, whether they're receiving it or not. So not only are the government increasing current pensioners benefits, they're also writing a big iou for the future.

It'll be a good excuse for them to increase state pension age higher and quicker than already planned.
Not only will people receive it for less time, but they'll be more likely to have to work for longer and so pay tax for longer.

More pensioners are also likely to breach the Personal Tax Allowance.

I don't think you're wrong, and the Triple Lock wasn't really designed for current inflation rates and needs to be looked at. But there's always a way the books can (theoretically) be balanced. The problem is that it will largely fall at the feet of the employed.