Pensions in trouble

[tpost]

Just read this piece on pensions in the Telegraph. It goes to show how many pension schemes in this country are having problems.

http://www.telegraph.co.uk/pensions-ret ... -millions/" onclick="window.open(this.href);return false;

[TheTrolleyMan]

Just read this piece on pensions in the Telegraph. It goes to show how many pension schemes in this country are having problems.

http://www.telegraph.co.uk/pensions-ret ... -millions/" onclick="window.open(this.href);return false;

But most of these companies don't make 712 million profit or give out a billion pounds in share dividends

[heapsy]

Can't read it due to add blocked in Chrome. No idea how to allow the site.

[heapsy]

Oops. Think I've sorted it. Interesting read. All the more reason why people should be putting money into a stocks and shares ISA.

[RobertT]

But most of these companies don't make 712 million profit or give out a billion pounds in share dividends

It’s relative really. Many of the nearly 6,000 companies that have pension liabilities will be much smaller than RM or BT and so generate less profit, etc. It doesn’t mean that proportionately they’re not in a similar situation pensions wise.

[RobertT]

Oops. Think I've sorted it. Interesting read. All the more reason why people should be putting money into a stocks and shares ISA.

I’m not saying S&S ISA’s shouldn’t be considered, but make sure you get the most you can out of pensions first, as they offer the potential for your money to be more tax efficient.

With pensions, you get tax breaks when putting your money in, and have the potential of being able to withdraw it all tax free too. While only the money you take out of your ISA will be tax free, as you’ll already have paid tax on it before you deposit it.

[heapsy]

Oops. Think I've sorted it. Interesting read. All the more reason why people should be putting money into a stocks and shares ISA.

I’m not saying S&S ISA’s shouldn’t be considered, but make sure you get the most you can out of pensions first, as they offer the potential for your money to be more tax efficient.

With pensions, you get tax breaks when putting your money in, and have the potential of being able to withdraw it all tax free too. While only the money you take out of your ISA will be tax free, as you’ll already have paid tax on it before you deposit it.

You're right. I've got a private pension. With the limitations of these in mind, I diversified into ISAs for more flexibility. I'm thinking of selling just enough units each year to ensure the ISA lasts as long as possible. (Thinking about the elastic band which is the state pension age )
The pension RM come up with will obviously have its limitations, ie. the number and types of funds available. Add to that the time left to invest in it, I've just turned 50, and am hoping to retire at 60, it doesn't leave much time for growth.

[jetblack]

Posted this in another thread - but there's an interesting article here:- https://ig.ft.com/sites/pensions-intere ... explainer/" onclick="window.open(this.href);return false;
if you read down the comments of that article you will find this post, which for me just about hits the nail on the head - it helps explain exactly why DB schemes are struggling :-

'Solon25
Aug 24, 2016

I am chairman of the trustees of a defined benefit pension plan, which is invested almost 100% in bond type instruments. My own pension entitlement is of the defined contribution variety and I am invested almost 100% in equities, despite the fact that I am now past retirement age. Both arrangements have fundamentally the same objective - to generate an adequate income for beneficiaries in retirement - but they have almost diametrically opposite investment strategies. Why? The reason for the difference is down to regulation: the defined benefit plan has to demonstrate to the regulator every year that its assets are sufficient to meet accrued liabilities. The sponsoring company has to make similar demonstrations in its financial statements. Those constraints force DB pension arrangements to invest in assets that are completely unsuited to the long-term nature of the liabilities. I don’t have any such constraints with my DC arrangement. There is no way that I could bring myself to invest in an asset that is guaranteed to yield less than 2% per annum if I hold it for the next 20 years when I can find high-quality equities that are yielding far more in dividends, and where the capital value at the end of 20 years is almost certain to be more than the current value. Rather than take as its starting point the bland statement: “pension funds rely on bonds to fund yearly payouts”, the article could have focused far more attention on the reasons why DB pension funds believe that they have to follow this nonsensical investment strategy.

Jesus Christ, even our own company RMG is paying out at 6% - yet the trustees are stocking up on gilts paying less than 2% !! UK Govt Gilt yield 0.45% for a 2 year gilt, 0.79% for 5 year, 1.37% for 10 year and a whopping 1.92% for 30 years. Meanwhile, here is a table of the percentage return in dividends of FTSE100 companies.

I wonder who formulated the regulation that the fellow above mentions ? Surely not the same people that have an interest in us lending them our money - and have set the cost of borrowing (for themselves in this case) at historically low levels ???