YOUR pension provision

[weekender]

Hello.

There's just been a programme on BBC2 about pensions.  As someone who works in the pensions industry, I found it quite interesting.  I also found it fucking annoying, because the people who are making the programme have made a wild oversight with regards to a change in accounting procedures which happened a few years ago which has affected the pensions industry massively, but never mind.

Now, some of the things that are happening in the pensions industry are new and different.  That's not to say that they're bad.

Here's an example.  There was a married couple in the show.  The husband was paying £230 a month into his pension scheme, the wife was paying £38 into her pension scheme.  Neither of them appeared to know this fact.

"So, what do you think the outcome of this will be?"

"Well, I suspect that I'll be better off than my wife".

No fucking shit sherlock.

Let me state something.  The pensions industry is not in as much of a crisis as people believe.  As a result of a change in an accounting procedures, the financial position of various company pension schemes is not as healthy as it was a few years ago (basically it was an accounting standard that you could offset future expected income against your current assets - until a few years ago).  What you see in the media, and especially shows like this, is the worst extremes when companies go bust.

Anyway, the problem with pensions, especially final salary pensions, is that people don't understand what the fuck they're paying into, nor what they can expect to receive.  I've lost count of the amount of people who have been told that they can expect to receive a "2/3rds pension", only to find out that their entitlement under the pension scheme isn't actually "2/3rds" at all, it's their entitlement under that bloody pension scheme.

To move onto a related point, the government has realised this.  They are trying to educate people about pensions, as far as they can.  However, there's only so much that you can do with people.

I therefore have two questions:

1.  Do you know what pension provision you have?

2.  Should it be up to the government to sort your pension provision out?

The latter question irks me.  Labour want to move to a situation where pension provision is up to the individual, and if the individual doesn't sort their own pension out then it's their fault.  This is an admirable principle, but in practice it doesn't happen.  I believe that people are ignorant and/or don't care.  They expect something without actually questioning the reality of what's there.  People expect something in retirement, but don't question how it's going to be there.

There's a minority there who do understand, and those are the people who question me about the financial state of their pension scheme.  I reckon 1 in 100 calls ask me those sort of questions though.  Most of the calls I get are people going "I'm 27, can you tell me what pension I can have at 65?".  No I fucking can't, it's not that simple.

Therefore, should this country adopt the position that contributing to a pension scheme should be mandatory?  Apparently in Australia you're forced to pay 9% of your salary for some sort of pension provision.  This might seem 'a bad thing' to the uneducated, but let's face it, how much are you contributing to your pension?  The state isn't going to do it, why not make it mandatory?

[bill hicks]

Most of the calls I get are people going "I'm 27, can you tell me what pension I can have at 65?"

Christ! I'm 25 and have never once thought about the existence of a pension scheme (until now obviously).

As far as I'm concerned it's like the Student Loan....it exists somewhere but I don't give a shit about it.

(Yes I know I should, but I'm banking on being long dead before then).

[weekender]

Christ! I'm 25 and have never once thought about the existence of a pension scheme (until now obviously).

I'm 27 and I only pay the bare minimum into a pension scheme on the grounds that I smoke and drink a lot more than I should, and I don't expect to reach retirement age.  I do understand it though, and I base my pension provision around that expectation.

As far as I'm concerned it's like the Student Loan....it exists somewhere but I don't give a shit about it.

Well, exactly.  Does that mean that you shouldn't give a shit about it?  Seriously, the government is banking on people making their own provisions for retirement.  The state isn't going to do fuck all, to be honest.

(Yes I know I should, but I'm banking on being long dead before then).

Ah well, at least you've considered your own circumstances.  It's the twats who expect to live to 50+ and expect the state to fund them that fuck me off.

[Cerys]

If I had a job I'd probably be paying into a pension scheme, but as it is I suspect I'm a tiny bit shafted.  Life of crime it is, then.

[All Surrogate]

I've lost count of the amount of people who have been told that they can expect to receive a "2/3rds pension", only to find out that their entitlement under the pension scheme isn't actually "2/3rds" at all, it's their entitlement under that bloody pension scheme.

I'm sorry, but I don't understand what you're saying.  Would you mind explaining it for me a bit?

[zozman]

I do pay into a pension scheme, and I'm told it's a good un, but I really don't know.  It's just one of those things that I know I should be interested in but it's just so dull.  I seem to pay a fortune into the thing and my employer matches this and a wee bit more I think.  This is the extent of my knowledge.

If the oil thread is right though, it won't matter.

[slim]

I pay into an LG pension scheme which is the subject of newsworthy dispute right now - we're apparently striking 23rd March.

As far as I'm aware, my pension provision is a final salary scheme and I will be able to retire at 65 and claim full benefits. Any earlier and it will be reduced (this is the main issue over which people are striking).

I am also led to understand that it won't be long before the government strip away the final salary rights from it, at which point I'll probably just shout "Fuck off" and stop paying into it.

I got a breakdown a while ago, after paying into the scheme for two years so far, and the future is bleak. Please excuse the rough figures, but it goes something like this:

Value of cashing in your pension now - £200.00 (or something ridiculous)
Your salary now - £x
Your salary worth at age 60 (with basic inflation, no payrise) - £x x 2
Your pension at age 60 - £x * 0.7

Obviously I've substituted what I actually earn through sheer embarrassment.

You seem a clever chap to me, weekender, and I wasn't aware you worked in pensions. My question to you is: do you think they're worth it? There are so many things that make me doubt I'm making the right move by paying into one...

Firstly, the figures above inspire no confidence in me at all. Even were I to presume to have paid a house off by then, thus radically lowering my outgoings, that's a pathetic sum to be expected to live on. This means I would be wise to pay into an extra secondary scheme to top it up.

Secondly, the state pension will, from what I've read, be means tested (if it exists at all) by the time I could retire, thus devaluing what pension I do have even further and meaning I would have to pay even more into a secondary scheme to remain comfortable during retirement.

Thirdly, the trend of companies removing various benefits from pension packages in retrospect fucking disgusts me. Why aren't enforcable contracts signed that protect the employee? (Please feel free to correct me if I'm misinformed)

Fourthly, do you not wonder if we'll make it another (in my case) 36 years? Even if the majority of us did, and I doubt that, the retirement age will surely have been upped by then.

Fifth, and lastly I think, pensions are hugely tied to the stock market, aren't they? If that's so, and the peak oil production crisis does plunge the world into recession, does that make my pension worthless? Or will it, relatively, still hold value in terms of x% of my salary and therefore will still keep me comfortable in old age?

I am paying into a pension because it is an LG scheme, and well managed so I'm told, and because I decided when I got this job I would just accept it and treat the money as if I couldn't have access to it, except to pay into the pension. It's worked so far but now I'm planning on building a house, I might need to free up the money, should interest rates go up.

Bet you didn't think this would turn into a "Ask weekender about pensions" thread, did you? Well, you owned up to the job, so it's your own fucking fault. :)

[weekender]

I'm sorry, but I don't understand what you're saying.  Would you mind explaining it for me a bit?

Sure.  

A lot of people are told that they will receive a pension of 2/3rds of their 'final salary'.  Most of the time, the pension that they can expect to receive is not related to a percentage of their final salary at all.

Furthermore, people don't realise that their 'final salary' as defined under their pension scheme's Trust Deed and Rules (the legislation which defines what benefits are payable from their pension scheme) is not necessarily equivalent to their actual salary.  

In summary, a lot people are told that they will receive a pension of 2/3rds of their 'final salary', but the people who are telling them that don't understand how final salary pension schemes work.  

I do, and when I explain this to people, I get fucking criticised for not explaining things to people clearly enough by members of the pension schemes, even when it wasn't me who told them this stuff in the first place, it was their idiotic employers.

[weekender]

I do pay into a pension scheme, and I'm told it's a good un, but I really don't know.  It's just one of those things that I know I should be interested in but it's just so dull.  I seem to pay a fortune into the thing and my employer matches this and a wee bit more I think.  This is the extent of my knowledge.

If the oil thread is right though, it won't matter.

I'm not picking on you personally, but this sums up the attitude of people to a tee.

People tell you that it's a good scheme, you should be interested in it etc, but it seems like the last thing you want to worry about right now.  I'm not criticising your attitude per se, but when you reach retirement age, don't complain to me about it, because I warned you.  That's the government's stance, it's also my stance.  Your financial position is your responsibility.

Yeah, fuck it, we'll all run out of fossil fuels soon.  Ooh, what if we don't?

[Alberon]

My Dad badgered me into joining my employers scheme as soon as I was allowed to. Then, when I was 21, I was a bit pissed off at his insistance, but I'm damn glad I did it now.

It's a final salary one and from the reports I get it seems to be doing OK at present. At present I'm on course for either a lump sum and half my final salary or 2/3rds my final salary. Of course, it's all more complicated than that, if I left today, I'd get something like 14/40ths of 2/3rds my final salary. Though I might buy a few years service in a few years.

[domesticgoddess]

Dear weekender

I'm confused.  Am I fucked because I have a final salary scheme?  It's not too late for me to change it - should I be going for a stakeholder scheme instead?
Everyone always said that final salary schemes were the best.  

Confused and miserable,
dg

And remember I gave you the best fucking sandwich recipe in the world, so be nice!

[zozman]

I tell you what Weekender  What type of pension have you got and where is it?

I know you weren't having a go at me, and whilst my post was pretty tongue in cheek,  it was pretty honest too.

[slim]

Where's my answers? This thread's not free financial advice at all, I've been jipped. I thought I would get at least 2/3 satisfaction.

[sproggy]

I got my fingers burnt several years ago by an incompetent accountant who saw fit to let my personal pension fund get pissed up a wall.

I've since transferred it to a 10% stakeholder pension with options in UK cash and bonds for security and I stuff £100 a month into a high income ISA and have several other high interest savings accounts, just to spread the risk.

I know full well I will probably never see the benefit of my wise investments as I am a borderline alcoholic, and will probably be dead way before chucking out time.  My main concern is for the future economic security of my wife and kids when I'm gone.  The last thing I want them to worry about is paying the mortgage and scraping enough money together to pay the bills.

But I can understand why a lot of young people don't feel the need to plan for the future, life these days if pretty soft and easy, so why worry about what's coming head on around the corner?

[weekender]

I pay into an LG pension scheme which is the subject of newsworthy dispute right now - we're apparently striking 23rd March.

As far as I'm aware, my pension provision is a final salary scheme and I will be able to retire at 65 and claim full benefits. Any earlier and it will be reduced (this is the main issue over which people are striking).

Hello slim.  Your post has raised a number of issues which I am probably only able to deal with in quote form.  Apologies in advance.

Your scheme sounds like it's a bit underfunded.  The fact that people are striking suggests that it's a major employer issue, and that historically people have been given an automatic 'right' to retire early.  That 'right' isn't true.  Under a scheme's Trust Deed and Rules (TD&R), the Trustees can allow or not allow early retirement as they see fit.  There are various legal obligations inherent in this, but that's a brief summary.

Allowing early retirement can cause a strain on the pension scheme, simply because if people retire early, they can expect their pension to be paid longer.  Any pension scheme worth it's salt will have various conditions in their TD&R  regarding this.  Assuming they have such conditions in place, the Trustees can allow people to retire early on actuarial grounds, or they can refuse people the right to retire early (barring legal issues).  

A point worth making now is that the Trustees of a pension scheme are appointed to run that pension scheme.  The company's assets/liabilities are completely separate to those of the pension scheme.  What's happening a lot nowadays is that various companies are fucked because of the stock market crashes etc, and they won't therefore commit to anything regarding their own pension scheme.  They need to sort out the company first, before worrying about any pension scheme complaints.  Separate assets.

I am also led to understand that it won't be long before the government strip away the final salary rights from it, at which point I'll probably just shout "Fuck off" and stop paying into it.

Well, that's just bollocks, to be honest.  There's a government regulation, Section 67 of some Pensions Act or other (I'm becoming drunk now), which says that you can't change benefits retrospectively.  Anyway, it's the pension scheme you're paying into that you want to worry about.  Government regulations may change so that your pension scheme can change their rules, don't let that stop your pension provision.

personal finance details, I'm not leaving them in (weekender).

You seem a clever chap to me, weekender, and I wasn't aware you worked in pensions. My question to you is: do you think they're worth it? There are so many things that make me doubt I'm making the right move by paying into one...

Well, it depends on the finances of the pension scheme involved.  I'm not going to deny that company pension schemes have taken a bad rap over the years.  What I think people who are concerned should do is look at the following:

What pension you can expect from your pension provider(s).

The financial state of your pension provider(s).

Firstly, the figures above inspire no confidence in me at all. Even were I to presume to have paid a house off by then, thus radically lowering my outgoings, that's a pathetic sum to be expected to live on. This means I would be wise to pay into an extra secondary scheme to top it up.

Quite.  You've realised it, but there's thousands of other people out there who haven't.

Secondly, the state pension will, from what I've read, be means tested (if it exists at all) by the time I could retire, thus devaluing what pension I do have even further and meaning I would have to pay even more into a secondary scheme to remain comfortable during retirement.

Your understanding is very accurate.

Thirdly, the trend of companies removing various benefits from pension packages in retrospect fucking disgusts me. Why aren't enforcable contracts signed that protect the employee? (Please feel free to correct me if I'm misinformed)

You're misinformed as far as pensions goes.  Employers are allowed to offer you their 'pensions package', that doesn't necessarily mean that they have to offer one that has been offered historically.

Fourthly, do you not wonder if we'll make it another (in my case) 36 years? Even if the majority of us did, and I doubt that, the retirement age will surely have been upped by then.

Well, what do you class as the 'retirement age'?  This is a problem pension schemes are facing, an increasing demographic population combined with unrealistic expectations.  Put simply, people want to be able to retire at age 50, and live until their expected death age of 75/80.  It's not realistic.

Fifth, and lastly I think, pensions are hugely tied to the stock market, aren't they?

Yes and no.  A pension scheme's assets are likely to be invested in stocks and shares which are related to the overall market.  The overall decision lies with the Trustees and the people they appoint as market advisors, investment managers, call them what you will.

If that's so, and the peak oil production crisis does plunge the world into recession, does that make my pension worthless? Or will it, relatively, still hold value in terms of x% of my salary and therefore will still keep me comfortable in old age?

Nope, you'll probably be fucked.  But then so will everyone who has an investment in anything.  You're probably better off keeping your investments in stocks and shares until the day the world falls over and we start fighting for food.

I am paying into a pension because it is an LG scheme, and well managed so I'm told, and because I decided when I got this job I would just accept it and treat the money as if I couldn't have access to it, except to pay into the pension. It's worked so far but now I'm planning on building a house, I might need to free up the money, should interest rates go up.

Go on then, believe what you get told.  You might also want to consider financial awareness, and the likely expectation(s) of your financial asset(s).  Factor in the risk of the world blowing up, and reach your decision.  I'm not preaching, I just want people to be financially aware.

Bet you didn't think this would turn into a "Ask weekender about pensions" thread, did you? Well, you owned up to the job, so it's your own fucking fault. :)

Well, I kind of expected it. to be honest.   I'm happy to help, unless it's within the next 24 hours when I'm passing out.  I am going to watch the last Nathan Barley, after all.  Christ knows why.

[Peking O]

The state isn't going to do fuck all, to be honest.

Well that makes it alright then doesn't it? Hooray, the state will provide for me.

[Dusty Gozongas]

I'm 27 and I only pay the bare minimum into a pension scheme on the grounds that I smoke and drink a lot more than I should, and I don't expect to reach retirement age.

Then I'll be ignoring any pension advice you may feel the need to offer, sir.

[Dusty Gozongas]

Dear weekender

I'm confused.  Am I fucked because I have a final salary scheme?  It's not too late for me to change it - should I be going for a stakeholder scheme instead?
Everyone always said that final salary schemes were the best.  

Take your pension details to an independent pensions advisor. Don't ask weekender.

Don't wait until you find your employer asks for permission to change contribution levels and/or retirement age.  Be prepared.

[domesticgoddess]

Be prepared.

What a bonus.  Pension preparedness, and a badge to stitch on my jumper!

[sproggy]

Take your pension details to an independent pensions advisor....

Is that independent financial advice?

[grundie]

I'm 28 and I'm a member or the final salary railway pension scheme, which is regarded as one of the best company pension schemes going, aparently. Plus given the rabidness of railway unions, they aren't going to mess around with it.

I also pay £50 a month in to BRASS, which my employer matches. So effectively I am paying £100 a month in to BRASS. BRASS being the railways own voluntary contribution scheme.

I also pay £30 a month in to a stakeholder pension with Norwich Union.

I also have several long term savings schemes ont he boil. So I like to think I'm well prepared for the future.

[terminallyrelaxed]

If the oil thread is right though, it won't matter.

Yep. Thats the excuse I wheel out to console myself whenever I remember that I'm 30 and have never contributed to any pension scheme ever and am a long, long way away from starting one.

[InfiniteFury]

I have to say, much as I dislike the government interferring in my finances and my personal life, my pension is one thing I would like them to plan for me and deduct money for because I am totally irresponsible at planning anything more than 6 months in the future.

I just won't get around to it until it's too late. Take it away from me, take 100-200 pounds from me every month specifically for a big old private (yet government run) pension pot of my own.

This ignores the whole state pension thing but I'd sort of like them to go 'Right 5% of your salary goes in here every month - sorry but you'll be glad we did. Feel free to have a moan about it every other day for the next 40 years'

Or something like that - know what I mean?

EDIT - in fact, it's a testament to how much Gordon Brown has fucked (in my opinion) the small-scale economy of the everyday life that I lump pensions in with things like buying a house, having children. I just can't fucking do it.
To my mind he's created a terrible ennui if not despair about personal finances. Why do people say he's a fantastic chancellor out of interest?

[Alberon]

I don't depend on the State Pension at all.

In thirty years it'll probably be nothing more than food and heating vouchers anyway.

[slim]

Allowing early retirement can cause a strain on the pension scheme, simply because if people retire early, they can expect their pension to be paid longer.

To be honest, if I live to 50, I'm hoping to be rich enough by then to retire early on the grounds of just having loads and loads of cash, baby! If I'm still plain old slim, then I think I'll work 'til the normal retirement age. I'm sure I'd be bored if I didn't work anyway.

Well, that's just bollocks, to be honest.  There's a government regulation, Section 67 of some Pensions Act or other (I'm becoming drunk now), which says that you can't change benefits retrospectively.  Anyway, it's the pension scheme you're paying into that you want to worry about.  Government regulations may change so that your pension scheme can change their rules, don't let that stop your pension provision.

Hmmm. Well, I've read some papers sent to me by my Council (that's who I work for) and I *think* the review of the Local Government Pension Scheme was coming from Prescott's office. It said that the third stage of the review of the scheme by the Deputy Prime Minister's office would include "looking at" the final salary aspect of it.

Do you mean that I signed up to the deal and they can't change it through protection by legislation? Sorry, I'm also a bit tipsy. Perhaps I ought to read that again when sober.

Your understanding is very accurate.

Bah. There goes my payrise then.

You're misinformed as far as pensions goes.  Employers are allowed to offer you their 'pensions package', that doesn't necessarily mean that they have to offer one that has been offered historically.

So they can offer it only once, when I sign up, or can it be retracted and offered again? Sorry for the simplistic questions, I like to be clear on things.

Nope, you'll probably be fucked.  But then so will everyone who has an investment in anything.  You're probably better off keeping your investments in stocks and shares until the day the world falls over and we start fighting for food.

Well, fair point. It's just wondering how long I think that will be (if at all) and judging what's best. Fuck it all away now and not worry about the future? Hardly a responsible attitude, but a tempting one given the horrible political climate.

You might also want to consider financial awareness, and the likely expectation(s) of your financial asset(s).  Factor in the risk of the world blowing up, and reach your decision.  I'm not preaching, I just want people to be financially aware.

Well, to be honest, I do read the internal newsletter/mag thing we're sent about the pension and how it's performing, what to expect, good secondary options to better provide for your retirement, etc. Unfortunately, it's not information I prioritise highly so it's filed away at the back of my mind.

The information provided seemed to be sound enough at the time I joined, and since, to ease any worries I may have had. The problem with that I suppose, is that I have no comparative idea of what to judge it against. This may sound trite, but is pensions analysis as broad and infinite as other forms of finance? Only, every time I've dabbled in money-orientated things in my life they've seemed to have a fractal-esque ability to provide ever more complex layers of choice and information the deeper you look into it. How much pensions knowledge is a good amount, and where do you obtain it?

I am going to watch the last Nathan Barley, after all.  Christ knows why.

I still haven't seen episode 5 yet. It's half annoying and half pleasant not being able to read or contribute to the threads.

[sproggy]

So I like to think I'm well prepared for the future.

Unlike the fucking crap trains & rail infrastructure.

[weekender]

Hello, I'm drunk, I'll try and answer the questions tomorrow when I'm soberer.  It's not as simple as bloody cooking.  Bye bye.

[Pinball]

I'm going to do a SIPP (self-invested personal pension). Don't give it to the suits, man ;-)

Bottomline, look at all those shiny skyscrapers in the City of London. Now, who do you think paid for all that...?

[Some Herbert]

If the oil thread is right though, it won't matter.

It might seem glib, but that's a distinct possibility. However, I wouldn't want to bet my shirt on it. I'm paying as much as I can into my company scheme (not final salary unfortunately) on the offchance that things will somehow miraculously turn out okay in the end. But another part of me suspects that the stock market is headed for collosal meltdown from which it'll probably never ever recover.

So the only winners are going to be financial advisors who are telling everyone to bet on the stock market whilst secretly not believing a word of it and stashing their money under the bed. The fuckers.

[Emergency Lalla Ward Ten]

They never educate you about pensions at school do they? They should do, because it's always been a complete mystery to me. I used to have this vague thought at the back of my mind that I'd get free money as soon as I turned 65 - like the dole, only with no hassle. It's only quite recently that I released this isn't the case.

What are you supposed to do if you're quite badly paid? Lots of people work minimum wage jobs - the maximum they could afford to pay into a pension fund each month would still give them bugger-all after 40 years of work. What advice are they given, except 'get a better job'?