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Old 28th April 2016, 18:33   #31
alanjay
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Quote:
Originally Posted by trebor View Post
Perhaps someone can explain to me why holes in the pension scheme funds appear ?

There are many assumptions that can be made about this:

> The company doesn't pay in to start with either what it deducts from employees and/or its own contribution

> They do pay in but are able to raid the fund without too many questions being asked if the company gets into financial difficulties

> An investment made with he funds goes bad


Surely it's about time some governance was put in place for all companies with pension schemes to have regular checks on funds to make sure all is ok and above board, after all it's not their money to do as they want with , what do you reckon would happen if they had to ask everyone in th scheme if they could borrow the money ?


Companies also deduct Tax/Nic under PAYE every month from their employees and have to pay it over within 2 weeks of the tax month end and if they don't HMRC is after them so how on earth do pension schemes get fleeced and it only comes to light in a crisis

As for Mr Green, more prudent tax planning with money going to his wife, living in Monaco, but also ex advisor to the present government and knighted for his services, is it any wonder a lot of people are cynical about our governments and the people with the real power and influence who appear to rule the roost
Wish I could answer all of your points but there is one bad practise that should be banned.
New owner of a company automatically becomes principle advisor of how to invest the pension fund.
More often than not they advise it should be invested in the company they've just bought.
Then they then declare, due to massive input to shares the value of the company has increased, so award themselves a bonus, roughly equal to the pension fund they've put in. To put it another way, they are exploiting a loop hole that allows them to legally steal the pension fund.
Robert Maxwell did that when he bought the Mirror group and despite all of the outcry after it's bankruptcy, nothing has changed.
Time to stop Company Directors having control of pension funds methinks.
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Old 28th April 2016, 19:43   #32
Leyland Worldmaster
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Quote:
Originally Posted by alanjay View Post
Wish I could answer all of your points but there is one bad practise that should be banned.
New owner of a company automatically becomes principle advisor of how to invest the pension fund.
More often than not they advise it should be invested in the company they've just bought.
Then they then declare, due to massive input to shares the value of the company has increased, so award themselves a bonus, roughly equal to the pension fund they've put in. To put it another way, they are exploiting a loop hole that allows them to legally steal the pension fund.
Robert Maxwell did that when he bought the Mirror group and despite all of the outcry after it's bankruptcy, nothing has changed.
Time to stop Company Directors having control of pension funds methinks.
Dammit! Ran out of thanks! So... thankyou Alan. More people should know this!
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Old 29th April 2016, 07:51   #33
Darcydog
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Originally Posted by trebor View Post
Perhaps someone can explain to me why holes in the pension scheme funds appear ?
Lack of funding due to poor profits

Increased liabilities due to retirees living longer than expected.

Increased Liabilities due to legislation increasing the pensions paid.

Reduced investment returns.



Hence most companies scrapping the Defined Benefit Pensions and moving to Defined Contribution schemes.

To give you an idea of what has hit these pension schemes - in the 1990's we had inflation in double figures - which also meant that investment returns were higher then - as indeed were interest rates.

If you had a pension pot of £100K you could buy an annuity at about 11% - so £100K gave you £11K income a year. So after about 9 years you have had your £100K paid back to you and after that you are in "profit".

Today with the BoE base rate at 0.5% and the fact that we are all living longer means that annuity rates are down to about 5% for someone at retirement. This means you have to live for 20 years before you even achieve repayment of your own £100K fund back to you.

So if you role this out to Final Salary Schemes - you can see that where a company has a scheme that guarantees a percentage of Final Salary - the money it needs to have in the scheme to meet that liability has truly sky-rocketed.
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Old 30th April 2016, 22:57   #34
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But isn't Alanjay nearer the real problem? As Darcy says it is perhaps more expensive to run a final salary scheme now, but the suggestion that the higher interest rates of the 70's somehow kept the schemes afloat, doesn't quite ring try either. Inflation during that period ran well ahead of interest rates. So the contributions made during the early years were in coppers whilst the pension at the end of the seventies would be in pounds.
Yes the bank interest rate is 0.5%, but far higher rates than that are still available to investors. The real problem is that on the one hand employers are more concerned about their own pension and would prefer not to contribute to a workers scheme, then added to that, any profit made on the investments are creamed off by the investment managers, hence we have to survive in pension for at least 20 years, just to get our own contributions back. And of course no mention is made of the interest the fund was earning during that 20 years.
OK, some of us are now living beyond the three score years and ten, but I don't believe the average age has reached 85.


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