To think we’re sitting in a pensions time bomb

[Iwanttobe8stoneagain]

I have been thinking more and more about my retirement I reckon I’ll have a pot (pension and other investments) equivalent to about £300k when I retire. But looking st what return I’ll get on this it’s about £11k year (plus whatever state pension still exists). My DH will prob have a little less. I thought we were doing quite well saving and certainly can’t afford any more. AIBU to be panicking over how we will be able to afford retirement and I suspect lots of people will have even less of a pot.

My dad lost 100k through equitable life. Look at all those pension schemes going bust now. Personally I think the defined contribution schemes for the low paid will be another scandal 30 years on - makes money for the companies, little benefit to employees.

Look into how the ppf works - it does not cover everything (plus its another govt subsidy of failing business) but worse is if your company doesnt go inside ppf and instead cuts your pension to nearly nothing.

We are teachers pension - unfunded. I expect govt haircuts to that one day when we go bankrupt as a nation. What recourse will we have, against our own government?

I agree dad

Painting I think you are very wrong and there are no defined contribution schemes going bust.

I do agree that defined benefit schemes have risks that aren't often appreciated. Even with the government, the obvious solution to being underfunded is to keep pushing out the retirement age which they can do at anytime so you don't really know when you will be entitled to those DB payments.

Private schemes (the few that still exist) are less underfunded that the government

I read somewhere that Western countries will be bankrupted by the old. Fil has been retired for nearly 36 years and in receipt of a generous civil service pension all that time. The first ten years or so of retirement were excellent for he and mil, but after that... pointless. Years of ill health and now years of "living" with dementia and all assets including house gone. There will be many who won't be paying their own way in care and how this is going to be financed is very troubling.

The lack of protection for pensions has put me right off increasing my contributions!

I can think of too many groups who have been affected -BHS, steel workers etc I think. It's one of the reasons I saved nothing for many years although I could and should have invested outside a pension. Bet I'm not alone in this.

How can you check how healthy your pension provider is? As a layperson I mean.

We have pensions with Scottish Widows, Standard Life and Aviva.

Those will all be fine independent providers assuming you are in a defined contribution scheme

tobitcoin - The lack of protection for pensions has put me right off increasing my contributions!

Pensions are well protected. I mentioned the PPF for DB, and I'll leave others (LondonGirl ?) to expand on that. For personal pensions (with insurance companies such as Scot Widows), the solvency rules give a lot of protection for policyholders. (I'm an actuary working in a life insurer with a lot of pensions business).

The failure of Equitable did for life insurers what Maxwell did for company pensions: ushered in much stronger risk-management rules and a great deal of regulator scrutiny. We have to ensure that we can withstand financial and other shocks, and the regulators (two of them) demand a lot of information and checks to ensure that it is very unlikely that policyholders would suffer.

We were just talking in my office how some industry analysis shows that where we are paying out annuities the capital requirements make us set aside more capital than would be needed if one just assumed that everyone lives forever, so that suggests we are well-covered!

I'm not saying that failure could never happen, but the attention to risks (both known and more speculative) is well-developed in the insurance sector these days - boards of directors have to show that they are taking it seriously.

For a public company their records are public. The financial statements will show a line item with a loss or a gain. If you read the footnotes there will be a section on the company pension and any shortage or surplus. The government pensions are much safer because the government can always just increase the deficit to pay.

In any case I have always saved my own pension. Very few people working in the private sector have a defined benefit pension plan if they are under the age of 40. Now we have higher income we save the maximum allowed.

Re pension security : this is a good reason, as ever, not to put all your eggs in one basket. I’d go for a mix of pension/ property/ savings and other investments ideally. Too much in any one place will always be a risk.

I raised pensions in the office today. A significant number (in their late 30’s and 40’s) have during their working life paid the minimum employee contribution and don’t plan on changing. They said with mortgages and childcare costs together with normal living costs they don’t have any spare money and any they do have (annual bonuses are about to be paid) they would rather enjoy holidays or put money away to contribute towards their DC’s future Uni fees. They are quite realistic that they will have a poor retirement but are more concerned with living and enjoying life now rather than thinking about the future.

NeverTwerkNaked

Even if you have some assets in a house and ISA's etc - who wants to put lots of hard earned money in a pension which might get taken away if the pension company folds... not everyone works for the civil service / local government/ public company.

Wouldn't the self-employed be additionally vulnerable with a SIPP too??

tobit I can see that perspective. I guess as others upthread have said they are much more regulated now, plus the tax relief etc makes it v cost effective. To me it’s about spreading risk and not putting all your eggs in one basket.

Parker - the issue is that it will be the next generation who have to fund the gap left when people decide they would rather enjoy nice holidays and live life now ☹️

PaintingByNumbers wrote "You can lose pretty much all of our future pension if your company or the pension company go bankrupt"

Surely the companies have bought reinsurance for this type of event?

My dad put money into a pension for most of his working life, Gordon Brown plundered it, needless to say he’s still working

It would be the next generation paying in any case, since contributions people pay now will go to fund those who retire/d before them.

hevonbu - insurance companies (who invest personal pension funds) don't use reinsurance for the eventuality of going bankrupt.

As I mentioned earlier on this thread, solvency regulations these days mean that it is very unlikely that an insurance company goes bust.

In any case, most pensions these days would be invested in unit-linked funds and the company has to hold the assets (shares, bonds etc invested across the markets) backing those funds. So even if the company went bust, those assets would still be sitting there and belong to policyholders (the regulator would make sure they got them).

@Ilovegin112 the reversal of tax credits on dividends had a critical impact on Final Salary schemes (though to be fair, so did increasing life expectancy and that wasn't GB's idea!)

But all the FS schemes that my friends and their parents have been in that closed, preserved their benefits from the date of closure for the period that they were in. And those preserved benefits are still an absolute bargain for what the individuals paid for them. Is that not the case for you father?

I've got 10 years in a closed FS scheme. It's bloody annoying that I won't have 30 years in it - I could have had a lovely early and wealthy retirement with it! But all that was taken away from me was money that I didn't already have. What I paid in during those 10 years was cheap compared to what I'll get when it pays out.