Thursday 6 August 2009

FTSE100 Pensions in Crisis; half the story

The huge falls in the stock market have really hit the FTSE100 pension liabilities. Ever since the controversial accounting regulation, FRS17, came into being, FTSE 100 companies have had a hard time showing any profits in their pension schemes, although they did collectively at the top of the boom.

Now they are £100 billion in debt which means the remaining defined benefit schemes are going to be closed, like Barclays.

Luckily for the Government, there is no FRS17 for the public sector. Here the unfunded liabilities run out into the far future with £100's of billions of debts. A far worse crisis than the private sector and one that the next Government will have to finally face up to.

Oddly there is a relatively easy solution to such a huge problem, shift the retirement age to 70.


Houdini said...

Oddly there is a relatively easy solution to such a huge problem, shift the retirement age to 70.

And Brown gets away with this piece of criminal incompetence scot free.

The Tories should make this the mainstay of the next attack and make sure, sin simple terms, that the voters know who is responsible and what the implications are.

But they won't because they are too clever and the voters too thick to understand [sic]

Sumoking said...

LOL @ any government facing up to the pension crisis

Simon Fawthrop said...

If we are to raise the pension age to the equivalent of 65 when it was first created then it needs raising to about 80 years old, if not slightly higher.

And that won't happen.

Does anyone remember how everyone yawned whenever MAggie raised this issue? Tory scaremongering etc exp from Labour and the left.

Chickens. Home. Roost.

CityUnslicker said...

Gonna happen one day. maybe one for the IMF list when they 'get0in'

Electro-Kevin said...

So we can't get any retirement ...

... while our kids can't get any work.

We can't ALL work in McDonald's.

Sackerson said...

Oddly there is a relatively easy solution to such a huge problem, shift the retirement age to 70.

Teachers, nurses, surgeons, dentists, bus drivers, airline pilots? Taking the first of these, I used to get long-term stats from the Teacher's Pension Agency and until they revised disability definitions, 1 in 4 was going to get early retirement on health grounds - and that's when the SRA was 60, not 65 as now for new entrants. Deferring the retirement age won't make them able to work longer - all you'll get is more early retirements and resignations (and bankrupts, if they can't get their pension) - and deaths, of course. Oh, and jailings - anyone else for a 2-pound weight round a kid's head?

Occupational schemes won't make up for the loss of the State pension: you note what's happening with company pension schemes; and if the unthinking element of the MSM and bloggertariat has its way with public sector pensions, the recruitment crisis in frontline jobs like teaching will burst. Few people have dying in harness as their dearest wish.

Electro-Kevin said...

I've just seen a retired copper on Sky News giving a press conference on the McCann case.

He looks about 45. Retired ???

A lot of people in the public sector retire at 50. How can this be reconciled with forcing private sector workers to work into their 70s ?

Nature will find a way.

Steven_L said...

Why isn't anyone suggesting women retire at 65 like men? One for Mrs Harman to take up perhaps?

dearieme said...

Jeez, people, get a grip. The original OAP pension age was 70, not 65. The female retirement age (for OAP) is already in the course of moving up to 65. Then both male and female will move - though probably too slowly - to 68.

CityUnslicker said...

Thank you dearime.

At a personal level retirement seems like a hideous penal sentence. It is not something I intend to embrace.

Sean said...

or we could let plp retire when they want and incentives the process with more benefits/money the later you leave it?

Sackerson said...

EK: it's min 55 now, by law. In the US you'll find police retired at 45 on 90% of former pay, I believe.

DM: When SPA was 70, far fewer people got there. Even now about 1 in 4 is pushing up daisies by 65.

Old BE said...

The neater solution is actually to abandon occupational pensions altogether. Let people run their own savings. That would set the public sector free and also end this ludicrous situation where a profitable company can go under because of a pension fund deficit.

roym said...

thats very accurate E-K.

how do you know that chap didnt use olay every night!

plenty of people retire young in the private sector too. theyre called non-exec directors

Demetrius said...

The public sector pensions problem came over the horizon twenty years ago, and has been coming ever closer since. Now it is much nearer and very big, and no party seems to have any answer to it. This is going to turn ugly.

James Higham said...

"We cannot ignore the challenge of unfunded public sector pensions."

It's a mess.

Anonymous said...

Retirement at 70? Yeah, right. Who is going to do the employing when people in their forties are thrown out of work and denied the chance of working again because they are deemed ’too old’ by employers that want to import dirt cheap youngsters?

Maybe the government should address the issue by offering us euthanasia for the terminally unemployed. Better dead than to live in poverty for decades until we die. If a chance to end the suffering with a bit of dignity and as pain free as possible would be welcomed.

I’m thinking along the lines of that scene in Soylent Green. I want one just like that please.

CityUnslicker said...

Anon - your post is why we need a self-starter culture. I am threatened with losing my job every year. Faced nine redudancy rounds in 9 years and I am only 33.
If someone else does not think your good enough, then get on by yourself.

This heart of Thatcherism was its greatest asset.

Mark Wadsworth said...

Chaps, what you all overlook is that there ain't no pensions 'crisis'.

To the extent that the government (using taxpayers' money) can 'do' something, all it needs to decide is two variables:

a) The per cent of GDP that should be paid as old age pensions, let's say 5% (roughly the current cost of state pensions, excluding public sector pensions).

b) The qualification age, let's say 65 for men an women, which gives you about 10 million who'd qualify.

Divide a) by the answer from b) and you get about £140 per week per pensioner. If you want more than that, save up for yourself. Everything else should be shut down or phased out and all the tax breaks can be scrapped ASAP.

All pensions do is transfer income from working age to older people.

Whether that is by working age people 'saving up for retirement' and then living off investment income; or by working age people paying for older people through their taxes is neither here nor there, and the latter is administratively far simpler and cheaper to run and less risky for all concerned.

That's that fixed, next.