Posts Tagged ‘ Pension Deficit ’

Lehman pensions case: a much needed reality check –

This was written by our CEO Nigel Green ,
Very interesting article on some “safe pension schemes ” that turned out not to be so safe .

Nigel Green -Lehman pensions case: a much needed reality check

Lehman pensions case: a much needed reality check The bankrupt groups Lehman Brothers and Nortel Networks (a Canadian telecoms organisation) won a landmark case in the Supreme Court yesterday over The Pensions Regulator’s (TPR) assertion that pension members should be given priority over the firms’ other creditors. Lehman Brothers and Nortel Networks left pension deficits of £130 million and £2.1 billion, respectively. This is a case where the term ‘landmark’ is certainly not wheeled out flippantly, as the ruling is likely to set a precedent for the other companies which fail and subsequently leave behind pension deficits. If nothing else, this judgement finally provides clarity to pension members that their pensions take no special priority within the company and any handout of assets in the event of liquidation. There is growing realisation among pension members that their once-considered ‘bullet proof’ final salary schemes are not so secure after all – and should their sponsoring company go into liquidation then they may find themselves waiting patiently in line with the rest of the company’s unsecured creditors. With economic concerns still prevailing, coupled with huge advances in technology (making it likely that some corporate giants of today might not even exist in decades to come) , it would be almost impossible to say that, in the vast majority of cases, company pension schemes are these days ‘guaranteed’. Indeed, as I recently pointed out, these schemes are, by their very nature, reliant on the financial stability of the members’ firm. The question someone, especially a younger worker, should ask themselves is ‘will my company still exist and be financially sound in three or four decades’ time when I come to draw my pension?’ The news underscores once again what deVere has been saying for years – that financial security is increasingly becoming a personal responsibility for each and every one of us – we can no longer hold on to assumptions that greater agencies (such as companies, the State) will be able to provide for us in the way they have done for previous generations. The world has changed. With this in mind, we need to ensure we have a sound, efficient and achievable financial plan in order to reach – and hopefully exceed – our objectives, which include for most people is financial freedom in our mature years.

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7,000 mineworkers retirement takes HUGE HIT ! British Coal Pension enters PPF , Who’s Next ?

I wrote an article for the British Chamber of Commerce Japan Magazine in March saying that there will be more and more pension schemes going into the PPF Article here , today British Coal went into the scheme.

The retirement income of 7,000 mineworkers at UK Coal, Britain’s largest coal mining business, took a hit on Tuesday . Why you ask ? as the pit operating group responsible for repairing the pension deficit of at least £450m sank into a long-anticipated administration.

The PPF—a statutory fund run by a statutory corporation—has neither government guarantees nor funding. The fund’s objective—to pay compensation to defined benefit (DB) pension scheme members when their employers go bust and cannot afford to pay what they promised—is to be commended. PPF has taken over responsibility for partially honouring the pension promises made by UK Coal before it went into administration .

Looking at the figures the PPF is looking like it will be taking on a deficit of £500m ! Making it the largest ever deficit to enter the scheme dwarfing the Nortel deficit which was £333m in 2009 .

I believe there are other schemes that are on the edge of entering the PPF scheme , What this means ? Simple the income you thought you were going to have from your pension will not be that !

Because of this I have created a list of my top 10 pension schemes who is on my watch list , Many of them are in the FTSE 100 .

Tony Evans

http://www.ft.com/cms/s/0/306e2522-e893-11e2-aead-00144feabdc0.html

BA pension deficit increases but shareholders can receive dividends re blogged Nigel Green Blog

Great article by our CEO,

http://www.nigel-green.com/2013/06/11/ba-pension-deficit-increases-but-shareholders-can-receive-dividends/#comment-20031

BA pension deficit increases but shareholders can receive dividends
11JUN
BA pension holders were let down again today as trustees of the pension scheme allowed BA to restore dividends to its shareholders despite the BA pension deficit increasing.

It seems to me that deficits are now just being accepted as the normal. If allowed to pay dividends with their massive deficits still in place what incentive is there for companies like BA to re-float their pension schemes.

British Airways announced an agreement with the trustees of its large pension schemes that should lift a restriction on the airline paying a dividend.

The dividend bar was put in place in 2010, when the deficit in British Airways’ two defined benefit pension schemes was put at £3.2bn, and the airline committed to payments to fix this.

In the latest actuarial valuation of the schemes announced on Tuesday, the deficit was estimated at £3.3bn. British Airways said it would make annual payments of £360m over a 10 to 13 year period to the pension schemes, partly to fix the deficit.

With payments as low as this agreed there is little or no chance in my opinion of BA catching up on its pension deficit.

Early this year I said a big pension scheme will fall

Nigel Green deVere group

Blog written 11th June

12 months to save UK final salary schemes – UK Pensions Minister

On March I wrote an article well this seams to be an answer 12 month , and that’s from the Pension Minister.

I have spoken to many people on this , and we are helping many . So if you want to know what you can do or like more info on this please drop me a mail tony.evans@devere-group.com

UK has 12 months to save final salary schemes – Pensions Minister.

UK Pensions Minister Steve Webb warned that there may only be a year to save company pension schemes that offer a guaranteed payout to savers and that there is ‘no point trying to apply electrodes to the corpse’.

Speaking to the pensions industry, Webb said that companies are opting to close defined benefit schemes and instead introduce defined contribution schemes where the members’ payouts are based on the performance of the investments and the annuity they buy with their fund on retirement.

However, Webb wants to see more ‘defined ambition’ schemes, which offer a middle ground with more secure payouts than a DC scheme, but this means that employees will take on more risk.

Webb believes that next year offers a critical opportunity to talk to companies about what they are offering their workers, as the programme to automatically enrol workers into pensions is rolled out and the introduction of a flat-rate state pension is fast approaching.

Defined benefit pension schemes, also known as final salary schemes, have been under pressure in recent years, since a combination of increased life expectancy and low gilt yields have made it increasingly expensive for companies to provide the retirement incomes promised to members.

Notably, research by the Pensions Protection Fund showed that by the end of April 2013, 5,142 of the UK private sector schemes were in deficit, with the total shortfall between liabilities and assets adding up to £257 billion.

Nigel Green CEO deVere Group comments

http://www.guardian.co.uk/money/2013/may/15/final-salary-schemes-pensions-minister

http://www.express.co.uk/news/uk/400226/Final-salary-pensions-in-meltdown

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UK company pensions – the end is nigh? Or even closer??

BCCJ Acumen March 2013 issue

UK company pensions – the end is nigh? Or even closer??

2007 saw the world suffer the largest financial meltdown of our generation, and while this was a key catalyst in today’s pension crisis, it is not the sole issue.

Coupled with a rise in life expectancies, this has now created a major problem for ANYONE (British, or non-British), with a UK pension, and expecting to receive an income in retirement.

The UK retirement age was set at 65 in1948 to provide financial support in the final year or two of life – the average life expectancy for a male at this time was 66.8.

Today the average life expectancy is in the 80’s and rising!

Pensions were designed to fund short retirements, not 20 or 30 years of retirement. As people’s life expectancy rose so did their expectations for an early and long retirement; in some cases 30 years of work and 30 years of retirement!!!
Pure Madness

Today 80% of UK company pension schemes are in serious deficit; they do not have the financial assets to meet their liabilities. Consequently the amount of pension income received in retirement could be significantly less than expected. Ten people for tea, only six sandwiches on the plate…

A guarantee is only as good as the one making the guarantee! In the words of Benjamin Franklin “‘In this world nothing can be said to be certain, except death and taxes.”

The UK has 7,800 pension schemes, and 1,184 have gone bust due to company failure or unsustainable funding ratios.

On average, 15 schemes a month are falling into Pension Protection Fund (PPF) and at this rate 25% of all Final Salary schemes will fall within the PPF within 7 years.

The PPF is a statutory fund run by a statutory corporation, not the government and has neither government guarantees or funding. It’s objective is to be commended, to pay compensation to defined benefit pension scheme members when their employers go bust and cannot afford to pay what they promised.

PPF Assets per member 2010/2011 £86,500
PPF anticipated assets per member 2015 £34,000

Once a DB scheme enters PPF assessment the opportunity for members to transfer out is gone.

But won’t the value of my pension recover?

Very unlikely :

• 60% of UK pension scheme money is invested in government bonds, not equities, therefore little growth!
• It is a myth that final salary schemes are guaranteed, they are NOT.
So in the BOOM in the stock market in 2013 (FTSE up 7.26%) UK pension schemes missed out!

11 FTSE 100 companies have pension liabilities in excess of their market capitalization:-

British Airways
British Telecom
BAE Systems
Royal Bank of Scotland
RSA Aviva
Lloyds TSB
GlaxoSmithKline
Marks & Spencer
Barclays
ITV
Sainsbury’s

BA’s DB pension scheme liabilities are 5 times the value of the company.

Many schemes are unsustainable and represent a serious risk to the future survival of the company.

What should you do?

If you have a frozen (DB) final salary scheme, then there has never been a better time to transfer into a Qualified Recognized Overseas Pension Scheme (QROPS). Why? Transfer values are 80 per cent higher today than they were six years ago.
Why the increase in QROPS ?
People are frustrated with Chancellor Osborne moving the goal post on pension benefit , age of retirement , contribution . When there is confusion people don’t do anything . People want some certainty , in Japan people have seen the £ go from 240 to 140 , seeing their incomes halved !

What can I do ?
Sit down and review your current situation , the pension itself and the scheme.
In my position as Area Manager of deVere Group Japan I have personally seen an increase in individuals fearful of the current UK pension crisis . With good reason there is an unprecedented window of opportunity available to eligible DB scheme members today that may well not be there tomorrow.
Due to the complex and convoluted nature of pension & pension transfers, the deVere Group have commissioned an independent actuary to prepare a report for interested individuals , this is very simple to initiate.

Download the article :
Industry_deVere

QROPS – deVere Japan reaffirms importance of pension transfers.

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