Posts Tagged ‘ pension ’

New pension proposals bring higher costs – UK insurers

New pension proposals bring higher costs – UK insurers.

The Association of British Insurers issued a warning against Pensions Minister Steve Webb’s flagship project, dubbed ‘defined ambition’ pension provision, saying that it will be too costly.

In a wide-ranging document, released in full today, the association that considers the role of insurers in Britain said that the new pension system will be too costly to deliver satisfactory outcomes and too difficult to regulate.

The ABI said that whilst defined ambition schemes have the benefit of apparent simplicity to the employee, they also face formidable obstacles. In fact, according to a finding from a recent study by the Institute and Faculty of Actuaries, guarantees on pots that can be moved from one employer to another are likely to cost more than they are worth.

Moreover, it believes that the similarity to with-profits funds is likely to incur the scepticism of regulators.

Meanwhile, a rapidly ageing UK in which the older generation disproportionately holds the majority of financial assets continues to place an unsustainable burden on younger adults, who have neither the house price appreciation or the generous pensions available to those now retired.

In recent weeks, defined ambition schemes have been a particular focus for Webb, who believes that they may offer more retirement security for members than is currently available under defined contribution savings scheme, but lower risks for employers than under the defined benefit schemes offering benefits as a percentage of final salary.

However, these schemes have proved so risky and expensive for employers that roughly 80% of private-sector employers have closed these to new members and a growing number are closing them to future accrual of benefit.

Defined contribution schemes have very uncertain outcomes and retirement incomes depend not only on investment returns, but also on the state of the annuities market and interest rates at the point a worker leaves the labour market.

Final salary pension becoming extinct

Final salary pension becoming extinct.

Final salary pension becoming extinct

A survey has shown that all FTSE 100 companies’ final salary pension schemes could be shut within a decade, after more than a quarter of companies have already shut their final salary pension schemes to all their workers.

The number of employees without a final salary pension has increased to 34%, as 27% of the UK’s largest companies have closed schemes to both new and existing members.

In recent weeks, companies including Axa and DHL have been among those announcing plans to close final salary schemes to existing members, having already introduced less costly defined contribution schemes for new employees.

Final salary, also known as defined benefit, schemes are under pressure after a combination of increased life expectancy and low gilt yields have made it increasingly expensive to provide the retirement incomes promised.

Many company pension schemes already have large deficits and changes in the rules around national insurance contributions, set to come in when the flat-rate state pension is introduced in 2016, will add to the cost of running a company pension scheme – according to experts.

Some also warned that larger than expected deficits and the loss of national insurance rebates from 2016 may lead even more employers to close their schemes sooner rather than later.


Re blogging -Nigel Green Blog -HSBC cut pensions despite huge profit

The below is comments from deVere CEO Nigel Green blog which I have copied , a link to the article is also below .

It’s very interesting , anyone who thinks these scheme are guarantee are mistaken, a guarantee is only as good as the person guarantee it.

Nigel Green Blog -HSBC cut pensions despite huge profit ( link to blog and article )

HSBC bank bosses yesterday posted profits today of £13.7 billion – at the same time as launching an attack on their workers’ pension scheme.

The bank’s chiefs plan to close down HSBC’s final-salary pension scheme in an effort to boost their huge profits even further.

They announced the decision to close the pension scheme to “future accrual” – the build-up in value of pensions – effectively freezing the scheme. It condemns future retirees to struggle financially and potential poverty after a lifetime’s work.

HSBC bosses said that shutting the scheme, combined with cutting holidays and sick pay, would save the bank £46 million a year.

Ex HSBC employees may well decide, that if HSBC aren’t committed to the pension, they may well be better off transferring existing benefits.

Companies are increasingly scrapping private-salary schemes to save money. The reality is whether employees like it or not, they we are all have to plan and take responsibility for our own pensions.

Individuals can’t rely on company schemes or the government in today’s world.

Nigel Green deVere Group

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