Private Sector Pensions

[um pahars]

Not a thread to reignite the ridiculous Public v Private Sector debate, but one to discuss what I thought was one of the startling "facts" that was trumpted so much yesterday.

 

Namely, the number of Private Sector employees who do not have a "company pension".

 

All the Private Sector companies I worked for provided decent pensions from General Motors, TVS, Meridian, Granada, Guinness World Records, Britt Allcroft and at one point my TVS Pension had 22% contributions per month going in to it (7% me & 15% co.).

 

So I suppose my two questions would be:

 

1) Why aren't companies providing pension contributions anymore? Has the Private Sector moved away from large multinationals more towards SME who find it "difficult" to afford contributions?

 

2) What is going to happen when this large rump of the working population hit retirement? Will they be able to survive on just the state pension? Will people have made their own provision to support themselves in retirement? Will the state have to contribute more over and above the pension on other things (heating allowances etc)?

[thefunkygibbons]

More interesting is the attitude of employees

 

My company will match employee contributions upto 5% and yet fewer than half of staff have signed up

[CB Saint]

15% contributions was pretty mega

 

These days (outside financial services) i suspect it is a lot less. B&q give 3%, as do many companies, I worked for one company who said I would have to take a pay cut to cover the employer contributions if I wanted to cover the scheme!! The larger multinational are better, however so many people are employed by smaller businesses who cannot afford to make these payments.

 

The issue highlighted above where employees elect not to join a scheme is unfortunately prevalent. Someone in their twenties is more often than not paying 9% towards their student loan, paying rent and trying to save for a deposit for a house, on top of trying to live a lifestyle of sorts. Pensions don't even register, or they cannot afford to pay the contributions. That will all change next year when pensions become compulsory.

[Joensuu]

My employer will match a whopping 3%. If I work until retirement I will have an annual pension of less than 1/5th of my salary. Is it worth it?

[CB Saint]

2) What is going to happen when this large rump of the working population hit retirement? Will they be able to survive on just the state pension? Will people have made their own provision to support themselves in retirement? Will the state have to contribute more over and above the pension on other things (heating allowances etc)?

 

A super tax on everyone receiving a state funded final salary scheme pension, as these people will be the new uber rich in 30 years time.

[so22saint]

by 2014 all companies will have to pay something into a pension. something being quite small mind you. auto-enrollment is the name of the legislation.

 

if stockmarkets carry on like they have for he past 10 years, they'll be worth naff all tho

[Doctoroncall]

Well this certainly hasn't helped!

[stockysaint]

I think this thread is the question government's should be asking themselves, trying to divide the working population into the haves and have-nots to diminish public support they are showing the major flaw in their argument.

The race to the bottom on pensions just means that if public sector pensions become as useless as private, people will do as they do in private sector and not bother making pension provision for themseleves; thereby creating a vastly greater burden on the exchequer (taxpayer).

The governments only measure to deal with this albeit quite astute (tongue firmly in cheek) is to keep raising the age of retirement so workers croak before they are eligible for pensions.

What a civilised society we live in.

[dubai_phil]

Thing is UP, there is another set of stats that needs to go hand in hand with the data you've questioned, and part of that may help the answer.

 

These days, it's extremely rare to get "A Job for Life". People chop and change much more regularly. Also you have the whole world of name changes & M&A's. When I started working GEC & Marconi had great schemes, I could have been set up for life, but where are they now?

 

Going back to my pre expat days, I worked for 3 or 4 years and moved up the ladder. I would have a scheme but then it became horrific to try and move it, great lumps would disappear in "transfer costs and fees" and by the time you had it in the new scheme it would be time to move on up the ladder again. At age 20 something, out of Uni & in debt it is VERY hard to see how you will stay in the same job long enough to earn the number of years service to gain a full pension so "What's the point". So you never get into the habit.

 

Think the actual answer lies in a slightly dfifferent question, Is it time to totally review the entire "Pensions Industry" after all the money you pay in every month has to be invested in someone like Friends Provident who then employ armies of administrators and call centres in large buildings and then let their Investment Bankers put your money into CDS & Derivatives and and and..

 

Surely there must be more simple ways for people to make their own investment choices on-line these days. Is it right that everyone pays other people to look after their money?

 

Is it a fault of the benefits society that nobody pays in - all assuming everything will come out alright, or is it that in the modern working era Individual Company Schemes have become dinosaurs because of chopping and changing to move up a career ladder?

 

Sure SOME people stay for the number of years to get the full benefit but many many do not.

 

Down here for us - we get nothing nada nowt, if we don't save we will starve to death when we finally come home. But it ain't that easy back there because of all the tax concessions etc.

[doddisalegend]

There are alot of people in the lower end of the pay spectrum who are struggling to make ends meet in the here and now saving for 30 or 40 years time seems like a low priority when your struggling to pay the gas bill right now.

[pedg]

...

wrong thread....

[Weston Saint]

When I took my voluntary redundancy/retirement in 2003 with a major international blue chip plc it was a non contributory final salary pension based on 40/60th's

. They had made a slight mistake with my notice which would have taken me into 2004 so they gave me an ex gratia amount to cover salary, bonus, pension contribution by the company to put that right. The pension contribution from the company into the fund was 25% of my salary!

 

Just after I left they closed the final salary to new employees and existing staff had to pay 5% contribution. Last year they closed the final salary scheme to all employees and limited their contribution to any new scheme.

 

That seems to be the way all companies in the private sector are going. There are major changes going on so it is only right that the public sector changes in pension follow, if not so harsh as the private. If you work for the state to serve the community you deserve a reward but it has to be relative to the private sector

 

But as UP says in his opening post, what is going to happen to the younger generation when they reach retirement age? It will be a major strain on the welfare state which will not be able to cope.

[buctootim]

A lot of people think short term and would rather have say an extra 10% on their salary than 15% employers contribution going into a pension.

[dune]

This is yesterdays news. Time to move on, just like all of us in the private sector did.

 

What is is with public sector workers thinking they are entitled to superior treatment?

[Lord Duckhunter]

The end for decent pension provision for Private sector workers can be traced back to March 1998 and Gordon Brown's first budget.He plundered the pensions of hardworking people and was specifically warned against doing so and what the consequences would be.

 

Documents were released on 30th March 2007 under the Freedom of Information Act from Her Majesty's Treasury which show that Internal Treasury forecasts, advised that his changes would "cause a shortfall in existing assets of up to £75 billion" and that "employers would have to contribute about an extra £10 billion a year for the next 10 to 15 years to get pension scheme funding back on track".These papers that were sent to Gordon Brown the Chancellor before he did away with the dividend tax credit and also advised that the worst effected victims would be the poorest members of society.

 

Faced with a £10 billion a year bill for another 10-15 years nearly all companies did away with their defined benefit plans.

[Seaford Saint]

Dune you are a mong. Vodafone will make £10,000,000,000 profit during this financial year, maybe even reaching 12 billion How much would it take to keep their entire workforce in a gold plated defined benefit scheme? I wager £100 million would easily cover it.

 

So mr brain dead, the conclusion I draw is that sheer greed is the motivating factor here. I do well from vodafone and it's not a complaint but there are many blue chip firms who could support the workforce, those without whom there woul be no profit, but choose not to.

 

It's a

 

classic case of a multinational having divergent aims...don't get me started on off shoring and outsourcing.

 

This is doing more damage to our country, the one you purport to love.

Edited 1 December, 2011 by Seaford Saint

[CB Saint]

Dune you are a mong. Vodafone will make £10,000,000,000 profit during this financial year, maybe even reaching 12 billion How much would it take to keep their entire workforce in a gold plated defined benefit scheme? I wager £100 million would easily cover it.

So mr brain dead, the conclusion I draw is that sheer greed is the motivating factor here. I do well from vodafone and it's not a complaint but there are many blue chip firms who could support the workforce, those without whom there woul be no profit, but choose not to.

 

It's a

 

classic case of a multinational having divergent aims...don't get me started on off shoring and outsourcing.

 

This is doing more damage to our country, the one you purport to love.

 

I'll have a few quid on that - vodafone have around 90,000 employees - £1,000 pa into the pensions isn't going to go far

[Johnny Bognor]

1) Why aren't companies providing pension contributions anymore? Has the Private Sector moved away from large multinationals more towards SME who find it "difficult" to afford contributions?

 

2) What is going to happen when this large rump of the working population hit retirement? Will they be able to survive on just the state pension? Will people have made their own provision to support themselves in retirement? Will the state have to contribute more over and above the pension on other things (heating allowances etc)?

 

There are over 1.2 million employers in the UK, however there are only 33,000 with more than 50 employees and only 2,900 with 500+ employees.

 

At the top end (ie more than 500+ employees), the pensions on offer are generally excellent. You would still expect a decent pension in the mid-market (50 to 500 employees). However, this leaves 1 million+ businesses that are in fact very small, with more than 800,000 businesses employing fewer than 9 employees. The vast majority of these businesses cannot afford a pension scheme. The stakeholder scheme was designed to encourage pension uptake, however the government are now having to force it upon smaller businesses. This does not take into account the 3m businesses that are effectively one man bands.

 

Often those who work in large corporates, who then move to the public sector, are often as far divorced from reality as those who have only worked in the public sector.

 

It really shouldn't be about public sector versus private sector, but SME versus the rest!

[dune]

I'll have a few quid on that - vodafone have around 90,000 employees - £1,000 pa into the pensions isn't going to go far

 

Twentytwentvision you are a mong.

[Clapham Saint]

Dune you are a mong. Vodafone will make £10,000,000,000 profit during this financial year, maybe even reaching 12 billion How much would it take to keep their entire workforce in a gold plated defined benefit scheme? I wager £100 million would easily cover it.

So mr brain dead, the conclusion I draw is that sheer greed is the motivating factor here. I do well from vodafone and it's not a complaint but there are many blue chip firms who could support the workforce, those without whom there woul be no profit, but choose not to.

 

It's a

 

classic case of a multinational having divergent aims...don't get me started on off shoring and outsourcing.

 

This is doing more damage to our country, the one you purport to love.

 

I'd wager that wouldn't come close.

 

If somebody can be bothered to download their accounts we could get a reasonable idea.

[CB Saint]

I'd wager that wouldn't come close.

 

If somebody can be bothered to download their accounts we could get a reasonable idea.

 

http://www.vodafone.com/content/annualreport/annual_report11/downloads/vf_ar2011_postemploymentbenefits.pdf

 

There you go - they spent £134m on pensions last year

[Seaford Saint]

I'd wager that wouldn't come close.

 

If somebody can be bothered to download their accounts we could get a reasonable idea.

 

Twentytwentvision you are a mong.

 

I am talking about vodafone paying some of their profits into keeping the pension funds they started in surplus. It might be 2 % but whatever the figure is in my view those who provide the wealth on behalf of shareholders should be looked after, and they were until recently. I am not hard done by at Vodafone either, my 12 years service at vodafone is already providing me a good earner but I worry about my kids and how they will survive. I look forward to HP providing me with an extra £6k in 4 years time too. My wife has taken her final salary pension 10 years early so we are comfortably off.

[teamsaint]

for most people, unless you are in a decent company pension scheme, contributions are just a way of locking away what little spare money you have until the insurance company or government see fit to let you buy an annuity with the pittance left after charges.

 

For personal pensions, the government will keep raising the age you can get your money out. They really hate us having our own money.

[Minty]

This is yesterdays news. Time to move on, just like all of us in the private sector did.

 

What is is with public sector workers thinking they are entitled to superior treatment?

 

dune - UP started a perfectly reasonable thread about PRIVATE sector pensions. So why wade in with such a complete ignorance of the OP and his point?

 

My personal theory is that you're on a permanent wind up and that you're a troll. I probably shouldn't have even bothered replying to you, but given that you told me on the other thread yesterday how you only reply to those who respect your point of view, and you ignore others, I thought it was worth highlighting (again) your complete lack of respect for others.

[um pahars]

Some interesting responses and Dubai Phil and Johnny Bognor have sought of hit on what I thought, in that the days of large companies, jobs for life, decent employer contributions and widespread pension schemes have decreased massively and that for whatever reasons SME don't seem to be as able (or willing) to be as "generous".

 

So how will this be resolved, as I haven't seen or heard anything that convinces me that the Private Sector will step up to the plate with regards providing support for their employees in their retirement? Should the Private Sector be more generous with its provision (can they be more generous given the current economic climate?)?

 

All I can assume is that the State will be left picking up a large benefits tab as so many people will retire in future years with insufficient pension schemes to cover them through retirement.

 

How do other European countries manage to do better with regards pensions? (although that might be up for debate when Europe implodes!!!).

[Minty]

So, back to the OP.

 

Personally, as others have mentioned, I think most people struggle to look beyond the next year or two, if that. Especially when they're young and pensions are mentioned, they tend to think 'Why do I need to think about that?' It's another reason why I think some kind of financial planning education should happen in schools, because it would have numerous real world applications, from personal pension scenarios, to understanding global economics, to business finance and more.

 

I think it is symptomatic of the modern short-term life and culture, and that most people, be they in the private sector or public, struggle to look beyond the next few years, and beyond their own personal situation. This dynamite combination of selfish short-termism is responsible for a lot of the worlds problems, not just financial ones, and is going to be very difficult, if not impossible, to reverse IMO.

[um pahars]

So, back to the OP.

 

Personally, as others have mentioned, I think most people struggle to look beyond the next year or two, if that. Especially when they're young and pensions are mentioned, they tend to think 'Why do I need to think about that?' It's another reason why I think some kind of financial planning education should happen in schools, because it would have numerous real world applications, from personal pension scenarios, to understanding global economics, to business finance and more.

 

I think it is symptomatic of the modern short-term life and culture, and that most people, be they in the private sector or public, struggle to look beyond the next few years, and beyond their own personal situation. This dynamite combination of selfish short-termism is responsible for a lot of the worlds problems, not just financial ones, and is going to be very difficult, if not impossible, to reverse IMO.

 

I think you're right in that we all seem to be so short term nowadays (that said, I remember waiting a while in my late teens to join the mega generous 15% company TVS Pension Scheme as it meant I had to give up 7% of my drinking fund).

 

I just can't see how we will change the culture of saving, even with the new NEST scheme. I just think people will just try and put off the inevitable as long as they can and not think about it.

[CB Saint]

The only way is to make compulsory. 10% employee and matched by employer, but who hell can afford that

[Minty]

I just can't see how we will change the culture of saving, even with the new NEST scheme. I just think people will just try and put off the inevitable as long as they can and not think about it.

Well, as i said, I think education has a big part to play and that the government actually stand to gain a lot by including it in the curriculum. It will be difficult but it's not impossible, and arguably the current issues in the world should really help highlight how important it is more than ever.