Who is paying for your pension ?

How about answering my question ?

Well, the government wouldn't allow me to put the AVC money into the CARE scheme and turn it into a pension at the same rate as the CARE scheme produced.

Why not ?

I would have happily done that, and from what you suggest, nobody would have been disadvantaged. In fact, on that basis, we might be able to do away with Annuity schemes altogether.

I think we're back to my suggestion above. Compulsary CARE schemes, managed and underwritten by the Government.

Surely the fact you did what you did, means the the taxpayer tops up private pensions.

I suspect you would have been disadvantaged, although no more so than if you'd bought an annuity.

I don't know if it's feasible to do away with annuities, I'd be happy if the government looked into how annuities are calculated and the excessive profits made by the providers.

Everybody can do what I did. Its a level playing field.

Not sure i'm with you on this one.

If i'd been allowed to put £225k into the CARE scheme, it would have generated a pension of c. £21k pa

Buying an annuity would have provided a pension c.£9k pa. Not my idea of a good deal.

Interesting discussion.  I recall at the time my private sector final salary scheme was being withdrawn asking why we couldn't simply increase contributions to maintain it and how much this would cost - nobody in management ever seemed to think this viable and I have no idea why.

Even as a private sector drone I actually congratulate the private sector on managing to maintain their gold standard approach to pensions and I blame corporate and financial services greed as much as I blame Gordon Brown for the demise of good pensions in private companies. 

I am starting to question whether capitalism as a system really benefits the majority of mankind and I'm concluding it doesn't.  What we have in essence is the work life balance, wages and terms and conditions of billions of people being driven down and diminished so that a small minority such as senior Execs and bankers can earn gargantuan remuneration.  The surplus profits from squeezing workers so hard are not taxed properly and are thus unable to benefit society or Governments but are syphoned off into tax evasive domiciles where the money sits in limbo rather than benefiting society at all.

The size of these useless cash mountains is truly staggering - http://www.bloomberg.com/news/...on-at-companies.html and for US based companies alone increased by $183bn last year to over $1.4 trillion.  You could deliver final salary schemes for all about ten times over with that amount of money!

So we now have a system where people are having pay cuts, wage freezes, pension cuts and redundancies at companies where large profits are being made so that a cash mountain which is entirely useless to anyone can be made bigger in order to deprive government of tax revenue it so badly needs.

The world has gone mad, the system is broken and perhaps the answer lies in a more balanced approach as demonstrated by the government sector where the pursuit of profit is not the only consideration but other factors such as employee benefits, environmental impact, social responsibility play a larger part.

Jonathan - whose pension provision rather like his career seems to be following a downward trajectory!!

1992-1995 Royal Insurance non contributory final salary scheme 40/60

1995-2002 British Airways contributory final salary scheme approx. 39/56

2007-date  Flybe contributory money purchase scheme forecast to pay out very little

Before anyone purchases an annuity, and assuming you've a reasonably large pension pot, you should investigate draw-down schemes. I've been retired for over nine years and, with some sound investment advice, have seen a steady increase most years with only a minor dip during the crash (only for one year) and an increasing annual pension payout.

There are risks of course; unlike annuity pensions there's far greater potential for considerable loss, but you've always got the option of purchasing an annuity. In terms of what I would be taking as a monthly pension if I'd elected to buy an annuity when I retired and what I can now draw down annually, the difference is quite staggering. One of my motivations for going down this route is because my wife's considerably younger than me and when I pop my clogs the pension pot I've accumulated will mostly go to her rather than into the insurance company's coffers. 

Of course, there is pressure from financial advisors etc. to go down the annuity route because they cop a healthy percentage of the funds, rather more that they get from annual charges charges for administering Self-Invested Personal Pensions. Of course lots depends on the size of your pot, your individual situation, availability of good advice and how much risk you're prepared to take, but before jumping in and buying an annuity it's an option worth investigating.

Interesting Tony. A couple of questions if I may:

What sort of figure would you say is a "reasonably large pension pot" to consider drawdown?

Taking £100,000 as an easy figure to compare, what would be the difference in annual pensions, between a drawdown and annuity? 

Nice summary Jonathan.

I am beginning to see a small increase in pilots getting jobs over the past 6 months. Still very fragile, but definitely upwards, so to speak. 

Hi count.d, 

They're difficult questions to answer. Going on advice when I originally retired the size of the pot available was taken into account in ensuring, should the investments fall significantly, I had a sufficient buffer to still have a reasonable income. At that time, pre-crash, annuities were paying rather more than those presently available. I had the option of building in inflationary increase but of course that reduced the monthly pension from the start. The money I'm able to draw down is at present limited by the government but as my pension pot's steadily increased over the period this has also gradually increased. I'd need to drag out the original annuity offers to give a definitive answer but I'm certainly receiving at least 40% more than I would have been, should I have purchased an annuity at the time.

As I pointed out in my post, before embarking on a drawdown scheme you need to think carefully, have good financial advice with regard to your own circumstances, and be prepared to take a greater risk.

No takers ? so sticking my neck out......

Under the pre-reform scheme, if his avergae salary over the 20 years had been £25k, his final salary would have been somewhat higher. A simple, hazardous guess, say £30k. It would have been that final salary that was used to calculate his pension ie 1/80 x 20 x £30,000 = £7,500 pa.

Or am I wrong ?

Yes, you are.

What if Peter doesn't achieve a promotion???????????

That looks interesting. Is it possible to initially take up the option of drawdown scheme, then buy an annuity at a later date with what's left of the drawdown fund.

Thanks Tony, all food for thought.

One must also factor in that the Eurocrats have their eyes on your pension as well:

http://www.zerohedge.com/news/...orced-redistribution

And if anyone doesn't think Obama's "MyRA" plan isn't the first step in force feeding us T-bills "for our own good" then you have another guess coming.  In the USA that is literally trillions of dollars, and they can't stand to not have a piece (or all) of it.  After all they screw up, bail out their corporate buddies, and you pay.  It works every time.

Indeed, with the caveat that you need to take into account charges and penalties you might incur from terminating investments before their maturation. It goes without saying that Self-Administered schemes can be very expensive in terms of charges from the various organisations you deal with, so you need to shop around.

Consider this, from Zero Hedge:

At first we thought Reuters had been punk'd in its article titled "EU executive sees personal savings used to plug long-term financing gap" which disclosed the latest leaked proposal by the European Commission, but after several hours without a retraction, we realized that the story is sadly true. Sadly, because everything that we warned about in "There May Be Only Painful Ways Out Of The Crisis" back in September of 2011, and everything that the depositors and citizens of Cyprus had to live through, seems on the verge of going continental. In a nutshell, and in Reuters' own words, "the savings of the European Union's 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says." What is left unsaid is that the "usage" will be on a purely involuntary basis, at the discretion of the "union", and can thus best be described as confiscation.

The source of this stunner is a document seen be Reuters, which describes how the EU is looking for ways to "wean" the 28-country bloc from its heavy reliance on bank financing and find other means of funding small companies, infrastructure projects and other investment. So as Europe finally admits that the ECB has failed to unclog its broken monetary pipelines for the past five years - something we highlight every month (most recently in No Waking From Draghi's Monetary Nightmare: Eurozone Credit Creation Tumbles To New All Time Low), the commissions report finally admits that "the economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment."

The solution? "The Commission will ask the bloc's insurance watchdog in the second half of this year for advice on a possible draft law "to mobilize more personal pension savings for long-term financing", the document said."

Mobilize, once again, is a more palatable word than, say, confiscate.

And yet this is precisely what Europe is contemplating:

 Banks have complained they are hindered from lending to the economy by post-crisis rules forcing them to hold much larger safety cushions of capital and liquidity.

 

The document said the "appropriateness" of the EU capital and liquidity rules for long-term financing will be reviewed over the next two years, a process likely to be scrutinized in the United States and elsewhere to head off any risk of EU banks gaining an unfair advantage.

But wait: there's more!

Inspired by the recently introduced "no risk, guaranteed return" collectivized savings instrument in the US better known as MyRA, Europe will also complete a study by the end of this year on the feasibility of introducing an EU savings account, open to individuals whose funds could be pooled and invested in small companies.

Because when corporations refuse to invest money in Capex, who will invest? Why you, dear Europeans. Whether you like it or not.

But wait, there is still more!

Additionally, Europe is seeking to restore the primary reason why Europe's banks are as insolvent as they are: securitizations, which the persuasive salesmen and sexy saleswomen of Goldman et al sold to idiot European bankers, who in turn invested the money or widows and orphans only to see all of it disappear.

 It is also seeking to revive the securitization market, which pools loans like mortgages into bonds that banks can sell to raise funding for themselves or companies. The market was tarnished by the financial crisis when bonds linked to U.S. home loans began defaulting in 2007, sparking the broader global markets meltdown over the ensuing two years.

 

The document says the Commission will "take into account possible future increases in the liquidity of a number of securitization products" when it comes to finalizing a new rule on what assets banks can place in their new liquidity buffers. This signals a possible loosening of the definition of eligible assets from the bloc's banking watchdog.

Because there is nothing quite like securitizing feta cheese-backed securities and selling it to a whole new batch of widows and orphans.

And topping it all off is a proposal to address a global change in accounting principles that will make sure that an accurate representation of any bank's balance sheet becomes a distant memory:

 

 

More controversially, the Commission will consider whether the use of fair value or pricing assets at the going rate in a new globally agreed accounting rule "is appropriate, in particular regarding long-term investing business models".

To summarize: forced savings "mobilization", the introduction of a collective and involuntary CapEx funding "savings" account, the return and expansion of securitization, and finally, tying it all together, is a change to accounting rules that will make the entire inevitable catastrophe smells like roses until it all comes crashing down.

So, aside from all this, Europe is "fixed."

The only remaining question is: why leak this now? Perhaps it's simply because the reallocation of "cash on the savings account sidelines" in the aftermath of the Cyprus deposit confiscation, into risk assets was not foreceful enough? What better way to give it a much needed boost than to leak that everyone's cash savings are suddenly fair game in Europe's next great wealth redistribution strategy.

Of course there's also this to consider from Zero Hedge:

At first we thought Reuters had been punk'd in its article titled "EU executive sees personal savings used to plug long-term financing gap" which disclosed the latest leaked proposal by the European Commission, but after several hours without a retraction, we realized that the story is sadly true. Sadly, because everything that we warned about in "There May Be Only Painful Ways Out Of The Crisis" back in September of 2011, and everything that the depositors and citizens of Cyprus had to live through, seems on the verge of going continental. In a nutshell, and in Reuters' own words, "the savings of the European Union's 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says." What is left unsaid is that the "usage" will be on a purely involuntary basis, at the discretion of the "union", and can thus best be described as confiscation.

The source of this stunner is a document seen be Reuters, which describes how the EU is looking for ways to "wean" the 28-country bloc from its heavy reliance on bank financing and find other means of funding small companies, infrastructure projects and other investment. So as Europe finally admits that the ECB has failed to unclog its broken monetary pipelines for the past five years - something we highlight every month (most recently in No Waking From Draghi's Monetary Nightmare: Eurozone Credit Creation Tumbles To New All Time Low), the commissions report finally admits that "the economic and financial crisis has impaired the ability of the financial sector to channel funds to the real economy, in particular long-term investment."

The solution? "The Commission will ask the bloc's insurance watchdog in the second half of this year for advice on a possible draft law "to mobilize more personal pension savings for long-term financing", the document said."

Mobilize, once again, is a more palatable word than, say, confiscate.

And yet this is precisely what Europe is contemplating:

 Banks have complained they are hindered from lending to the economy by post-crisis rules forcing them to hold much larger safety cushions of capital and liquidity.

 

The document said the "appropriateness" of the EU capital and liquidity rules for long-term financing will be reviewed over the next two years, a process likely to be scrutinized in the United States and elsewhere to head off any risk of EU banks gaining an unfair advantage.

But wait: there's more!

Inspired by the recently introduced "no risk, guaranteed return" collectivized savings instrument in the US better known as MyRA, Europe will also complete a study by the end of this year on the feasibility of introducing an EU savings account, open to individuals whose funds could be pooled and invested in small companies.

Because when corporations refuse to invest money in Capex, who will invest? Why you, dear Europeans. Whether you like it or not.

But wait, there is still more!

Additionally, Europe is seeking to restore the primary reason why Europe's banks are as insolvent as they are: securitizations, which the persuasive salesmen and sexy saleswomen of Goldman et al sold to idiot European bankers, who in turn invested the money or widows and orphans only to see all of it disappear.

 

 

It is also seeking to revive the securitization market, which pools loans like mortgages into bonds that banks can sell to raise funding for themselves or companies. The market was tarnished by the financial crisis when bonds linked to U.S. home loans began defaulting in 2007, sparking the broader global markets meltdown over the ensuing two years.

 

The document says the Commission will "take into account possible future increases in the liquidity of a number of securitization products" when it comes to finalizing a new rule on what assets banks can place in their new liquidity buffers. This signals a possible loosening of the definition of eligible assets from the bloc's banking watchdog.

Because there is nothing quite like securitizing feta cheese-backed securities and selling it to a whole new batch of widows and orphans.

And topping it all off is a proposal to address a global change in accounting principles that will make sure that an accurate representation of any bank's balance sheet becomes a distant memory:

 

 

More controversially, the Commission will consider whether the use of fair value or pricing assets at the going rate in a new globally agreed accounting rule "is appropriate, in particular regarding long-term investing business models".

To summarize: forced savings "mobilization", the introduction of a collective and involuntary CapEx funding "savings" account, the return and expansion of securitization, and finally, tying it all together, is a change to accounting rules that will make the entire inevitable catastrophe smells like roses until it all comes crashing down.

So, aside from all this, Europe is "fixed."

The only remaining question is: why leak this now? Perhaps it's simply because the reallocation of "cash on the savings account sidelines" in the aftermath of the Cyprus deposit confiscation, into risk assets was not forceful enough? What better way to give it a much needed boost than to leak that everyone's cash savings are suddenly fair game in Europe's next great wealth redistribution strategy.

=============================================================================

And for the Yanks on this forum, don't think that Obama's "MyRA" isn't the first step towards the same thing here in the USA...where you may be forced to buy US Treasuries "for your own good."

apologies for the double post

I pay 6% of my salary and SSE pay 12% toward my pension. We also have share saves we buy shares at a discounted price. Also a SIP share incentive plan. buy 3 shares and get 6 free, I pay in £125.00 a month so its a good return plus you get the dividends as well. We also get holiday plus, where we can buy additional holiday. Can apply to get a lease car on a company scheme. Discounts on electric and gas plus a staff discount. The pay is not the best but the package is quite attractive.

I'm a public sector worker and, respectfully, I would suggest that what I pay into my pension is non of your business but it is considerable.  I can assure you that in my position, if I were working for a private sector company, I would command a significantly higher salary and a range of perks to go with it.  I chose to work in the public sector knowing that salary levels are lower but that there are other advantages which include a fair pensions scheme.  If someone else chooses to work in the private sector and to aim for the highest possible remuneration then good luck to them but they can't expect to have the best of both worlds.  As for the tax payer and value for money, there are some excellent professionals working in the public sector that could make much more money elsewhere - the package that retains them, along with their desire to work for the public, needs to be considered in the rounds, not just on one or two elements that the tories and their pet media float every time they want to cut costs fund rewards for the top 1%  If you remove the good elements of the public sector pay structure you are simply left with below average wages and constant cost cutting pressure and those who are able will leave to work in the private sector

You don't mention whether you agree with my suggestion (inspired by HH) that the Private Sector should have mandatory CARE schemes with the same level of employee/employer contribution as the Public Sector with the Government managing and underwritting both.

That makes 18% which is the same as my 7.2% and my emploer's 10.8%.

I wonder if this is a Public Sector average ?

I don't agree because it only takes into account one element of remuneration and ignores all others. At the end of the day we all make a decision as to what career path we take and that path includes salary levels, pensions, bonus schemes,  work life balance and a host of other considerations. There are pros and cons for either sector, you pay your money you take your choice and then you live with the consequences. I believe that my package is competitive but that it offers vfm compared to my equivalents in the private sector,  if I didn't I'd change employers,  simple really