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>Final Salary schemes generally only became crippling as funding regulations were progressively lightened and removed during the Thatcher years. This isn't eve

by Ntrails 11y ago

>Final Salary schemes generally only became crippling as funding regulations were progressively lightened and removed during the Thatcher years. This isn't even slightly true - you can look at a company such as BA which is now a pension deficit with an airline attached - the liabilities drastically outsize the company turnover. That means Interest Rate changes and Mortality expectation changes cause changes in funding requirements which are completely un-sustainable. The changes to pension funds under Thatcher (and let's not forget Gordon Brown, too, wanted a piece of that money and was willing to screw people over to get it) definitely had a negative impact - but final/average salary defined benefits pensions are by design unsustainable because they never considered the current economic environment as a possibility. Back when interest rates were 10%+ and most people died before taking 10 years of pension, they seemed like a good idea.

anexprogrammer 11y ago
Hmm you're probably right - I didn't consider sustained low interest rates. The decline started long before rates came down but I've no idea how 30+ years of differently funded schemes would look (ie without the funding changes). That's a lot of compound interest. > let's not forget Gordon Brown Oh he gets no free pass on pensions - he raided them for billions. My personal pension has performed disastrously from 2 bad years it'll probably never recover properly from. There went my early retirement thoughts. My parent's generation retirement options look pretty good.
- Ntrails 11y ago
  We're probably still understating the deficits by assuming interest rates will increase soon™ - and yet the deficits are somewhere in the region of 1.5 times GDP in the UK[1]. It's terrifying I empathise with you on the personal pension - but that's the reality of risk/reward investments. I'd have thought a lot of the bad performance should have recovered based on current markets? Depending on your age the solution is usually to: -Contribute more -Risk on (aiming for higher rewards) -Work longer. I think it's really really important to recognise that early retirement probably means finishing work ~65 years old if you want a comparable "lifetime in retirement" to earlier generations who retired at 55. One simply cannot expect to spend 25 years in full retirement after only working 25 years. I think as a society we've got to make some huge adjustments in expectations, because we're stuck in a mindset from 70 years ago that isn't really viable. Personally I expect to aim to retire "early" into a different role that is less stressful and in the countryside - but I don't intend to stop working until much later. [1] I haven't seen updated numbers in a few years, maybe it's better now..

by Ntrails 11y ago

anexprogrammer 11y ago

Hmm you're probably right - I didn't consider sustained low interest rates. The decline started long before rates came down but I've no idea how 30+ years of differently funded schemes would look (ie without the funding changes). That's a lot of compound interest. > let's not forget Gordon Brown Oh he gets no free pass on pensions - he raided them for billions. My personal pension has performed disastrously from 2 bad years it'll probably never recover properly from. There went my early retirement thoughts. My parent's generation retirement options look pretty good.

Ntrails 11y ago
We're probably still understating the deficits by assuming interest rates will increase soon™ - and yet the deficits are somewhere in the region of 1.5 times GDP in the UK[1]. It's terrifying I empathise with you on the personal pension - but that's the reality of risk/reward investments. I'd have thought a lot of the bad performance should have recovered based on current markets? Depending on your age the solution is usually to: -Contribute more -Risk on (aiming for higher rewards) -Work longer. I think it's really really important to recognise that early retirement probably means finishing work ~65 years old if you want a comparable "lifetime in retirement" to earlier generations who retired at 55. One simply cannot expect to spend 25 years in full retirement after only working 25 years. I think as a society we've got to make some huge adjustments in expectations, because we're stuck in a mindset from 70 years ago that isn't really viable. Personally I expect to aim to retire "early" into a different role that is less stressful and in the countryside - but I don't intend to stop working until much later. [1] I haven't seen updated numbers in a few years, maybe it's better now..