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> What happened is, he promised a certain pension to his employees. No, he promised to pay a certain amount into an established scheme. Then he did so. He's up

> What happened is, he promised a certain pension to his employees. No, he promised to pay a certain amount into an established scheme. Then he did so. He's upheld his side of every agreement he's been party to. > Then, he put his money in a pension scheme that actually wasn't charging enough. Enough for what? > Now, years later, once some sane accounting rules are put in place, it turns out that there isn't enough money to live up to the promises that were made. What promises? Why do you think they can't be met? > It sucks that a decision like this would make a business go bankrupt There is no business involved here any more. It's just an individual person who once employed people. > but that's what happens when you make financial commitments that you can't afford to pay He didn't make any such commitments. They were conjured out of the air by a legal change that rewrote the terms of his pension contributions retroactively.

lacker 7y ago
He promised to pay a certain amount into an established scheme. That is typically not the case with pensions. That is the whole problem here! With a pension, you promise your employees they will get a certain amount of money in retirement. With an American 401k, you promise your employees that you will contribute a certain amount of money to an investment that they control. So when a pension plan runs out of money, that means an employer is reneging on promises they made to their employees.
- XCabbage 7y ago
  > With a pension, you promise your employees they will get a certain amount of money in retirement. No, that's not how it works for most workplace pensions in the UK now that we have a statutory system for them. There are statutorily-specified percentages of the employee's paycheck that get paid into a workplace pension account by the employer - one percentage as a deduction from the employee's paycheck, the other out of employer's pocket on top of the employee's paycheck. Then the employer's duty is done; the money is now in an account controlled by the employee, they're free to move the money to a different provider if they want to, and if they don't and the provider they're using fails, that's not the employer's problem any more. As I understand it, the agreement the employer and employee had in this case worked in essentially the same way. However, retroactive statutory changes to the rules governing the scheme type had the effect that: 1. The employer retroactively became a guarantor for the liabilities of the scheme 2. The scheme became obligated to have a greater amount of capital on hand to ensure solvency, which the employer was then liable for

lacker 7y ago

He promised to pay a certain amount into an established scheme. That is typically not the case with pensions. That is the whole problem here! With a pension, you promise your employees they will get a certain amount of money in retirement. With an American 401k, you promise your employees that you will contribute a certain amount of money to an investment that they control. So when a pension plan runs out of money, that means an employer is reneging on promises they made to their employees.

XCabbage 7y ago
> With a pension, you promise your employees they will get a certain amount of money in retirement. No, that's not how it works for most workplace pensions in the UK now that we have a statutory system for them. There are statutorily-specified percentages of the employee's paycheck that get paid into a workplace pension account by the employer - one percentage as a deduction from the employee's paycheck, the other out of employer's pocket on top of the employee's paycheck. Then the employer's duty is done; the money is now in an account controlled by the employee, they're free to move the money to a different provider if they want to, and if they don't and the provider they're using fails, that's not the employer's problem any more. As I understand it, the agreement the employer and employee had in this case worked in essentially the same way. However, retroactive statutory changes to the rules governing the scheme type had the effect that: 1. The employer retroactively became a guarantor for the liabilities of the scheme 2. The scheme became obligated to have a greater amount of capital on hand to ensure solvency, which the employer was then liable for