The UKa��s Pension Time Bomb
Following the collapse of Carillion recently, the Prime Minister said there would be a�?tough new rules for executives who try to line their own pockets by putting workersa�� pensions at riska�?. In February 2017 a Green Paper was issued calling on views to give the Pensions Regulator the power to issue a�?substantial fines on companies for corporate transactions which have a detrimental impact on (pension) schemesa�?. The resultant White Paper is due in Spring this year.
The problem of managing huge (defined benefit) Pension schemes of older retirees and workers is only going to grow over the coming years. An industry Risk Manager calculates the total of the UKa��s private sector (defined benefit) pension schemesa�� solvency deficit at over A?780 Billion (!) and according the Pension Protection Fund (PPF), the combined chasm of the two thirds of Pension schemes it monitors were in deficit at the end of 2017 to the tune of A?210 Billion.
The PPF is the industry body designed to step in and take over if firms go under, and is a lifeboat for about 11 million holders of such schemes at the moment. Its assets under management stand at A?28.1 Billion with hopes to rise to A?32 Billion by 2020. This sounds big, but that is before factoring the enormous scale of the Defined Benefit Pension deficits.
BT alone has a Pension deficit of A?9.1bn, Shell A?6.9bn, BP A?6.7bn, Tesco and BAE Systems A?6.6bn eacha��a��.! The top five biggest company Pension deficits could wipe out those assets in one fell swoop, and at least three other FTSE100 companies have deficits of A?2bn each. Even to replace the hole left by Carillion the PPF estimates this will be around A?900 Million and the Chairman of Carillion Pensions has written to MPs to say it is nearer A?1 Billion. There is now mounting speculation on who is next, and it is a question of when and not if.
When the Pension deficit risk becomes more than 30% of the value of a company that is when they impact on the viability of a firm. According to a study carried out by Cardano, called the a�?Worry Indexa�?, 20% of FTSE100 companies are now high risk and could potentially topple the companies attached to them. There are Pensions Schemes out there with deficits much bigger than the companies trying to support them.
Remember, the PPF only protects 90% of YOUR Pension at best a�� do you want a 10% a�?pay cuta�? just as you retire? Surely 100% of YOUR fund, under YOUR control, is better? Worth a look at least before it is too latea��a��a��a��a��.
Did you, or someone you know, ever work for one of the a�?top fivea�? companies? Maybe you need to transfer YOUR Pension to be under YOUR control before it is too late? Contact me now for helpa��..