Here is our round up of pension news for October 2018. In this edition we cover company pension schemes mounting problems, the effect of raising the state pension age for women and some good news for a 20 year RAF veteran.
Company Pensions Schemes in Trouble
The Bank of England (BoE) is warning that interest rates are unlikely to ever go back to what they were for the latter stages of the 20th century.
So that means final salary pension funds are going to be even less sustainable than they are now. So many company pension schemes are now closed to new members or wound up completely and transferred different types of pension. With over 10 years of low interest rates company pension schemes have racked up £200 billion in deficits and the number is growing.
It’s no wonder companies are struggling to stay afloat under the tidal wave of pension liabilities.
It’s only ever going to get worse for firms regarding bigger deficits. So many firms that are struggling now can’t find a buyer because no investor in their right mind wants to take on the huge black hole of a final salary pension scheme.
Gertjan Vlieghe from the BoE warned that even when quantitative easing (QE) is unwound long-term interest rates will not improve enough to save them. He also says that long-term rates were already falling before QE.
This means that pension funds will not be able to get better returns investing in longer-term bonds.
Currently I doubt there is a single final salary pension scheme in the UK that isn’t running at a huge loss currently.
Fund managers are lobbying the Government to allow them to access a wider range of investments than the current rules permit, to help them spread the risk and search out better returns.
Raising the state pension age has been tough for many women
There are many women around the ages of 60 -63 who thought they were going to get the state pension by now, but they are having to wait till they are 66.
This is having a huge impact on their financial situation as many are struggling to get by on minimum wage jobs or part time work.
Because of the high divorce rate in the UK there are an awful lot of women living on their own and struggling to make ends meet.
Lots have been penalised for giving up work to look after their children or care for elderly family members. Also going back 30-40 years company pension schemes were not offered as a matter of course like they are nowadays.
One of the most alarming things about the pension age being raised is the speed it’s happening at. You almost feel as if each year you get one year older but two years further from retirement!
For women born during 1951 it is now six extra years of having a pension in payment than those born during 1954. If you’re born in 54 you now must wait till age 66.
Women have been at a pay disadvantage for men since the beginning of time but getting equality where pension age is concerned is certainly costly.
RAF mum in kids’ pension victory
A mother who is dying was delighted that the defence chiefs have done a U-turn, this means her two children will be able to take the benefits that her RAF pension provided.
Sadly, Ex-RAF linguist Samantha McConnell has just weeks to live (pancreatic/liver cancer) and she was very concerned that some of the outdated rules would prevent her children from getting the pension money.
Her bosses originally said her children wouldn’t be entitled to the pension because they were born nine months after she left the RAF and she wasn’t married to the father.
Thankfully after 20 years of loyal service they have decided to allow the pension, of £15,000 per year, to be paid to the children until they are old enough to look after themselves. Here is a link to the Crowdfunding page set up to help the children.