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   Pension Advice Norwich|  Private Sector Pensions


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       Those were the days, my friend...

 

Topical Pension Issues

 

 

 

Private Sector Pensions used to be very widespread and although they in many cases did not have quite as generous terms as their public sector equivalents they were nevertheless very useful vehicles for many people to ensure appropriate funds for their retirement years.

 

 

However, a number of factors have severely affected private sector pensions since the mid-late 1990s when Britain's private sector occupational pension system was regarded as one of the best in the world.

 

Data referred to below have, unless otherwise indicated, been obtained from the Office of National Statistics and are the latest available at the time of writing (June 2012). Relevant documents can be found at the following address: http://www.statistics.gov.uk or by contacting ONS directly on the address displayed on their home-page.

 

One factor which is often mentioned as a significant cause for the problems encountered by many private sector pension schemes is Gordon Brown’s 1997 abolition of Advance Corporation Tax (ACT) relief on existing assets leaving accrued liabilities uncovered.

 

This retrospective tax is estimated to have cost private sector pension funds a cumulative £150-£225 billion due to lower-than-otherwise dividends and growth.

 

The resulting downward slide of occupational schemes in the private sector has been remarkable:

 

Since 1995, there has been a 43% fall in the number of active members of private sector defined benefit schemes, and an overall 41% fall (data from ONS).

 

The rate of decline has accelerated sharply over this time frame. Since 2000, the annual average fall in the number of active members of all private sector occupational schemes has been over 300,000.

 

If this trend is to continue, there will be no active members left of any occupational schemes in the private sector in just 10 years time.

 

Since 2000, the annual average fall in the number of open occupational schemes in the private sector has been almost 4,800, and this is unlikely to be due solely to schemes merging. If this rate of decline is to continue, there will simply be no open occupational private sector pension schemes left in just 4-5 years.

 

Another factor which is affecting all pension schemes is the rising life expectancy in retirement. This places extra strains on any form of pension arrangements. The Private Sector Pension schemes were mostly funded by member and employer contributions. In contrast the State Pension Schemes and the Public Sector Occupational pensions remain largely unfunded, which means they will increasingly have to be bailed out by taxpayers in the future, or face draconian restructuring.

 

It is worth remembering that the current pension crises started well before the recent global financial turmoil. The current financial downturn and continued uncertainty obviously does not make it easier to tackle the mounting pension problems.

 

If you do have an occupational pension, it is highly recommended that you investigate how it is performing and whether sufficient funds are available to cover all the liabilities that the scheme may have.

 

Also, it is well worth considering setting up an independent Personal Pension to supplement income and act as an 'insurance policy' just in case things turn nasty.

 

 

I don't want to retire right

now - maybe next year, or

the year after...

But, can I afford to cut down

on my work hours already?

     find out more 
 

Is it a good idea to buy an

Annuity now or is it better

to wait?

Should it be a single or a

joint annuity?

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retired couple

What is the right way to

arrange our Investments?

How much risk can we

afford to take?

How much income can we get?

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You are always Welcome

to contact NFA for a free discussion

of your Private Sector

Pension arrangements

 

Phone: 01603 452686

 

 

e-mail: info@norwichpensions.co.uk

 
     

 

 

 

 

 

Norwich Financial Advice Limited  is authorised and regulated by the Financial Conduct Authority

and is entered on the FCA Register under FCA reference: 706645

Norwich Financial Advice Ltd. is registered in England and Wales; Company No. 8533929.  

Registered office: 74 Muriel Road, Norwich NR2 3NZ, Norfolk, England.