AN IMPORTANT topic for anyone nearing retirement or planning their financial future will be the issues surrounding UK pensions.
These are some of the key pension problems the new government will need to address.
UK Corporate Pension Deficits
The UK corporate pension deficit has remained fairly stable over the last year, falling 0.5% for the year ended April 30. However, for some of the largest companies in Britain it has risen significantly, with the pension’s deficit of businesses on the FTSE 100 index increasing 13%. Many of these firms will be carrying out pension revaluations in the coming months and growing deficits could cause problems. Factors such as quantitative easing and record low interest rates are helping to prevent corporate pension deficits from falling, so the government would have to act on these areas in any hope of doing so.
Workplace Pension Scheme
In 2010, the government launched its Nest scheme as part of its workplace pension plan. While the workplace pension scheme has many good intentions, and is proving successful so far, one concern is that Nest will not break even until 20 years after it was formed. It is also estimated that by 2026 the loan provided by the Department of Work and Pensions will have risen to £1.28bn from £539m now. Ensuring Nest can become self-sufficient and that the loan is repaid could be a big task.
There have been calls for greater pension’s transparency from the new government, along with passing on more power to the Pensions Regulator to tackle employers. For businesses, increased transparency should lead to safer pension funds and greater awareness of any problems. While for individuals, increased transparency can make it easier when consolidating pensions, as is common for anyone who ever changes occupation.
People are living longer, which is undoubtedly a good thing. However, for pensions it means the state and employers paying out more for longer. This is a tricky issue for the new government to tackle, working out how to cover the costs of a population living longer, in a humane way.
Whether you’re just starting to save for retirement or will be collecting your first pension in a few weeks, keep an eye on the new government’s policies and plans, as it will likely affect you in some way.