Quote:
Originally Posted by 1andrew1
It may be related to the fact that this is causing the value of final-salary pension schemes to reduce. Left unresolved, this would lead to more potential pension deficits and employers and the government having to top up these pension funds.
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I think so yes. If you’re in a defined contribution scheme (which is what almost all private sector pension schemes are now) then if the market falls, the value of the pension falls, but that’s a “feature” of the product so no problem (well, it’s a problem if it’s your pension but not for the provider, because they continue to pay what they promised). If on the other hand you’re one of the lucky ones in a defined benefit scheme, which is what final salary schemes are, then the pension provider has a massive problem if the value of the fund is squeezed too much, because they are already committed to pay out a certain amount so they have to find the shortfall from somewhere.
One of the electoral risks for Truss here is that, while there are very few private sector final salary pension schemes open today, a significant portion of the core Tory vote will have been in one in the past, and if their pension schemes start collapsing and needing rescued by the Pension Protection Scheme, unless they are already retired they wouldn’t get their full pension from the PPS, and the PPS’ annual updating to allow for inflation is capped at 2.5% which is likely to be far less generous than their pension scheme would have been (mine is capped at 5%).