Oh great, yet another scheme - PRS inspections !

[stillp]

per your suggestion, they would only get their full expected pension if there was ongoing 'sufficient income' from members contributing to the scheme

What gave you the impression that I suggested that?

you have made statements that suggest that an employer has more involvement in the management of a pension scheme than is (or should be!) the case).

Where?

 

[JohnW2]

What gave you the impression that I suggested that?

You've already asked me this, in post #85, and I responded in #87. Anyway ....

If the ability to pay pensions to existing members were at least partially dependent on utilising predicted 'current' contributions (contributions being paid at the time the pension was being paid out), the scheme would not be able to fulfil its pension-paying commitments in full if, due to changes related to the employer, those contributions cease or fall substantially. For that reason, I rather doubt that it is allowable to have a scheme which is reliant on 'current' contributions to at least partially honour pension commitments to existing members.

Of course it is, if the income is sufficient.

I would hope you would agree that the corollary of what you said is that that if the income is "not sufficient", then the scheme would not be able to fully honour its pension commitments (if it were relying on future income), AND also that zero income for evermore (employer went bust) would not be 'sufficient' income'

Where?

It would take some trawling through all the pages to answer that, but I'll try if I have some spare moments. However, if you're saying that I misunderstood, and that you accept that an employer should have no involvement in the management of a pension scheme they offer to their employees, then there's probably no need. My memory may actually have been confusing you with JohnD.

Kind Regards, John

 

[stillp]

you accept that an employer should have no involvement in the management of a pension scheme they offer to their employees

No, I don't accept that an employer should have no involvement. Pension boards usually IME include representation from the employer as well as the employees.

 

[stillp]

I would hope you would agree that the corollary of what you said is that that if the income is "not sufficient...

So you hope I agree that the opposite of something I said is something I didn't say?

 

[JohnW2]

No, I don't accept that an employer should have no involvement. Pension boards usually IME include representation from the employer as well as the employees.

Agreed. "Involvement" was the wrong word. I meant that they should not have any sort of 'controlling' role.

Kind Regards, John

 

[JohnW2]

So you hope I agree that the opposite of something I said is something I didn't say?

C'mon! You said that a pension scheme would be able to honour it's commitments to members "if the fund's income were sufficient", so it surely follows that it would not be able to honour those commitments if the fund's income was not "sufficient"?

If not, did you really mean that it would be able to honour the commitments whether the fund's income were "sufficient" or "non sufficient" - and, if so, what exactly do you mean by "sufficient"? - "sufficient" for what (if not the honouring of commitments)?

Kind Regards, John

 

[stillp]

Of course it is, if the income is sufficient.
I'm not sure what you're struggling with - there's a sum of money - the fund - which has incomings - contributions by members and employers, investment growth - and outgoings - pension payments, fund managers' fees. The incomings over time have to be sufficient to fund the outgoings over time.

Have you now forgotten about the fund?

 

[EFLImpudence]

I don't know much about the subject, but -

what happens when life assurance and pension companies go bust?

Don't the customers just get ditched?

 

[stillp]

Equitable Life for example? Supposed to be impossible these days.

 

[JohnW2]

Have you now forgotten about the fund?

Of course not, but I think you may have lost track of the discussion (which has, admittedly, been a bit tortuous).

I think we can probably agree that the fund has to be adequate to service commitments (pension payments). As you say, income into that fund consists of contributions from members, contributions from employers and investment income. It still has to be able to service the commitments if the employer ceases to exist, so that the only ongoing income is the investment income.

You suggested that contributions (members' and employers') are used, in more-or-less real time, to partially fund the outgoings (predominantly pension payments). If that were necessary, then there would clearly be a problem if those contributions suddenly stopped ('for evermore').

Kind Regards, John

 

[JohnW2]

I don't know much about the subject, but - what happens when life assurance and pension companies go bust? Don't the customers just get ditched?

As I've said, I don't know much either, so I'm talking mainly from the point of view of common sense and an understanding of the maths. However, my understanding is that safeguards are meant to be in place to prevent pension schemes from 'going broke'.

That is why I find it hard to believe that stillp's suggestion that a pension scheme reliant on ongoing contributions would be allowed. A pension scheme has to be able to survive the demise of the employer (hence cessation of all contributions), in order to be able to service the pensions of existing members.

Whilst I know little, what I do know is that there is a lot of legislation and regulation which seeks to safeguard the interests of members of pension schemes. "The State" is, of course, immune from all such regulation.

Kind Regards, John

 

[stillp]

stillp's suggestion that a pension scheme reliant on ongoing contributions would be allowed

I HAVE NOT SUGGESTED THAT!

 

[JohnW2]

I HAVE NOT SUGGESTED THAT!

If that's the case, the the last two or three pages of discussion have been pretty pointless.

Perhaps you need to explain what you meant when you started this by writing ...

Yes, but isn't it also the case that those people's contributions (as well as the investment income from those contributions) will have been used to fund the much lower pensions of those who preceded them?

If the contributions (and investment income thereon) of currently working members are being used to fund the pensions of those already drawing pensions, what is going to happen to those yet to retire (or cease employment) if the company ceases to trade tomorrow, so that there are no "currently working members" to fund their pensions when they try to draw them?

Kind Regards, John

 

[stillp]

the last two or three pages of discussion have been pretty pointless

At last, you've said something that's correct!

what is going to happen to those yet to retire (or cease employment) if the company ceases to trade tomorrow, so that there are no "currently working members" to fund their pensions when they try to draw them?

They will receive their pensions from the pension fund, where else?

 

[SimonH2]

I HAVE NOT SUGGESTED THAT!

To be fair, when I read your earlier post, I got the impression that you were describing a situation where the fund did not contain enough money to pay out on all it's liabilities without further inputs. Or put another way, what's usually referred to as a Ponzi scheme.

I believe the post in question is this one :

Yes, but isn't it also the case that those people's contributions (as well as the investment income from those contributions) will have been used to fund the much lower pensions of those who preceded them?

You appear to be describing that some of the contributions going in are/have been used to pay out pensions rather than being invested in the scheme to pay future pensions (for those currently paying in). Unless the contributions are significantly in excess of what's needed for future pensions of those paying in, then it's hard to see how the fund will be solvent if it stops getting further income.
In the absence of such excess contributions, there's no way such a scheme could be viable since it could never stop accepting new entrants as it will always be reliant on new contributions to (in part) pay out it's liabilities. If it ever stops taking on new members, then it'll find itself without enough money in the kitty to pay out on the pensions it has already promised. Such a setup is specifically prohibited by law - except when run by the state.
But if there were such excess contributions then I doubt anyone would consider joining it as it would be "very uncompetitive".