The pension funding gap of Britain’s top companies has widened in the past year despite billions of pounds of corporate cash being injected into retirement schemes, a report said on Tuesday.

Pension consultants LCP said pension scheme deficits for companies in the UK’s FTSE 100 blue chip stock index grew to 43 billion pounds at June 30 compared with 42 billion a year before, as fund assets didn’t generate enough cash to cover obligations.

The finding is an illustration of the impact of repeated rounds of “quantitative easing”, under which the Bank of England has been buying back bonds to boost economic growth, contributing to a sharp drop in the yield on British government gilts – a staple investment for pension funds.

Pension funds have been left searching for higher-yielding investments such as real estate while they wait for gilt yields to turn higher.

Continue reading (Reuters) →

Britain’s state pension one of the worst in the world

BRITAIN’S state pension is among the worst in the developed world with only Mexico offering its workers less.

Britons on average wages can expect a pension worth just 33 per cent of their final salary when they retire, according to the Organisation for Economic Co-operation and Development yesterday.

Of the 34 countries in the OECD, only Mexico had a worse rate at 29 per cent compared to a 54 per cent average across the rest of the bloc.

The startling statistics were contained in the organisation’s annual Pensions At A Glance report published yesterday.

Continue reading (Daily Express) →

Speaking at the end of a three-day conference in Yokohama, Japanese president Shinzo Abe said Africa will be an engine for world growth in the coming decades and Japan has to invest more heavily in the continent. The fifth Tokyo International Conference on African Development finished its three-day meeting in Yokohama on Monday. The TICAD, held every five years, was started in 1993 at the initiative of Japan as a forum for African leaders to discuss Africa’s economic development and the shape of assistance to the continent. Some 50 African leaders attended this year’s conference, as did Prime Minister Shinzo Abe.

Japan pledged $32bn (£21bn) in aid to Africa, including money to tackle militant Islamists.  Japan appears to be worried how its rival China is gaining more and more influence in the African region.  “Africa will be a growth centre over the next couple of decades until the middle of this century… now is the time for us to invest in Africa,” Mr Abe said at the end of the conference co-hosted with the African Union (AU), World Bank and UN.

Continue reading Africa future centre of World Growth →

There has been some speculation that capital markets have priced in the ending quantitative easing (QE) by the US Fed.  I believe that it is impossible to predict what will happen to the US and global economy, or to global capital markets, as QE is withdrawn. Therefore it is illogical to believe that the effects of tapering QE can be priced in.  Since the ending of QE will mean $85 billion less demand for US and global financial assets each month, if its withdrawal is priced in then surely – everything else being equal – we should see the S&P 500 index at more subdued levels? Not at all-time highs, as it has been this week, and on a trailing P/E of 17.9 (as calculated by ThomsonReuters).

Proponents of the argument point to last week’s positive reaction by the US stock market to stronger than expected jobs data, noting that it defied the recent habit of falling on any good economic data which might in turn trigger the ending of QE. At last, they argue, investors are looking beyond the ending of QE and to the increased corporate profits that will come from the economic recovery.  Certainly, the US and the global economy are recovering, illustrated recently by another good third quarter earnings season in the US and the October jobs data.

Continue reading Has the US stock market priced in the ending of QE? →

British businesses could face a £450 billion bill as a result of plans to force pension funds to protect themselves from risk with extra capital. If the proposed rules were introduced, they would accelerate the closure of Britain’s remaining final salary pension schemes in the private sector. The EU body that regulates occupational pensions estimated that the deficit in the UK’s defined benefit pension schemes would almost double from £237bn to £450bn if the new rules, called “Solvency II”, were introduced.

Steve Webb, the minister for pensions, said: “The EU’s latest figures show the extremely high cost its plans would place on UK defined benefit pension schemes. “This confirms that any such new rules would harm businesses’ ability to invest, grow and create jobs, and many more schemes could be forced to close. I continue to urge the Commission to abandon these reckless plans.”

The National Association of Pension Funds (NAPF) warned that moving to the new rules for pensions would put a “huge burden” on Britain’s remaining final salary pension schemes and the businesses that run them. Joanne Segars, the NAPF’s chief executive, said: “The EU plans for UK pensions come with a clear and unpalatable price tag. Businesses trying to run final salary pensions could be faced with bigger pensions bills to plug an astonishing £450bn funding gap. This would have a highly damaging effect for the retirement prospects of millions of workers.

Continue reading New EU rules would double the cost of British pensions →

The UK Government has announced controversial plans to UK final s alary pensions which could drastically reduce the benefits which members are currently entitled to. Under the proposals, which are subject to a six week consultation, the Department for Work and Pensions is planning on removing pension scheme obligations to provide Index linked increases to pensions, potentially increase a members retirement age and remove the right of Widows to receive a pension upon the death of their spouse.

These new measures, which could come into force in April, will see the real “value” of an individual’s pension slashed overnight and put even more pressure on individuals to ensure that they have their own arrangements in place to ensure that they have sufficient pensions in place for not only when they retire but also for their surviving spouse once they pass away. Should these proposals come in to force many members of these schemes will feel that they have been lied to over the years with promises of “guaranteed” pensions that will take care of them and their loved ones in retirement. It many instances these promises made by companies helped them to retain staff from leaving companies and giving up their “gold-plated” pensions.

So why is the Government proposing these changes?

Continue reading Government proposes to slash final salary benefits – Could this be the final nail in the coffin? →

If you have a UK pension, from a company or private scheme then this site will be a useful resource for you, to learn more about the UK pension system, what opportunities you have as an expatriate living in Thailand, and how future pension changes may affect you.

Leaving that pension in a UK scheme could be very costly to your future income, tax position and restrict the income which your family can enjoy when the inevitable happens.

Continue reading Welcome to Expat Pensions Thailand →