Patrick Tooher, 31 December 2022, thisismoney.co.uk (DMG Media)
Excerpt:
>The retirement plans of up to a million workers lie in tatters as the recent collapse in supposedly safe government bonds battered the value of their pension pots.
>More than £4.5billion has been wiped from the value of older workers’ pensions, with an estimated £15billion invested in these lifestyling bond funds, according to investment platform AJ Bell. As a result, around 850,000 workers have lost an average of 32 per cent this year.
>Most affected are those who took out workplace pensions in the 1990s and 2000s, or who paid into individual stakeholder plans over the past two decades with household names such as Legal & General, Fidelity Aegon, Aon and Scottish Widows.
>Their pension pots are automatically moved to so-called ‘lifestyling’ funds, typically five years before retirement age.
>The latest pensions shock follows the one that engulfed final salary schemes during the recent gilts crisis when the use of liability-driven investment (LDI) strategies revealed dangerous levels of hidden leverage in the financial system.
Further reading:
>Regulatory concerns that consultants pushed complex products on trustees — many of whom are not financial experts — and the difficulty of assessing the quality of the advice trustees receive remain unresolved.
This is bad for those older workers but also for everyone else as these billions of lost pounds will not flow into the economy either.
“They’ll get it all, because they own this place. It’s a big club. And you ain’t in it!” – George Carlin
Maybe the older generation will finally stop voting Tory if they can see they arent getting taken care of like they are expecting
The move from DB to DC pensions was one of the worst things to happen in recent times. All the risk is on your shoulders and politicians can pull the rug just like Truss did. I know a few colleagues that have been deeply impacted by this.
Is it too much for them to remember who did this to them in 2025 when we vote?
A reduction in self reliant retirement for older workers inevitably places additional strains on Gov’t and charitable services.
Honestly bonds have been shitty investments for the last decade or so. You’re getting better yields off ‘retail savings accounts’ than you are off bonds. (At least at the scale of the average personal investor – which obviously a pension fund isn’t).
But someone got rich out of this, didn’t they?
Remind us what you used to do for a living, Mr Kwarteng
It’s not clear from the article – but do the value of these have a the potential to recover (as they would do if they were stocks investments rather than bonds)?
i dont suppose anyone’s interested, but this is spectacularly bad jouranalism and from a suposedly financial site. the reason pendion funds transfer pension pots into bonds near retirement is because it ensures the stability of future income flows irrespective of moves in the market value of funds. if the fund goes down, the cost of annuites also falls. heres a link from the same paper telling us what a great time it is to retire. https://www.thisismoney.co.uk/money/pensions/article-11283887/Time-annuities-chance-Rates-soar-50-year.html
Increases in gilt yields work both ways though. Many of those retiring today will be better off than they would have been a year ago.
The value of funds may be down 32% on average, but the annuity you can purchase with those funds has increased.
£100,000 would have bought you an annuity of around £2,750 per year (retire at 60, single life, 3% escalation, no guarantee) a year ago. Today it would get you around £4,200.
If your fund has lost value and is only £70,000 you’d still get a £2,940 annuity. More than you would have got last year with £100,000.
17 comments
Patrick Tooher, 31 December 2022, thisismoney.co.uk (DMG Media)
Excerpt:
>The retirement plans of up to a million workers lie in tatters as the recent collapse in supposedly safe government bonds battered the value of their pension pots.
>More than £4.5billion has been wiped from the value of older workers’ pensions, with an estimated £15billion invested in these lifestyling bond funds, according to investment platform AJ Bell. As a result, around 850,000 workers have lost an average of 32 per cent this year.
>Most affected are those who took out workplace pensions in the 1990s and 2000s, or who paid into individual stakeholder plans over the past two decades with household names such as Legal & General, Fidelity Aegon, Aon and Scottish Widows.
>Their pension pots are automatically moved to so-called ‘lifestyling’ funds, typically five years before retirement age.
>The latest pensions shock follows the one that engulfed final salary schemes during the recent gilts crisis when the use of liability-driven investment (LDI) strategies revealed dangerous levels of hidden leverage in the financial system.
Further reading:
>Regulatory concerns that consultants pushed complex products on trustees — many of whom are not financial experts — and the difficulty of assessing the quality of the advice trustees receive remain unresolved.
*Pensions industry and consultants play blame game over LDI crisis*, Financial Times, 29 Dec. 2022, https://www.ft.com/content/1da5c955-b6b1-4695-b61b-ef67f859aa3a
This is bad for those older workers but also for everyone else as these billions of lost pounds will not flow into the economy either.
“They’ll get it all, because they own this place. It’s a big club. And you ain’t in it!” – George Carlin
Maybe the older generation will finally stop voting Tory if they can see they arent getting taken care of like they are expecting
The move from DB to DC pensions was one of the worst things to happen in recent times. All the risk is on your shoulders and politicians can pull the rug just like Truss did. I know a few colleagues that have been deeply impacted by this.
Is it too much for them to remember who did this to them in 2025 when we vote?
A reduction in self reliant retirement for older workers inevitably places additional strains on Gov’t and charitable services.
Honestly bonds have been shitty investments for the last decade or so. You’re getting better yields off ‘retail savings accounts’ than you are off bonds. (At least at the scale of the average personal investor – which obviously a pension fund isn’t).
But someone got rich out of this, didn’t they?
Remind us what you used to do for a living, Mr Kwarteng
[https://www.fnlondon.com/articles/kwasi-kwarteng-chancellor-truss-cabinet-finance-positions-city-20220906](https://www.fnlondon.com/articles/kwasi-kwarteng-chancellor-truss-cabinet-finance-positions-city-20220906)
It’s not clear from the article – but do the value of these have a the potential to recover (as they would do if they were stocks investments rather than bonds)?
i dont suppose anyone’s interested, but this is spectacularly bad jouranalism and from a suposedly financial site. the reason pendion funds transfer pension pots into bonds near retirement is because it ensures the stability of future income flows irrespective of moves in the market value of funds. if the fund goes down, the cost of annuites also falls. heres a link from the same paper telling us what a great time it is to retire.
https://www.thisismoney.co.uk/money/pensions/article-11283887/Time-annuities-chance-Rates-soar-50-year.html
Increases in gilt yields work both ways though. Many of those retiring today will be better off than they would have been a year ago.
The value of funds may be down 32% on average, but the annuity you can purchase with those funds has increased.
£100,000 would have bought you an annuity of around £2,750 per year (retire at 60, single life, 3% escalation, no guarantee) a year ago. Today it would get you around £4,200.
If your fund has lost value and is only £70,000 you’d still get a £2,940 annuity. More than you would have got last year with £100,000.
https://www.sharingpensions.co.uk/annuity_rates.htm
They are the demographic who vote Tories, I find it hard to feel sorry for them…
Maybe they just need to stop buying avocado toast and work a bit harder?
Aren’t most boomers heavily invested in buy to lets and second / holiday homes anyway
They may have too cut back on the avacado on toast in retirement
but i’m sure they will cope 😂
I have zero sympathy for pensioners. They’ve done this.
I switched my investment from stocks to bonds as my pension adviser said it was a defensive play. It wasn’t