There are a very large number of UK employees who have been contributing to a private pension scheme partially funded by their employers, which they are assuming will provide them with either a very tasty lump sum, or a monthly stipend that will considerably boost their state pension. However people who are due to retire within the next five years are in for a not too pleasant surprise when they discover that the value of their pension has been eroded due to the economic ravages that the equities market has experienced in the last 24 months.

Some worrying information has emerged that the UK’s largest private sector retirement fund ,the BT Group Pension Scheme was reported to have only sufficient funds on hand to pay about 57 per cent of their pension obligations in the event, albeit unlikely, that the telecommunications company were to become insolvent. A spokesman for the company did hasten to announce that they are now taking every step possible to return this figure to a healthier level, as well as considerably cutting back on its future investments in equities for the future.

Huge companies, such as BT, who are faced with the awesome responsibility of handling huge pension funds consistently, took refuge in the FTSE as a hedge against inflation. The shift in investment strategy that they will now be making is significant and they will now have to find ways to make safer short term investments to keep their pensions funds at a higher level.

A spokesman for the British Telecom Pension Scheme (BTPS) announced their target is cut to 33 per cent of the fund’s equities portfolio and instead acquire assets which are low yielding and safer such as bonds that will move in line with liabilities.

The statement of investment principles applying to company managed pension funds explained the investment shift, noting: “The trustee acknowledges that, in particular, the level of investment in risky assets might, over the short to medium-term, influence the volatility of the funding level of the scheme, and hence may influence the volatility of the employer balancing contribution rate.”

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Tags: Company Pension, Minister for Pensions, Pension Scheme, Pensions, Private Pension

While most of the not so long ago “upwardly mobile” families are clinging on to logs that seem to be floating rapidly towards a torrent, the baby boomer generation are finding themselves facing an even bleaker future. And one that they might justifiably feel that they don’t deserve.

With the thought of a pleasant retirement looming, bolstered by some money in the bank, a healthy pension and even the thought of “downsizing” their property, one step at a time, they have seen these options dissolve and fade away before their eyes, with an overwhelming feeling of powerless to do anything about it.

Many of the UK’s population in their late fifties and early sixties have been looking forward to their golden years in the knowledge that they had prepared themselves with a “nest egg” that should have been valued at at least

£250,000 , with experts saying that the sum of one million pounds, in a savings, pension and property package not an unreasonable sum to expect after a life time of hard work and relative frugality.

What those approaching retirement age feel that they were entitled to expect was that the UK business and banking communities would provide them was a reasonable framework where their assets and savings would be protected and would also receive a reasonable return. .

What the current situation means now is that most people will be unable to retire at the age of sixty five, and instead will need to continue working and earning an average salary for at eat another two years after their retirement date to have any chance of making up the shortfall in their pension packet.

Recent research now show that, if the current situation prevails, UK citizens will need to accumulate an average of £34billion annually by 2037, in order to maintain their pensions at their current value.

Even more alarming for many , is the warning issued by the National Association of Pension Funds (NAPF) that the Pension Protection Fund, company pension schemes are now showing a shortfall of over two hundred billion pounds, the highest level since the fund was launched.

Savings are also seriously under siege, with interest rates in the last year dropping to a level where they almost non- existent, with very little sign that they are liable to rise to anywhere like a reasonable level anu time soon.

Many soon to be pensioners feel that the UK government hastened to bail out the banks without thinking too long and hard about the welfare of the sector of the senior citizens of the country, and especially those who were about to fall into that category.

Meanwhile Rosie Winterton, UK Minister for Pensions, has defended the government’s actions by saying ” “I certainly have sympathy with people who have saved and have seen interest rates cut. But at the same time what I would say is that remember we have taken swift action to prevent the collapse of the banks, if we hadn’t taken that action then imagine the situation that savers would be facing,” she says.

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Tags: Financial News, Interest Rates, Minister for Pensions, Money Management, Rosie Winterton, Savings, UK