No great surprises in yesterday's report from KPMG, on the funding position of the top UK DB pension schemes, but interesting that they feel the "tipping point" has been reached, at which schemes are paying out more on retired scheme members' benefits than on current members' benefits. What's more, 22% of the top DB schemes "face no prospect of clearing pension deficits from discretionary cashflow over any reasonable time period" – a sobering thought given that cashflows are unlikely to improve in the foreseeable future.
The findings echo the views of senior figures in the pensions and investment industries revealed in a Penrose survey earlier this week, of whom 94% thought private sector DB schemes are "unsustainable" and would close to existing members for future accruals in the next couple of years.
With DB schemes seemingly being closed on a "weekly basis", the end of DB provision in the private sector looks to have been factored in by most commentators as pretty much a fait accompli. The debate instead is moving towards what will replace DB schemes. Here the picture is much less clear cut. Many fear employers will revert to DC schemes with contributions levelled down to the minimum prescribed under the Personal Accounts system. Others, such as Adrian Waddingham interviewed in FTfm this week, feel some will bring in some form of hybrid scheme, comprising elements of DB and DC.
The real "tipping point" in all this has more to do with the shift in the balance of risk between the employer and the individual. It's about the labour market and life expectancy. During the post-war period, when many of the DB schemes now facing closure were originally set up, there was a shortage of labour, so employers introduced final salary pensions as a way of attracting workers. Life expectancy for the average UK male was somewhere in the low seventies, so the cost of providing this benefit to people retiring at 65 was relatively low. Nowadays, with unemployment at 2.4 million and rising, employers don't need to go to such generous lengths to attract staff. And with life expectancy in the mid-eighties (and also rising), but retirement age still 65, the cost to employers is significantly greater. To put simply, if a trifle brutally: in 2009 can any rational employer justify offering a DB pension as an employee benefit? The answer, sadly, seems to be a resounding "No".
CM
Friday, August 14, 2009
Wednesday, August 12, 2009
Back to the bad old days?
Today's UK unemployment figures make for grim reading. Nearly two and a half million Britons are out of work, the highest figure since the mid nineties, accounting for 7.8% of the workforce. What's more, the data emerges amidst dire warnings of continuing deterioration in the jobs market into 2010 and beyond.
For those of us old enough to remember the 1980's, when unemployment was well over 3 million, one of the striking differences between then and now is the relative scarcity of cultural references to the jobless. Where is today's television equivalent of Alan Bleasdale's Boys_from_the_Blackstuff? Who is recording the noughties versions of The Specials' Ghost Town or UB40's One in Ten? (Admittedly "One in Twelve point Eight" doesn't scan well, but you get my drift.)
Perhaps the cultural references will follow in due course, as the full impact of rising unemployment hits home. But a couple of other explanations occur to me. One is that however frightening redundancy is today, the modern labour market has changed beyond recognition in the last 25 years. Unemployment induced such despair in the 1980s because it affected millions of men (and it was mainly men) in traditional manufacturing industries who had assumed they were in jobs for life and saw no realistic alternative once those jobs disappeared. These days, there can be few people labouring (pardon the pun) under such illusions. Redundancy is still a nasty shock, but not necessarily a cause of despair.
It also occurs to me that some of the generation which grew up watching such TV programmes and listening to those records are now in senior enough positions to affect decisions about redundancy. They may be more inclined to look at freezing or cutting pay, or introducing part-time working as "least worst" alternatives to cutting jobs. Measures like these offer cold comfort to struggling families, of course. But it would be reassuring to think that the lasting impact of the work of Bleasdale and his contemporaries may have played some role in softening the impact of unemployment on today's workers.
AF
For those of us old enough to remember the 1980's, when unemployment was well over 3 million, one of the striking differences between then and now is the relative scarcity of cultural references to the jobless. Where is today's television equivalent of Alan Bleasdale's Boys_from_the_Blackstuff? Who is recording the noughties versions of The Specials' Ghost Town or UB40's One in Ten? (Admittedly "One in Twelve point Eight" doesn't scan well, but you get my drift.)
Perhaps the cultural references will follow in due course, as the full impact of rising unemployment hits home. But a couple of other explanations occur to me. One is that however frightening redundancy is today, the modern labour market has changed beyond recognition in the last 25 years. Unemployment induced such despair in the 1980s because it affected millions of men (and it was mainly men) in traditional manufacturing industries who had assumed they were in jobs for life and saw no realistic alternative once those jobs disappeared. These days, there can be few people labouring (pardon the pun) under such illusions. Redundancy is still a nasty shock, but not necessarily a cause of despair.
It also occurs to me that some of the generation which grew up watching such TV programmes and listening to those records are now in senior enough positions to affect decisions about redundancy. They may be more inclined to look at freezing or cutting pay, or introducing part-time working as "least worst" alternatives to cutting jobs. Measures like these offer cold comfort to struggling families, of course. But it would be reassuring to think that the lasting impact of the work of Bleasdale and his contemporaries may have played some role in softening the impact of unemployment on today's workers.
AF
Subscribe to:
Posts (Atom)
Posts
