Good news only, please

The defined benefit scheme – whereby the employer promises the employee a specified payment upon retirement, the amount of which is calculated based on several factors including the years the contributor has been in the scheme, their age, and their salary at retirement – is no longer viable in today’s world.

Recently, the high-profile collapse of the construction firm Carillion has served as yet another example of why this is the case.

The collapse means that, just like in the heavily reported case of retail giant BHS, thousands of employees are likely to have their carefully laid out retirement plans affected. Now that the company has gone into liquidation, it cannot afford to pay employees their expected pension amount, leading to yet another sizeable pensions black hole with a deficit of around £580 million (although the BBC reports that the final figure could be as high as £900 million).

Norway’s novel wealth management strategy of allowing taxpayers to pay additional tax if they feel their mandatory contributions are an insufficient reflection of their true capability to pay has yielded a perhaps unsurprising result: since the scheme’s launch in June just $1,325 in extra revenue has been raised.

The voluntary contributions strategy was initially mooted as a response to criticisms that Norway’s centre-right government was over-enthusiastically cutting taxes while simultaneously increasing spending.