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Defined Benefit Plan Deficit Raises Questions

The figures were calculated as part of Mercer’s 2018 Pensions Risk Survey and were drawn from the FTSE companies’ corporate accounts.

Partner at Mercer Andrew Ward commented in a press release on the firm’s website*: “2018 was a record year for premiums paid to insurers for buy ins and buy outs, with more than £20 billion of DB obligations being insured. We forecast nearly one third of a trillion pounds to be paid by UK private sector DB pension schemes over a three-year period, from 2019-2021.”

The take home

For some time now there have been questions about the ability of defined benefit plans to weather any significant shocks to the market. The pertinence of these questions has only been augmented by the uncertainties of Brexit. Now, perhaps more than ever, it is important that defined benefit plan members sit down with their financial advisers and examine the suitability of their pension for reaching their financial and retirement goals and, fundamentally, whether they have confidence in the long-term viability of their plan.

Nevertheless, it is important to remember that fluctuation and volatility is an inherent part of financial markets, including those that affect defined benefit pension schemes. And although it is true that the FTSE organisations finished 2018 in deficit, they remain in much ruder health than they did following the 2016 Brexit referendum.

Review your Pension Planning with Blacktower FM

Defined benefit schemes were once thought of as being the gold standard for pensions in the UK. However, in the twenty-first century they face many funding challenges with even some of the best-funded schemes now seriously underfunded.

If you have pension benefits and are considering a transfer, Blacktower can help you make sense of your options and, as a fully regulated firm, can help you decide whether a transfer is suitable for your circumstances.

Contact us today for more information.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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Auto-Enrolment increases number of savers, but are they saving enough?

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The figures show that the proportion of employees who are contributing to a company pension has risen significantly in the five years since Auto-Enrolment (AE) began.

AE was introduced in 2012 and makes it compulsory for employers to automatically enrol all eligible employees into a pension scheme unless the employee actively opts out. An employee is eligible for AE if they are aged between 22 and the state pension age and have a salary of more than £10,000.

In 2012, prior to AE, 47 per cent of UK employees were enrolled on a company pension scheme. This figure has now risen to 73 per cent in 2017. In other words, there are over 9.5 million more people saving for their retirement than there were five years ago, and it’s mainly thanks to AE.

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The biggest saving regret? Not starting sooner

Hourglass“Non, je ne regrette rien”.

Expats in France may be able to translate this famous song title to “No, I regret nothing,” which is ideally what every saver wants to be able to say as they reach the end of their expat retirement planning period and look forward to moving abroad to their own personal paradise.

But not everyone has the initiative to stay on top of their pension pot, and it might be interesting for the younger generation to hear what older workers and retirees have to say about their pension saving experiences and what they would do differently if they could turn back the clock.

With this in mind, research recently released by Aegon, which asked pension savers about which decisions regarding their pensions they regretted the most, could prove very useful and serve as a firm reminder of why sufficient retirement planning isn’t something to leave until the eleventh hour.

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