The document summarizes the current pension crisis in the UK. It states that 80% of company pension schemes are now underfunded, which means retirees may receive less than expected. It also notes that over 1,000 pension schemes have collapsed due to company failures or unsustainable funding levels. Several factors contributed to the crisis, including the 2008 financial crisis, increased life expectancies, and lack of policies to address growing funding deficits. The crisis has major implications for both current and future retirees' expected pension incomes and standards of living.

1. 80% of company schemes are
now seriously in deficit. As a
result the amount of pension you
actually receive in retirement could
be significantly less than you are
expecting.
The UK has 7,800 pension schemes,
and 1,184 have gone bust due to
company failure or unsustainable
funding ratios.
7 FTSE companies have pensions
liabilities that are in excess of its
market capital. BA, BT, BAE Systems,
RBS, RSA Aviva, Lloyds TSB, GKN,
M&S, Barclays, ITV and Sainsbury’s.
BA’s Liabilities are 5 times the value
of the company. Many schemes are
simply unsustainable and represent
a serious risk to the future survival of
the company.
So why is there a crisis?
In 2007 the world suffered the largest financial meltdown of
our generation, and while this was a key catalyst in today’s
pension crisis, it is not the sole issue. This, coupled with
a rise in life expectancy, has now caused a major problem
for anyone with a UK pension and for anyone to receive an
income in retirement. When UK Retirement age was set at
65 in 1948, the average life expectancy for a male was 66.8.
Nowadays life expectancy is in the late 80’s and rising.
Pensions were designed to fund short retirements and not
retirements of 20-30 years.
Since the financial crash 5 years ago the gap between
liabilities and assets is getting bigger and bigger with no
policies being put in place to reduce deficits and secure
pension incomes.
Here are some
FACTS
for you:
1400
Assets (£Billion)
Liabilities (£Billion)
Mar03
Mar06
Mar10
Sep03
Sep06
Sep10
Sep04
Sep07
Sep11
Sep05
Sep09
Sep08
Sep12
Mar04
Mar07
Mar11
Mar05
Mar09
Mar08
Mar12
1100
800
1300
1000
700
1200
900
600
500
Rising male life expectancy
Life expectancy at 30*
60
65
70
75
Women
Men
80
85
90
1950
1960
1970
1980
1990
2000
2010
2020
2030
Projected convergence in 2030
*England and Wales
Source: Les Mayhew
UK Pensions Crisis
When did you see your last valuation?
When can you access your pension?
Where is your pension currently invested?
How are the investments performing?
When was the last time you changed your funds?
Are you even allowed to change your funds?
What are the charges of the pension?
In the event of your death what happens to the pension?
What about taxation on the pension?
How do you feel about the current historically low annuity rates?

2. But won’t the value of my pension recover?
Unlikely...
60% of UK pension money is now invested in bonds and not equities. Growth
is limited to say the least. This is the lowest level since the 1950 “great equity
sell off” meaning that when markets do rise, schemes will not take advantage
and increase their asset base.
It is a myth that final salary schemes are guaranteed, they are not.
Companies are now increasing retirement age such as Tesco which has
increased the age to 67.
On average, 15 schemes a month are falling within PPF
(Pension Protection Fund) and so within 7 years 25% of all Final
Salary schemes will fall within the PPF
PPF is not guaranteed by the government.
The level of benefits payable by the PPF are greatly reduced from what you
hope to get from your company scheme.
It is the responsibility of companies to fund the PPF which puts more pressure
on their own scheme.
What is the UK government doing?
Since 1997 there have been over 20 pension ministers.
Pensions are due for a big shake up which will affect your benefits, and also
the solutions available to you. Make sure you’re not one of them.
The reality
Annual pension
income (including
state pension):
£13,000
Total pension pot
for the average
saver:
£150,000
The expectation
Amount people
think they need
annually for
retirement
£24,500
The size of pension
pot needed to
achieve this annual
income:
£450,000
Annual Shortfall:
£11,500
Pensions gap:
£300,000
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This material is for information purposes only and does not contain (and should not be construed as containing) investment advice or an investment recommendation, or, an offer of
or solicitation for, a transaction in any financial instrument. Always seek independent financial advice before investing in any product. The information provided and contained in this
promotional material is believed to be reliable, but is subject to change without notice and deVere makes no representation as to the completeness or accuracy of the information or
of any opinions expressed. deVere Group // November 2012 // DG141112
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