Oh great, yet another scheme - PRS inspections !

[JohnW2]

They will receive their pensions from the pension fund, where else?

Quite. They should receive them from the fund, but, as I previously quoted ....

Yes, but isn't it also the case that those people's contributions (as well as the investment income from those contributions) will have been used to fund the much lower pensions of those who preceded them?

If your proposal had worked from inception of the scheme, where would the fund have come from - and, come to that, if people's contributions were being used more-or-less in real time to pay current pensioners, how would those contributions have generated any significant investment income?

Kind Regards, John

 

[stillp]

What are you calling my proposal? Your insistence that because I didn't mention the existence of a pension fund I 'must' be postulating that there isn't one?

 

[JohnW2]

What are you calling my proposal? Your insistence that because I didn't mention the existence of a pension fund I 'must' be postulating that there isn't one?

I've never suggested that there is no fund. However, as Simon has said, unless contributions were so excessive that no-one would join the scheme, if some of the contributions were used to fund current pension payments, the fund would be inadequate in the event that contributions into it ceased - which is the main risk that a pension scheme/fund has to be guarded against.

As I previously wrote, I know people who are drawing 'full' ('as expected') pensions from a scheme mmany years after the employer (and hence any contributions into the fund) ceased to exist. That wouldn't be possible wit what you are talki ng about - unless, as Simon and I have both said, contributions were ridiculously high.

Kind Regards, John

 

[stillp]

As I previously wrote, I know people who are drawing 'full' ('as expected') pensions from a scheme mmany years after the employer (and hence any contributions into the fund) ceased to exist. That wouldn't be possible wit what you are talki ng about - unless, as Simon and I have both said, contributions were ridiculously high.

Nonsense.

 

[stillp]

You appear to be describing that some of the contributions going in are/have been used to pay out pensions rather than being invested in the scheme to pay future pensions (for those currently paying in). Unless the contributions are significantly in excess of what's needed for future pensions of those paying in, then it's hard to see how the fund will be solvent if it stops getting further income.

There's a fund. Money goes in, and money goes out. The size of the fund, together with investment income, employer's contributions, and members' contributions, has to be sufficient to meet the projected liabilities of the scheme. Inflation means that at any given time the current level of contributions is likely to be greater than those at some earlier time, and the pensions will be greater than those preceding (except for index-linked schemes). What's so hard to understand about that?

 

[JohnW2]

There's a fund. Money goes in, and money goes out. The size of the fund, together with investment income, employer's contributions, and members' contributions, has to be sufficient to meet the projected liabilities of the scheme.

Quite so.

Maybe the statement of yours which we keep quoting has been misunderstood. However, what you wrote certainly gave the impression that you were saying that at least some part of the incoming contributions (members' and employers') had to be used to pay out current pensions in order that the scheme 'worked' (i.e. remained capable of meeting its projected liabilities). If that were the case, then if those contributions suddenly fell to zero (for evermore), the simplest of arithmetic indicates that the scheme would be no longer capable of meeting its projected liabilities.

As I said, maybe we have misunderstood your statement - but if it didn't mean what I suggest above, then I find it hard to think of what it was meant to mean.

What I don't understand is how final salary schemes were ever constituted in a way which would enable them to service projected future liabilities (pension payouts) in the event that all income into the scheme other than (diminishing) investment income was to suddenly cease, particularly during periods of high inflation. We are essentially talking about the same arithmetic as with an annuity - i.e. the fund alone (including its ongoing, but diminishing, investment income) must, at any point in time, be large enough to service all pension payments to all members who retire, for the remainder of their lives. Particularly in the early stages of a scheme, it's not easy to see how an adequately large fund could be created. ... but that's an illustration of the fact that I don't know much about this subject.

Kind Regards, John

 

[stillp]

I find it hard to think

Indeed.

 

[JohnW2]

Indeed.

I'm very surprised. Of all the people here, you are one of the last I would have expected to resort to 'personal insults', but I suppose the fact that you have resorted to that may be quite telling.

I really don't understand why you apparently cannot understand what Simon and myself thought your comment meant - and if it was meant to mean something different from what us two (and maybe more) took it to mean, you surely ought to be able to explain what you did mean?

Kind Regards, John

 

[stillp]

you are one of the last I would have expected to resort to 'personal insults

I had thought the same of you. It seems we were both wrong.

 

[JohnW2]

I had thought the same of you. It seems we were both wrong.

Who on earth do you believe I have directed any 'personal insults' at? It simply is not in my nature, even if I am losing an argument.

Kind Regards, John