"Income needed to retire jumps..."

Check out https://bbc.co.uk/news/business-68222807

So you need now a #pension income of £31k if single & £43k per year if couple, for a "moderate" retirement (e.g go out for a family meal once a month?). How many will get this this much?

Remember this is "net of income tax" and does not include housing costs (since we will all have paid off our mortgages by then...yeah. How many will still be renting or paying off mortgages in their retirement).

You now need a pension pot lump sum worth £646,000 to have a comfortable retirement

Check out this shocking report that rising prices mean that in last year a couple on a "minimum" retirement income (including state pension) will need almost 20% income (extra £3200 pa) per year.  But who anyway wants to retire on the "minimum"?

To get a "comfortable" retirement (e.g go on holiday Europe for 3 weeks per year) a couple will need a "pension pot" lump worth a staggering £646,000 to provide this income. 

I wonder how many of my UNISON members will have a pension pot anywhere near that figure. 

Employers must take the lead in providing suitable pensions for its staff. They must pay the lion share. It is in their interests since otherwise you will find a workforce unable to retire regardless of their age or health since they would be living in poverty. 

The rush to the gutter in pension provision of so many employers in a national disgrace. I hope and expect a future Labour Government to act. 

Introducing the Retirement Living Standards (& Future Christmas Dinners)

This is a really clever approach by the PLSA to encouraging people think about their pensions seriously Once you decide what lifestyle you want after retirement you can then think about what you have to do to achieve it. 

Do you want a "Minimum", "Moderate" or "Comfortable" retirement? 

Of course due to the current grossly inadequate state and employer pension provision many will be left with only a "minimum" retirement. 

Check out https://www.retirementlivingstandards.org.uk/ 

and also a seasonal variation on what sort of Christmas dinner you could afford on the different pension standards. 

https://infogram.com/9797f63c-f761-4f60-9e5c-1011e606d7bd

Why Pensions are so important and organising to defend the Local Government Pension Scheme

Today I had a record breaking 3 meetings on Pensions. First I chaired a meeting of Greater London UNISON reps who sit on local Council Pension Boards (see group picture of Forum members above).

UNISON has cross service group national and regional forums on the Local Government Pension Scheme (LGPS). The overriding purpose of these forums is to defend and improve the LGPS which 4 million UK workers depend upon and has £250 billion in assets.

We discussed:-

• Support appropriate take up of the 50/50 option, especially for low paid workers who would otherwise leave the LGPS. Point out you still get full life insurance cover with 50/50
• Recruiting and training for new reps; 
• LGPS fund manager Baillie Gifford refusal to talk to trade unions about manufacturer Tesla's appalling  health & safety record.
• Indemnity insurance for Pension board members. The saga continues. Why do some funds have it but others say it is not necessary? 
• How to challenge inaccurate calculations of pensions (a rep reported that there has been some awful big mistakes made); 
• Poor governance arrangements on some London Pension boards; 
• Member representation on the London Pension Fund Authority
• Access to UNISONs financial advice partner Lighthouse; 
• Carbon divestment campaign. Branches and Climate campaigners need to work together. 
• Carbon Neutral investment; 
• New Minister for Local Government Pensions (who knows his stuff); 
• 2018 LGPS PLSA conference; 
• Millions of pounds of savings already made by London Pension funds due to UNISON's work on exposing excessive fees:
• Problems with the London Collective Investment Vehicle (especially with Governance and ESG)
• Disaster. The government wins legal appeal that they can force LGPS to invest in line with the whims of Boris Johnson as Foreign Secretary. What could possibly go wrong?  
• We finished with a minutes silence for the victims of Grenfell. 

PLSA Local Government Pension Conference 2018

Just arrived for the Pensions and Lifetime Savings Association annual conference in Gloucestershire as
Newham London delegate from Investment and Accounts Committee.

Some interesting speakers and seminars ahead.  Local Government minister Rishi Sunak MP, fees, ESG, economy, change, the regulator, cost cap, funding & current affairs.

Will blog as and when

The Emperor has no clothes. DC Pensions

From Professional Pensions "John Gray looks at whether current contribution levels across DB and DC are adequate.

As well as being an employee representative on a pension board I am also a UNISON trade union branch secretary with members in more than 140 different private and public service employers.

While I am pleased that auto-enrolment (AE) has taken off so far, I am astonished about how little money employers are paying into pension pots. While many do pay more than the statutory requirement, we see well known national organisations with supposedly good reputations paying peanuts into their employee pension schemes.

If you put in only the AE 8% then you will be retiring and die in relative poverty.

I remember my first ever TUC pension course and our tutor (by coincidence the father of present day PLSA CEO, Joanne Segars) telling us there was an unscientific rule of thumb that you need to put around 20% of your income into a pension for 40 years to retire on half pay and receive a lump sum. Since workers cannot afford to pay 20% into their pension the employer has to pay the greater share.

Whenever I repeat this story to trade union members and to employers they are genuinely horrified at both the amount and the length of time needed.

I know this 20% rule of thumb is full of holes but recently I went to the website of a well-known stakeholder provider and spent a little time on its pension calculator site. While there is no such thing as a perfect projection I was pretty shocked at what I found.

How much?
I used the example of a worker aged 28, who has no existing pension provision on £30,000 per year, who is planning to retire in 40 years' time at age 68. I worked out that not 20% but a ridiculous 50% (£1,250 per month) of their income would have to be invested in order to hopefully retire on half pay (with no lump sum).

If you include the projected state pension you will still have to pay in an eye-watering 34% of your income (£850 per month). So only paying 20% into your pension for 40 years will actually get you nowhere near half pay. If you put in only the AE 8% then you will be retiring and dying in relative poverty.

Okay, maybe under AE a 28-year-old will by that age have some existing pension provision. Current investment assumptions may prove to be wrong and be too pessimistic. Perhaps the industry will really drive down costs and charges (including hidden fees) and increase return. Annuity rates could improve?

Maybe, maybe not. Young people have student loans to pay off, sky high rents to cover while also trying to save for a mortgage. While retention rates for AE have been much higher than expected, this might change. Especially if people think it is not going to be worth it. Current investment assumptions could prove to be optimistic. The industry is very good at side-tracking attempts to cut its charges and annuity rates could remain the same for decades.

So let's keep the 34% of income figure. It's a good enough guess as any I think. Now, should the union be arguing with employers to be paying, say, 26% employer pension contributions and employees 6%? I can imagine the response. Let's face up to it – defined contribution schemes are just not going to deliver.

But why is it some of my union members still belong to a good-quality, national, career average defined benefit schemes, whose total cost for future actuarial is capped at 18.5%? With the employer contribution a maximum of 13%? Surely it's time to think again about modern defined benefit schemes?

John Gray is a London Borough of Tower Hamlets Pension board member though he is writing in a personal capacity