Posted on: 10th January 2017
Things have been looking a little on the uncertain side for final salaryfor some time now. But as far as many experts are concerned, things are about to become a whole lot tougher going into 2017. A review of the sector has brought to light evidence that many companies will struggle next year, with many of them apparently already ‘treading water’.
With the future of steelworkers’ final salary pensions schemes have has been a subject of heavy debate. According to those working with the Protection Fund – the scheme that represents an emergency lifeline for the sector – the overall deficit hasn’t really improved at all.deals and the collapse of BHS having been in the spotlight for much of 2016, exactly what kind of future
“When we look back at what progress schemes have made over the last decade, it appears that many schemes are just treading water,” commented Andrew McKinnon, chief financial officer for the PPF.
“The average recovery plan length, at around eight years, has barely improved, which brings home the challenge we now face,”
“The current economic backdrop, as well as scrutiny faced by the entire industry, suggests conditions will remain tough in 2017.”
According to the report issued by the PPF, final salary schemes totalling 5,794 had stacked up a total deficit of £222 billion by the end of March this year, which had changed very little from the same time a year prior. What’s causing additional concern, however, is the way in which fluctuations in the GBP’s value and a general lack of investor interest in the wake of the Brexit vote are combining to make things even more turbulent.
Experts and advisors are in agreement that final-salary pensions are facing two very distinct threats right now. The first being the fact that with people living longer now than ever before, it is becoming more expensive for the companies that have to pay for longerschemes. Along with this, the generally uncertain economic outlook is also causing concern, given the way in which there are few safe havens for that guarantee strong returns at present.
“Pension schemes used to be owners of UK companies as well as being funded by them,” said Tom McPhail, head of retirement policy at Hargreaves Lansdown.
“being used to help finance the growth in British companies is becoming a thing of the past; instead our savings are either being lent to the government or invested abroad.”
Now more than ever, it is critically important to consider all available options both before and during retirement. There are still a great many options available to savers at all levels and of all ages. The key to successful saving lies in selecting the right options at the right time, along with knowing how, when and by what means your savings can/should be accessed when the time comes.
For more information on anything to do with pensions or saving of any kind, get in touch with the Haven IFA team today.