Politics and The Economy

The thing about major financial crises is that they are entirely predictable, but almost entirely unpredicted. That is to say, when they happen (but only then, except for those with foresight) it becomes clear at once that they were always on the cards; it becomes obvious that a bubble was going to burst, or that in some other way a reality check was on the way. Now, feel yourself very lucky you chanced to read this, because I am going to tell you about the NEXT crisis. Remember you read it here first!

Companies have been frantically baling out of commitments to index-linked "defined benefit" pensions. They represent a threatening, unquantifiable and scary liability. Such pensions can be discontinued for new entrants, curtailed for current members, but such action does not cancel historical promises which were never envisioned to be a fraction as costly as they have turned out to be. Go back twenty years and look at projected life expectancy for the years 2010, 2020, 2030 as reflected in the actuarial tables of the time. You'll be surprised! Even last year's data requires revision. And meantime, returns on capital diminish and grow more hazardous.

Time was, pension funds would be in a modest surplus one year, a manageable deficit the next, as stock and share prices fluctuated. The holes often healed themselves. Sometimes they needed to be darned with an extra but modest helping hand. There was generally no reason for fear. These days, more and more companies have big holes in their pension funds and the situation tends to deteriorate year by year. Gordon Brown's "pension snatch" (1998) has not made things any easier; in fact, that may be about the time that the pensions rot set in.

Moreover, the admitted deficits increasingly understate the realities because historic assumptions are only slowly abandoned. Some companies continue to trade, and their shares continue to be quoted, even when a chasm has opened up between the size of the hole and the prospect of the company ever generating the wherewithal to fill it. Worried finance directors wind up schemes, reduce benefits, but their alarm has not spread to the investing public. So far, it is as if the pension fund were regarded as a distant hazard, trotting along somewhere behind the company unlikely to grab it round the throat and throttle it.

There are two reasons for this. The first is that these liabilities are not immediately and properly reflected in "bottom line" company profit or loss. The second is that we have not yet seen a firm directly bankrupted by its pension deficit – which is mainly due to pension commissioners fearing to bring down ruin upon their own heads. Nonetheless, I would not like to bet against the possiblity that sometime in the not too distant future, a judge will rule that a major company is to be removed from the control of its shareholders and administered for the sole benefit of its pension fund. Remember: the pension fund ranks ahead of the shareholder!

Whatever the exact choreography of the event, sooner or later we will see a major company laid low by its pension fund liabilities. (It is to some degree a matter of chance that this has not happened already.) It will need the lesson of this happening just once, spectacularly, and under an alarmist media spotlight, to generate an avalanche of reality. Every quoted company will at once be reassessed on its ability to sustain its pension responsibities, and will be adjudged safe, vulnerable, or bust. Leaders of Government, Industry and Commerce will hold crisis talks. Newspaper headlines will echo a crescendo of popular panic.

If you want to sleep soundly, I suggest you review all your investments in terms of their pension fund deficits. For safety, add 50% to the declared pension deficit and add the resultant figure to the liabilities side of the balance sheet.

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Some thoughts and advice gratefully accepted here on a possible change of tack for my retirement savings.

I'm in my early 30s and have been saving into stakeholder pensions for over a decade now. After several company changes etc I have about 6 pensions now active. (Looking to consolidate them at some point soon.)

The problem as I see it with pensions long term is that the earliest age at which you can draw down your pension will soon be 55. The government will surely steadily increase this to 60+ over the coming decades. My intention is to retire around the age of 55 - and I don't like the idea of not having control over access to my retirement savings when I want them.

With the new ISA limits coming, I'm considering stopping my private pension contributions altogether (but opting out and having my Class 2 NICs forwarded to a private stakeholder) and simply investing the maximum into ISAs. Between my wife and I that's £20k per year we can put away each year 'ear marked' for retirement.

The obvious downside is being taxed upfront, rather than at the end. But the longterm upside is unrestricted access, and who knows what the tax rates might be in 20 years.

Caveats include, ISA limits changing. A future govt repealing the tax free-status etc. But the pension eligibility age in the future is surely likely to advance to the early 60s but the time I'm in my early 50s.

Any angles on this I've missed completely?

Thanks for your help.

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please don't let this man become president of eu. he needs to be dragged to a war crimes tribunal. he is an international conman - he duped the world and he continues to dupe himself by saying he did what he thought was right.

" "Mr Blair, who has repeatedly defended his decision to lead Britain into the conflict, was rebuked by Peter Brierley, whose son, Lance Corporal Shaun Brierley, was killed in 2003. Mr Brierley refused to shake Mr Blair’s outstretched hand at a reception that followed the service at the Guildhall in the City and told the politician: “I’m not shaking your hand, you’ ve got blood on it.” "

http://www.ft.com/cms/s/0/c24524f2-b519-11de-8b17-00144feab49a.html

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has become interesting again after the speeches by gb and mandelson at the labour conference. even the sun felt it necessary to stub out any signs of life with their "labour's lost it" headline.

i bet dave interesting cameron won't be so exciting - when he speaks all i see is eton bliar.

as for the lib dems' conference... zzzzzzzzzzzz - a pity, the idea of an atheist prime minister has a hint of excitement about it.

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Surely someone should be on here, talking about this subject everyday after trading.

I don't believe it.

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It is rumoured that Jacqui Smith was overheard in the House of Commons saying that when she got home she was going to give her husband a damn good spanking.

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I all ways thought fraud was wrong but its not if its perpetrated by some one in power, or the fraud is big enough, then the law backs of and lets them go un punished.But then we the public have to find the money to pay out millions in compensation to the fraudsters, we even pay off bankers and MP when there vote out of office , or pushed out for being naughty so they get compensated even after they have taken every penny they can from us, to up date both their houses ,even if both places are in London just 6 miles apart, and now they even get blue movies and sky telly now on the public purse, so what’s different. Why shouldn’t lags be compensated for stealing a few quid, especially if there released early from the only holiday camp they will ever get see in there lives, remember this punishment is given out in our name, and the establishment put them in the first place, so we wouldn’t up set our European friends by falling fowl of the human rights act buy giving them harsh penalties . Remember we are the good guys so we can take it, and our government knows best, and if that is true, then why shouldn’t the poor people of the world be allowed to enjoy them selves at our expense in prison.And if some idiot wants to take that perk away from them early then why shouldn’t the lags be compensated for loosing that facility after all we told them they would be there for at least 1 year ,it was us that broke the contract not them , so they should be compensated for the distress coursed, just as there masters are, when their caught being naughty .
Be happy
Dave

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Morning Citytrade,

As you say you wont have any augment, then I won't as obviously that means you don't want to hear opinions.
I also find it impossible to take your comments seriously. GB and his cronies have done more harm to this country than any other government within the last 100 years. We have been sold down the river.
Please look at the facts.

Regards Pond.

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" If we wage war with all our strength, our subordinate commanders and even our troops (especially if they are not used to warfare) will frequently encounter difficulties which they declare insurmountable. They find the march too long, the fatigue too great, the provisions impossible. If we lend our ear to all these DIFFICULTIES, as Frederick II called them, we shall soon succumb completely, and instead of acting with force and determination, we shall be reduced to weakness and inactivity.

To resist all this we must have faith in our own insight and convictions. At the time this often has the appearance of stubbornness. but in reality it is that strength of mind and character which is called firmness. "

Von Clauzwitz



There cannot BE a solution to a world crisis other than a world solution.


Although that seems obvious, Gordon Brown was the only person shouting it as he made one of his famous rugby dashes earlier last year.

The Americans would be naive to distance themselves from what they see as a flailing British Government.

They blundered like that as Joseph Kennedy cabled Washington that the UK would certainly fall in 2 weeks, when Churchill, new to office, was thought an absolute disaster as he gathered the reins of office.

Brown is slow; but he is sure. He studies long, hard and though one-eyed - like Nelson, their greatest British hero - makes correct moves.

Anyone who confuses his patience with cowardice is young. That patience is the patience of the time-served statesman.

The General Election must be a much closer run thing than we may anticipate, and the idea that the minorities and the poor will not come out to vote Labour in unprecedented numbers is a sorry gamble.

A week is a long time in politics, and the British like, the Americans, have a moral leader who follows The Way.





I wont have any argument that he caused the world crisis, nor that the UK can magically go this alone

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Well worth a watch.

Would like to have seen how he replied.

http://ukhousebubble.blogspot.com/2009/03/devalued-prime-minister-of-devalued.html

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So there is going to be yet another enquiry re the Government Minister Tony (greed b*****d) McNultys claim on his 2nd (sic) home.
He was heard to say by a reporter, 'Sometimes I feel so down from being bullied at work, by that nasty Gordon Brown, that I have to go home to my mummy and daddy for a cuddle. I also keep my teddies there'.

I am going to make a tour of the local bookies today to see what odds they will give me re him being found guilty of any corrupt practise.

No doubt the odds will be up there with Elvis being found alive.
Green men being found on Mars.
Gordon Brown winning the Nobel Prize for economics.
Alistair Darling winning, er anything.
OR...Trev winning Mastermind.

Anyone care to bet (pun intended) what odds I will get offered.
By the way I think Elvis being found alive, is the favourite.

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Brummell,

Yes, I am certain it is true (but hard to believe I know).
It was reported in The Daily Telegraph (presumably on the day of my post, 10/03/09).
If you put 'compensation early release prisoners' into google it will bring up many other sources for the story.
The lunatics are really running the asylum.

I apologise for not putting the source (telegraph) in my previous post. This was an oversight.

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Is that true? Where was it reported? If true it is a complete distortion of logic. The prisoner is a liability on society as a result of his/her anti-social activity. That liability should be repaid by acceptance of rehabilitation as an honest citizen. Society pays the price of that rehabilitation as part of its responsilbility for maintaining law and order and developing the potential of all citizens. Compensation for a reduction in sentence is wrong and everyone involved in its authorisation should be subject to investigation and punishment for a corrupt expenditure of public money because they have participated in a criminal exploitation of the public purse.

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Just when I started to think that this countries rules could not get any more ridiculous.

It appears that over £5,000,000 has been paid to compensate prisoners that have been released early under the 'early release scheme'.
This 'compensation' is to reimburse the prisoners for loss of accommodation/food etc that would have been supplied by the state (IE us) if they had not been released early.
No doubt it won't be long before some enterprising ex con claims for other losses.

How about a years free Gym membership, to compensate for loss of facilities.
Free private medical/dental cover.
Hairdressing, free TV licence, phone calls (they are allowed a certain number of free calls) and of course the regulatory bit of spending money for essentials.

What brain dead muppet thought up this one.
The mind truly boggles.

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Eventually the system will either completely break down or the foreign investors will repossess the country. I completely agree with the author on how supremely clueless the general American public is about how this country is actually financed.

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We are now printing money. The pound is in freefall and soon we will have a repeat of the "pound in your pocket" speech. Savers are actively discouraged and spenders encouraged.
All of these factors will worsen our position. Interest rates need to rise before we are forced to increase them to save a complete meltdown. Savings should be encouraged so that we are not attempting recovery on a base of credit and toxic debt.
To save face and preserve what little confidence there is the government must Nationalise the major banks
Watch out for more dithering dithering and dithering.

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This cut of 5% would have had an impact on everyone straight away. The cost would have been lower than the 11 billion and the customer could then choose what to do with the money.
People will not buy on a 2.5% cut of vat unless they want something.

REGARDS
TIGER

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erm, correction - reduce VAT by 1.5%...

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* Increase the tax threshold to encourage people into work.
* Reduce VAT to 1.5% on all goods, and slash it to zero on energy-efficient items.
* Re-introduce MIRAS
* Offer NHS opt-outs
* Cut fuel duty
* Offer tax holiday for entrepreneurial start-ups
* Allow public sector jobs to wither via natural attrition - freeze on hiring. The rationale being that it's cheaper to pay people dole money than sustain them in cushy jobs with gold-plated pensions.

Cut government waste - the NHS has more quangos than it needs - most of which were created to correct the b*llsups of previously-created quangos. What a joke!

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The Chancellor should stop robbing from the pensions of the country's value earners - the private sector workers. They would spend more if they weren't worried about retirement.
L.

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