In Reply to: Re: A Solution? posted by Freddy on 21 September 2004 at 08:21:35:
Freddy - just so - and rules can be changed! If its an IR rule that would take longer (!). However it seems to me to be neutral to the IR.
If an annuity had been purchased then that is different simply because an annuity contract is "till death us do part".
Before I collected my pension (10 years ago at age 50) I asked for its transfer value and investigated buying an Annuity. At the time the best quote was from the Pru, who offered me a flat Annuity some 25% above the IBM pension. I did some sums based on inflation assumptions (using the 66% rule!) and concluded that the IBM pension was the better bet... I was wrong because (a) Inflation has been a lot lower than I expected and (b) IBM has paid out somewhat less than 66% and (c) the security that came from IBM's then reputation has turned out to be something of an an illusion. The flat annuity is still some 15% above my present pension!
Turning the argument around, from IBM's point of view, if inflation had been 10%pa and they increased pensions by 6.6%pa then the real cost diminishes by 3.3% pa compound - which over 10 years is a lot of dosh.
Thus, given the C-Plan deficit, it sems that I was not the only one to make wrong inflation estimates...!