I am not an expert on pensions but I feel compelled to share what little I do know. You know! Retirement pensions. Actually, your Social Security benefits are a pension.
50-60 years ago it was common for many companies to provide for employees retirement by setting aside “profits” on an annual basis. It meant that employees could receive regular payments (usually monthly) according to a pre-determined schedule upon retirement.
Here is a word you should remember when people talk about pensions: “assumptions”. Most companies hired a financial expert known as an actuary. He was a shriveled up old man who wore green eyeshades and sat in a closet calculating the numbers involved in a pension.
Assumptions going into a pension include things like the number of participants, the amount of indiviual pay each person gets, years of service, conditions for qualifying and vesting schedules. And more….
Remember that many pension plans began 50-60 years ago. The money that the sponsoring company set aside each year would earn interest and growth from investments. Mr “green eyeshade guy” normally guessed on a rate of return for the investments. 8% annual return was fairly common.
Alas, everything is not going as was designed for pensions. The money that is in the funds for pensions has been making 1% per year for the last 12 years and there have even been “loss years”. Some companies have been losing money and delay putting aside money for their pension plans. In fact, if a company goes bankrupt and has an unfunded pension plan, guess who “get it in the shorts”? Yep, the pensioners. There are some plans backed by insurance but that gets complicated.
Pension plans have been replaced by 401(k)s and IRA’s leaving the individual in charge of their own plans. Companies have wanted distance themselves from published retirement plans because the original assumptions always change.
I know of one family member participant on a pension. Good luck!
Before the rest of you feel relieved, we all have the prospect of our Social Security pension being interrupted, changed or cancelled. The original assumptions of Social Security have changed and the Government has pi—- the money away. Good luck to us all!
Love,
Dad