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Carillion Bombshell: The time for trust in employers has long gone!

If you stopped the average Joe in the street and asked do you trust the government or your boss they would probably tell you not wholeheartedly. Yet when it comes to money they leave most of their assets in the hands of their employers and the Government.

A good example of this is the 20,000 odd employees of Carillion in the UK who on January the 15th 2018 turned up to work on various projects around the UK and were told to go home. Later they learned that the company was in debt to over 1 Billion pounds and with pension liabilities of a similar amount and has now collapsed exposing the other 20,000 employees around the world exposed as well.

The most fundamental reason for the collapse of this company was to blame; not leaving enough in the pot for unforeseen circumstances. Carillion’s bosses bid notoriously low for Public contracts which brought very little profits and hope to score peripheral contracts of the back of them. When some large hospital contracts found Asbestos in the roofing and disagreements abroad over FIFA World cup contracts leaned heavily on their room for maneuver, their vulnerability was laid bare, and regardless of size if you have no cash for things that can go wrong, you will fall.

So what happens to all their employees who were on pensions schemes? Well the Government’s Pension Protection Fund will step in. The P.P.F. place a levy on member companies and are pretty well funded for the time being and can absorb the 900 Million G.B.P. hole left by Carillion, but if this trend continues their pot will dwindle like everything else. The P.P.F. is prevalent in older established companies which is an arena now dwindling and not being replaced as the UK moves slowly into the digital age, so fewer members as time goes by.

Those who have already retired on Carillion based pensions are in the main OK, but their future increases will be less than the inflation rate. Those yet to retire will see a cap of $48000 a year (90% of their benefits).

Takeaway

Regardless of how big the company you work for, no one business is now 100% secure, job security is something our grandfathers may have talked about, there are no more ‘jobs for life.’

Any company big or small can fall, if you do not have a plan B or are at least investing in yourself to improve your chances of being employable or are able to rely on a skill that can earn you some money as a side line, you will be exposing you and your family to a high degree of risk.

Leaving your financial security to the government or big financial players is foolhardy. yes in our grandparents age you would be in the main ‘comfortable,’ but in any generation born of the first baby boomers as in anyone born on or after 1960 you must start asking questions to your government, employers and financial institutions about how they are managing your money, you have to take responsibility now.

That doesn’t mean you have to start becoming a financial expert and reading the Financial Times every day and playing the markets, it means you find a trusted and established financial expert to help you and bring you closer to understanding what his happening to your money and how much you will have when you retire and what you can do now to help your situation later.

If you are working abroad and have the expat label even more so. Working abroad can have massive implications to how much tax you pay and leaving pensions in UK is not the best thing you can do with your money period.

For us, the most important factors when choosing a financial advisor is their back ground, find out from their own clients if they are trustworthy, and check up whether they are certified by UK and /or local financial regulators. lastly look to see how much money they are making for their customers.

By investing in yourself and by finding out what is happening to your money you may find out that all to often your pension pot is managed by some people who cant even manage their own basic finances, (eg Carillion) and by moving cash to investment vehicles managed by people who have a better acumen and track record, you may find that it makes a massive difference to whether you retire in a small council flat or a decent house by a warm ocean.