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Money matters: Pension Black Hole
Graham Macdonald
MBMG International Ltd.
A while ago we looked at the under-funding of pensions
liabilities among US blue chip employers and virtually concluded that the
scale of the problem allied to the generous US bankruptcy laws could
result in a situation where just about every big US employer files Chapter
11 at some stage to divest their employer 401K obligations and therefore
all employees suddenly end up being much worse off virtually overnight.
 We
would not want you to think that this is just a US problem - on our
website we’ve, for some time, had an article about how the revered Swiss
state pension scheme is struggling to fund its liabilities at current
contribution levels (many other state schemes in Europe seem ready to
throw in the towel already) and a recent report from the actuary firm
Lane, Clark and Peacock (LCP) shows that there is a massive deficit on UK
company pensions.
They report that the combined pension fund deficit for
all FTSE100 listed companies now stands at GBP37 billion. Although there
had been increased contributions from employers, a change from defined
benefit to defined contribution and, obviously, a rally in the stock
markets this is not nearly enough to close the gap. Indeed, Martin Slack,
a senior partner at LCP, reckoned that the current trend would have to
continue for another eight years before the deficit was brought down to
zero. The staggering thing is that there are only three firms out of 100
that do NOT have a pension scheme deficit.
 The
change from defined benefit is worth looking at - in order to reduce the
drain on profits, many companies have been replacing final salary schemes
which guarantee a retirement income as a percentage of the employee’s
final salary (the actual % being based on the amount of years an
individual has worked for the company). What they have been exchanged for
is money purchase plans where the company only has to guarantee how much
it will pay into the pension and not how much it will be worth on
retirement. This doesn’t so much solve the problem as transfer it to the
individual. The scheme can’t generate enough money to cover its
liabilities, so it will pay less to the members of the scheme.
 Where
the problems lie is that, as any regular reader of this column knows,
there is expected to be a large market correction in the near future where
the FTSE could lose up to 40% of its present value. This would then mean
the time frame would be significantly longer than eight years for the
deficit to be brought back to even manageable figures. In fact at expected
rates of real return (over the level of inflation) it would start to look
increasingly impossible.
The problem globally has been exacerbated by the fact
that people now live longer against an unhelpful backdrop of lower
interest rates - hence more money is needed to reduce the deficit. This
explains why, even with the recent improved results, some employers had
actually seen their deficits grow in the last twelve months and that
unless they increased their contributions Martin Slack envisages them
being down for “tens of years”.
 Whichever
way you look at it, company profits are going to be drained by the
liabilities of pension fund shortfalls, individual pensions will be
reduced in real terms to reduce the rate at which the shortfalls are
getting worse and the bottom line is that both companies and individuals
are in a worse position that they had previously thought because of this.
What impact this will have on corporate balance sheets and valuations is
hard to say but pension liabilities needs to become an increasingly
significant factor in stock evaluation. For individuals the outcome is
already being discussed - an increase in standard retirement ages to 67 or
68 is already mooted, and an increase in the minimum pensionable age from
50 to 55 becomes law over the next 5 years. Individual retirement saving
is now of even greater importance then ever before.
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The above data and research was compiled from sources believed to be
reliable. However, neither MBMG International Ltd nor its officers can accept
any liability for any errors or omissions in the above article nor bear any
responsibility for any losses achieved as a result of any actions taken or not
taken as a consequence of reading the above article. For more information please
contact Graham Macdonald on [email protected]
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Snap Shots: The 10 best tips you will ever get
by Harry Flashman
 In
answer to repeated requests for my best tips, I wrote these down around
three years ago. They still remain my top 10, three years later. These
“secrets” come from years of experience as a pro photographer, and
many of them come from painful learning experiences. None of it is made
up. Follow these tips and your journey through photography will be plain
sailing!
Tip number 1. When you find a roll of film in your
camera bag or suitcase, that you’d completely forgotten about, use it to
throw at predatory poodles, rather than using it in your camera. If you
do, you can be guaranteed the results will be no good at all. The colours
will be all wrong because the film has been hot at some time or exposed to
airport irradiation. No matter how tempting it is to slip it into the
camera when you urgently need another roll of film, don’t do it! You
will be disappointed. Guaranteed.
Tip number 2. When going on holidays with your camera,
take spare batteries with you – always. No matter how new the batteries,
if there is a failure while you are trekking in Transylvania, or just
lazing on the beaches in Koh Chang you will not be able to get the correct
replacement. That’s as sure as God made little green apples as the song
goes. Remember that your camera may also use more than one type of
battery, another trap for young players.
Tip number 3. Always carry one more roll of film than
you think you’ll need when on holidays. The shot of a lifetime will
appear and you will have already used all your film. And don’t use the
one you’ve suddenly found in the bag – see Tip number 1.
Tip number 4. Always put exposed film immediately back
into their plastic canisters. In such a container, they are protected from
dust and water. They will also float when you drop one overboard and you
can scoop it up with a fish net. Having managed to drop one overboard
while in the Solomon Islands, after taking pictures of coral through the
hull of an expensively hired glass bottomed boat, I found the truth in
this tip. The film was saved!
Tip number 5. Always check that the camera neck strap
is indeed tight and secure on both ends. If one end lets go, the camera
will hit the ground before you have time enough to react. Guaranteed.
Cameras do not bounce well, if at all.
Tip number 6. When you get the book of prints back, and
the envelope with the negatives from the photo shop, immediately write on
both the subject material of the shots and the date. Do this with black
texta pen so it doesn’t rub off and you will have saved yourself hours
of work, flicking through books of prints, while looking for Transylvania
trip 2005.
Tip number 7. Never keep your camera in the glove box
of your car. With the temperatures that can be reached in the cubby hole
reaching as high as 50 degrees Celsius in our blazing summers, at best the
film is spoiled, at worst, the camera is spoiled. The newer “plastic”
bodied cameras and camera backs can actually warp with the high
temperature.
Tip number 8. When you decide that you want an
enlargement made of one particular shot, arrange for it straight away,
while you still have the negative handy, and before it gets covered in
dust and scratched, making it impossible to get a decent enlargement. And
before it gets lost. See tip Number 6.
Tip number 9. Frequently check the exposure controls on
your camera, that it really is set on Auto, or Shutter priority or what
have you. It is very easy to knock the controls and settings when taking
the camera in and out of the bag, or even when it has been hanging round
your neck. That also goes for the ASA rating, which will upset every
calculation worked out by the electro-brain inside your camera.
Tip number 10. Remember tips 1-9. Happy shooting!
Modern Medicine: How much exercise should I do, Doctor?
by Dr. Iain Corness, ConsultantWe
medicos are good at handing out advice, but not too many of us follow our
own wise words. Of course, we have an excuse – we are so busy telling
people what to do, that we haven’t got the time to do it ourselves.
Exercise is a classic example. I tell everyone that they should build in an
exercise component into their lifestyle, but my mate Alan is the only one I
know who does it. For many of us, the excuse is that we don’t know how
much.
My next door neighbours had a concession on Jomtien
Beach. You know, the usual beach chairs and tables, umbrellas and drinks.
They also had what was probably Thailand’s oldest truck. It is around 50
years old and crawls down the street every morning and evening, laden down
with ice, bottles and deck chairs. Many times I have had to help the old
girl into the driveway as it has wheezed to a halt half way in. But it
continues to stagger on. Good enough for the job it has to do. After all, it
is 50 years old.
Every morning I also see the 50 year old joggers along
Jomtien Beach as I go to the office. They appear to be held together
anatomically by leotard and lycra, or even older men doing what I call the
“cardiac shuffle” having been advised by their doctors to get some
exercise following their heart attack. I also ponder in the mornings as to
whether these people are really going (jogging) down the right track?
The question, “How much exercise should I do, Doc?”
is one that I have had to parry all my medical life. When I was a young buck
it was easy. “You can’t get too much of it,” was my usual reply (and
that just about covered everything in life!). However, now being ten years
older than my neighbour’s truck I tend to be a little more conservative.
More and more I have learned to look at the animal kingdom for a pointer.
What is the difference between your new puppy and the old
dog it replaced? Or the kitten and the 14 year old tabby? Or the lion cub
and the lord of the pride? One thing is for certain, the older animal is
less active than the younger, exercises less and sleeps more. If we accept
that the older members of the animal kingdom have not been advised by their
doctors to train for the Octogenarian Olympics, whose advice are they
following? Nature, that’s who. Mother Nature has told the old lion to lie
under the tree.
Now with regard to the human animal, is Mother Nature
wrong, or are the doctors on the wrong track? Actually neither is
“wrong” - the correctness comes in the sensible application of advice,
be that coming from within yourself or given to you. Your body, by the time
it is as old as my neighbour’s truck, has already told you to slow down
somewhat. Even in the “what you used to do all night now takes you all
night to do” department. This is all very natural.
However, we do also know that activity is good for you,
and even protective against some of the more terminal conditions that we can
get, like the aforementioned heart attacks. So, sounds like plenty of
jogging is good for you at any age. Not necessarily so! The secret is in the
balance.
As we get older, we must stay “active” both
physically and mentally. Staying “active” does not mean pushing your 50+
year old joints beyond the limits that Mother Nature intended. It really is
all things in moderation. Think about it.
Learn to Live to Learn: Postcard from Bangalore
with Andrew Watson
Off on my travels again. Lucky me. This time and my
first time, to India. I travelled with a sense of “about time too”,
having had what should have been my first trip to India, to Mumbai
eighteen months ago, untimely ripped from me. 
Bangalore
– on the move – but to where?
My trip was to serve three purposes. Firstly, to
attend an International Baccalaureate Diploma (IBDP) workshop on the
core and uniquely IB subject of “Theory of Knowledge”. Second, I
came to look at two or more (depending on the traffic) leading
educational institutions in the city and thirdly, I came to have fun,
bags of it, whether at work or play.
Fun, the Beatles sang, is the “one thing that money
can’t buy” and is something dear to my heart. In school, when a
lesson is fun, we remember it. Actually, I reckon fun should be
an essential component of any quality lesson and should preferably play
a major role in any and every day of our lives.
Bangalore, I think, was sent to test my resolve on
this issue. Eleven million people and one road (or so it seemed). During
the daylight hours, my determination to enjoy life was tested and in the
evenings, my most excellent Bangalorian companions helped celebrate our
success in this regard. Of course, part by fortune and part by design, I
had arrived at an auspicious time of the year – Diwali, with all its
light, confectionary, colour, flair and partying.
There is something magical about arriving somewhere
new for the first time and seeing it with “fresh eyes”. And yet,
from the moment of my arrival to the moment of my departure, I seemed to
spend an inordinate amount of time on the road. On average about three
and a half hours a day. Now, anyone who has ever lived in a metropolis
probably recognises that it always seems to take “an hour” to get
anywhere. But Bangalore is frankly, ridiculous, yet according to the
available evidence, much more fluid than either Mumbai or Delhi. Scary
stuff.
There’s this brilliant scene, where an Oxen pulling
a cart full of greenery is leaving the newest model Mercedes, rendered
inert by the chronic congestion, for dead, in the central thoroughfare
of the city, as a family of stray cows causes random havoc. Welcome to
India, the world’s largest democracy, storming into the twenty first
century, dragging the twentieth behind it.
My hosts, symbols of all that is brave and beautiful
in this new India, professional and passionate, educated, egalitarian
and erudite, required no prompting when asked about what Bangalore is
missing. As one they cry, “Infrastructure!” I’m just there on a
fleeting visit, but I’m witnessing my average speed on the road
reduced from three figures to one. What would Einstein say? He who
advocated travelling at high speed as a way of ageing slower? The
important thing as far as I can see, is to make sure you’re enjoying
yourself as you negotiate the craters that line any given route. That
involves embracing a positive mental attitude towards life and work, an
attitude I sensed was radiating from the delegates at the IBAP
(International Baccalaureate Asia Pacific) workshops and their host, The
International School of Bangalore (TISB).
TISB is a highly impressive school set in magnificent
seclusion, with state of the art facilities. If you believe in judging a
school by its students, then TISB gets an A+. Their Prefects performed
wonders over three days of frenetic and impassioned IB activity. Rarely
have I witnessed such regular demonstrations of initiative,
attentiveness and articulation in a group of young people. On more than
one occasion, amidst a group of twenty-five seasoned practitioners, they
were asked to offer their view on a particular aspect of the IB diploma
programme and they responded nervelessly. It was really rather
impressive. Similarly, their musical expertise was evident at a dinner
hosted by TISB at the Marriot. There were no cursory gestures to
“cultural understanding” here.
At Shristi (meaning “Creation”) College of
Art & Design, synonymous with dynamic and cutting edge work across a
range of media, creativity was oozing through the floors. I woke up one
morning to find a film going on in my bedroom. A perfectly true, if
surreal, experience. I spoke with Geetha Narayanan, the founder and
director of Shristi, about the present and future of India. It appeared
less certain than I had imagined. From all that I had read and seen
before my visit, the reported economic emancipation in India had
generated an image of an unstoppable locomotive. Now I learned how some
thought the tracks were still being laid.
The IBAP workshops lasted three days, 8.30am to
4.30pm. Workshops are a quintessential if exhausting part of allowing
and encouraging implementation the IBO Mission statement into daily
classroom practice. Quite apart from increasing knowledge and
understanding of discreet subject areas, they raise awareness of how in
the IB world, discreet subject areas are interlinked and interdependent.
By bringing practitioners together from all over the region (attendees
came from as far a field as Mauritius and Shanghai), they foster the
sharing of resources, ideas and best practice and generate a sense of
common purpose. It was an enriching, often inspiring experience, a far
cry from a school I once laboured in, where I was castigated for
offering another local school all my extensive, IB diploma material and
where if you wanted to attend an IBO workshop, you’d have to fund it
yourself, which I (apparently alone in IB world) consistently did.
As I sat in interminable traffic facing towards the
airport on my way out of India, I once more considered what sustainable,
well managed, strategic growth, entails. The IBAP at least, seem to
understand perfectly well.
[email protected]
Next week: Responding to Demand
 Heart to Heart with Hillary
Dear Hillary,
With reference to Oct. 14 edition, “Another Lonely Old fool”, may I
commend your reply, and, as I was touched by the gentleman’s letter
may I add to what you have written.
Firstly, an Esan wife in Thailand is easily replaceable.
Secondly, it is my understanding, that most Thai ladies living abroad do
not settle very well, and yearn to return to their families and
homeland. The majority who do stay, do so mainly for financial reasons,
and when that goal is achieved, they, too, return to Thailand.
Considering the nature of the job and the profession (police officer) or
the upstart his ex-wife has taken up with, I would think, I would give a
higher that average chance of her wanting to return to Thailand, with
her daughter - sooner rather than later.
I am at a loss to understand why, when his daughter was approaching
school age, he was only considering local international schools for his
daughter’s education. As his wife was Thai, and I assume his daughter
was born here, she would have been eligible for placement in the state
schools. The state schools in Thailand are good, particularly in
Pattaya, and under the present government, are continually improving. My
lady’s son this year stared at the Pitisampahn high school in Naglua.
The total coast for the year for food, books and all his uniforms came
to approx. 8,500 baht, and this was offset by a government competitive
grant of 6,000 baht for the brighter students. I am also informed that
junior state schools here are of the same standard and the cost even
lower. From the letters I have read recently in the local press
regarding international schools and my own low opinion of
money-orientated services in this country, an international school would
not be my choice for a child’s education.
Unfortunately this information is too late for this chap. Perhaps his
return to Thailand, were he does not have to confront bigoted,
narrow-minded western values, is a wise move. Also his money will go a
lot further here than it will in his home country. Take heart that you
discovered this wonderful country, and enjoy it again like the rest of
us old codgers.
An Old Codger in Paradise
Dear An Old Codger in Paradise,
Thank you for adding your piece and I hope that the original letter
writer has read all the replies and understands that life more than
carries on, but moves forward into pastures new. As Tom Lehrer once
said, “Life is like a sewer, you get out of it what you put into
it!” (And for those of you who don’t know who Tom Lehrer was, shame
on you. He was one of the finest cynics to ever come out of the USA.
Look him up in Google.) However, I would take you to task, my Petal on
your statement that an “Esan wife in Thailand is easily
replaceable”. Certainly there seems to be a never-ending supply of
Isaan (I prefer this spelling) women prepared to take on “wifely”
duties, but that does not make them good wives. You are equating
“wife” with “paid servant” and there is a huge difference.
Certainly you will be able to find a woman to live with you, but if the
emotional connection is not there, there is no depth to the
relationship, and length or stability to it either. Just something to
think over.
Dear Hillary
If I am not mistaken, you published the letter inquiry of Mr. Windblower
at least twice in only few month? In Europe, there are quite few cars
circulating and powered with pure biogas or natural gas. Biogas has a
tremendous future, due to the exorbitant increase of gasoline prices.
Motorbikes, might as well fit for this unlimited new source of power.
The driver of a very slow moving motorbike, must therefore be your
penpal, or did you invent the whole story on your desk? Well, sometimes
I wonder, if letters such as the one of Mr. Blower or the notorious Mr.
Singha do not cause you serious headaches?
Rolf B.
Dear Rolf B.,
Many people have doubted the existence of the Mistersingha person, but
let me assure you that someone using that nom de plume regularly writes
in detailing his exploits with his Isaan twins, whilst promising Hillary
champagne and chocolates. The only headache that person gives me will be
when he actually delivers the bubbly as I will be so surprised I will
drink it all in one sitting. Fortunately, that day will never happen, so
I can save the headache pills for a real ripsnorter of a pounding
headache.
As far as biogas is concerned, thank you for the lecture, and perhaps I
should have suggested that Windblower connect himself to his motorcycle
and ride off into the sunset, though it sounds as if that would be very
slowly and very noisily. Though as you say, biogas has a tremendous
future, so the young man is really sitting on a sizable fortune, if he
can harness the supply and be prepared to produce on demand. Could he
perhaps bottle it?
Psychological Perspectives: Can we trust our intuitions?
by Michael Catalanello,
Ph.D.
A reader writes, “Years ago I
‘felt’ something was wrong with my sister. I kept trying to call her
with no response. At the time I was working on a very busy switchboard and
had contacts all over the place, so I rang the local exchange in the town
where she was living. Two hours later I had my sister on the phone, telling
me her house had burned down around the time I had tried to call her.
Luckily everyone managed to get out. It was a very freaky feeling.”
Have you ever felt that you knew something without the
use of reasoning or detailed analysis? Perhaps you had a hunch, a piece of
knowledge for which you could not account. Are you guided by “gut
instincts?” Are there advantages to heeding your intuitions?
Some peak performance gurus advocate intuitive decision
making. They suggest turning off the analytical mind, and tuning into the
“right brain,” a hidden source of wisdom useful for making important
decisions. Is this a valid claim? Is there a reason to trust our intuition?
There is plenty of evidence that we are routinely guided
or influenced by automatic or unconscious mental processes, and that these
processes can serve us well. When we respond emotionally to situations, for
example, we usually do so without extensive deliberative thought or
analysis. If experiencing a sense of uneasiness in unfamiliar and dangerous
surroundings motivates you to move quickly to a place of safety, that
feeling might be considered wise or adaptive.
Irrational or disturbed emotional reactions, however,
are often maladaptive. Those who refuse to board an airliner out of fear,
but seem unconcerned about using earthbound automobile transportation are
ignoring statistics which demonstrate the far greater danger associated
with automobile travel.
There are other types of mental processes that occur
outside of our awareness. If there is a task that you perform with great
regularity and expertise, you probably perform it efficiently with very
little conscious thought or effort, seemingly intuitively.
For many of us, driving a car is one such over-learned
skill. Having driven daily for many years, we are able to do it more or
less automatically, without much effortful thought. We can sing along with
the radio, talk on a cell phone, converse with passengers, and even eat a
snack while navigating mindlessly and more or less flawlessly through rush
hour traffic.
Some people will insist following an event that, “I
intuitively knew it all along.” Social psychologists have researched this
hindsight judgment and found it to be notoriously error prone. Similarly,
people like the above reader occasionally report experiencing a
premonition, unexplained knowledge of events which later occur, or are
shown to have occurred. Some people are passionately confident in the
validity of premonitions, based upon remarkable experiences like this one.
A scientific explanation of premonitions usually goes
like this: A premonition that is confirmed by subsequent events tends to be
remembered, while premonitions of events that fail to occur are typically
forgotten. The result is that people experiencing premonitions tend to
overestimate the reliability of these random experiences, leaving them with
a false impression of extrasensory perception.
Psychologist David Dunning and his colleagues were
interested in this feeling of overconfidence we have in decisions we make.
They allowed students to interview people about their backgrounds, hobbies,
interests, and whatever else they wished. Following each interview, the
students were asked to predict how the interviewee would respond to 20
two-choice questions.
The students guessed correctly 63% of the time, 13%
better than chance; however, they felt 75% confident of the accuracy of
their predictions. Studies like this have led theorists to conclude that we
are biased toward overestimating the accuracy of our judgments and
decisions. Could this help explain the confidence of some in the validity
of their intuitions?
Human decision making is an interesting area of psychological
investigation. I suppose that being human means that we are bound to make
errors in our judgments. Nevertheless, as we learn more about the ways in
which human decisions go awry, we might likewise sharpen our ability to
think critically, possibly improving the precision of our decision making
processes.
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Dr. Catalanello is a licensed psychologist in his home State of Louisiana, USA, and a member of the Faculty of Liberal Arts at Asian University,
Chonburi. You may address questions and comments to him at [email protected], or post on his weblog at
http://asianupsych.blogspot.com
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