Reasons Why you are Pensionless!

Currently, employers are encouraged to pay pensions but it is not a requirement by law. In fact, only about half of all employees have a pension, so it is already hard to get a pension in the U.S. However, sometimes some retirees lack a pension because of other reasons that could have been avoided.

Multiemployer Pension Reform Act of 2014 was signed into law in December 2014. Barrack Obama signed the new measure as part of a reform aimed specifically at union pension plans facing long-term insolvency.

In November 2014, the PBGC’s 2014 annual report recorded a USD 42.4 billion deficit in the multiemployer insurance program. This is a USD 34 billion increase in the deficit for the program as compared to the prior year. The reason for the increase is 16 multiemployer pension plans that the PBGC predicts will need financial assistance within the next decade, with two of those plans expected to need assistance in excess of USD 26 billion.

Sourced from: http://www.pensionfundsonline.co.uk/content/country-profiles/usa/122

Unfortunately, the deserving retirees depend on the goodwill of the employer to provide a pension scheme, as companies are not required by law to give pension. In some cases, even employees with a pension scheme miss on their pension because of the following factors:

  • No union card

Workers who belong to a union are significantly more likely to be offered a traditional pension at work. Some 82 percent of union members have access to traditional pensions, compared with 21 percent of nonunion employees. “Unions certainly will negotiate and have some ability to hang on to pensions through negotiations,” says Jonathan Barry, a partner in Mercer’s retirement risk and finance consulting group.

  • You’re not a public servant

Top-notch retirement benefits are prolific in the public sector. A vast majority of state and local government workers (84 percent) were offered a traditional pension in 2010, compared with just 20 percent of private industry workers. The public sector professions most likely to come with pensions include primary, secondary, and special education school teachers (96 percent), natural resources, construction, and maintenance jobs (87 percent), and the protective service (84 percent). “State and local governments, some federal government employees, and the military are the primary areas where they remain strong,” says Olivia Mitchell, director of the Boettner Center for Pensions and Retirement Research at the University of Pennsylvania’s Wharton School.

  • You work for a small company

Large enterprises generally offer the most generous retirement packages. While 63 percent of employers with 500 or more workers offer traditional pensions, that proportion gradually declines to just 10 percent at companies with fewer than 50 workers. “Having a pension plan is a fairly complicated thing to do, and you need some resources to be able to deal with it,” says Barry. “A small company probably doesn’t want to deal with all the hassle when they can sign up for a 401(k) plan fairly easily.”

  • You picked a pension-less industry

If you are looking for a pension plan in the private sector, consider working for a utility, where 82 percent of employees are offered traditional pensions. Other industries that continue to provide traditional pensions to workers include credit intermediation firms (57 percent) and insurance carriers (48 percent). The job least likely to come with a pension is food service (3 percent).

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  • You job hop

Most pension plans are designed to reward long-term employees. If you do not stay with an employer until you are vested in the plan, you may not qualify for any payout in retirement. Even after you are vested, payouts will generally be pretty small unless you rack up decades of service with the same employer. “Most traditional pensions plans have a five-year vesting period,” says Barry. “If you are hopping from job to job to job, even if you make it to vesting, you might only get a small pension.”

  • You don’t work full-time

If you cut back to part-time employment, you may no longer qualify to participate in the retirement plan. While over a third (36 percent) of full-time workers are provided with a traditional pension, just 14 percent of part-time workers are offered the same benefit. “Most people today will never remain with the same employer for their whole career,” says Mitchell. “If you have a job change, if you stay home to have a family if you work part-time, all those things will make you ineligible for a defined-benefit pension.”

  • You don’t live in an area where pensions are prevalent

Employers generally aim to offer retirement benefits that are competitive with other companies in the same geographic area and industry. Private sector pensions are the most common in the Middle Atlantic (26 percent) and Northeastern (25 percent) the United States. Workers in the southern United States are the least likely to have access to traditional pensions.

Sourced from: http://money.usnews.com/money/retirement/articles/2011/02/07/7-reasons-you-dont-have-a-pension

The Mobile Banking Revolution

Technology advancements have played a significant role in allowing many people in the world to have access to services they need. One of these services is mobile banking that seeks to simplify money transfer and banking while at the same time ensuring that the client’s funds are secured.

Mobile technology is revolutionizing the global banking and payment industry. It offers new opportunities for banks to provide added convenience to their existing customers in developed countries, and reach a large population of unbanked customers in emerging markets. However, banks face significant challenges as new players enter these markets and change the ecosystem of the industry. Although no single model has been successfully imported from one country to another due to significant country-specific differences in the financial regulatory infrastructure, and customer needs; financial service firms can learn some lessons from the limited success of current approaches to design their strategy in this exciting area.

Sourced from:http://www.europeanfinancialreview.com/?p=996

The mobile banking industry is one that is still young which indicates vast possibilities for any interested banks and providers. It has been very successful in developing countries with platforms such as Kenya’s M-Pesa showing great innovation and service. The developed world, however, is yet to embrace such opportunities. The system will involve the following fundamental characteristics;

1.Instant, 24/7, 365 days/year operation — the first such remittance solution without the need for cards of any kind, money moves from account to account instantly using mobile as the channel

2.Works on all mobile phones

3.Mobile Money Identifier (MMID)

  • A unique 7 digit number for each account
  • Enables customers to link the same mobile to multiple accounts
  • Removes chances of wrong transfer resulting from change of mobile numbers and typing errors

4.Mobile number and MMID combination uniquely points to a bank account

5.Works on the existing ATM Messaging, Switch, and Network, making it easier for banks to adopt this quickly.

Sourced from: https://hbr.org/2012/04/innovations-in-mobile-banking

The industry presents an opportunity for better collaborations between network companies and banks as mobile banking utilizes the existing mobile number and ATM messaging. The system promises some incredible benefits apart from making banking easy, and on the go.

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1.Banks are already investing in mobile technology and security, developing Smartphone apps, adding new features such as the remote deposit of checks, and educating consumers. Consequently mobile banking adoption among consumers has been much faster than the adoption of online banking more than a decade ago.3

2.Most banks believe that the mobile channel will help them reduce transaction costs as well as increase customer engagement and retention. This is similar to the intended benefits of online banking several years ago. However, a Harvard study shows that while online banking improved customer retention and reduced cost per transaction, it led to an increase in the total number of online and offline transactions that resulted in an increase in the total transaction cost.4

3.More importantly, banks will be myopic if they view mobile as just another channel for doing business. Mobile technology is changing the ecosystem of the banking industry as new players with innovative solutions enter this market.

Sourced from: http://www.europeanfinancialreview.com/?p=996

Luckily, the success of the industry in other countries has challenged banks to invest in secure mobile technology systems. However, the mobile banking system is still young, so there are some kinks that still to be worked out.

1.However, to-date there has been a lack of corporate banking features that enable businesses to review and approve payments remotely. As the adoption of mobile banking and its convenience continue to drive consumer demand for personal banking, more and more businesses will require the same for their corporate banking services. Mobiles can provide treasurers and cash managers access to real-time information in their corporate environments. They’re also willing to pay for mobile services that will increase efficiency for their businesses. Tablets can further extend corporate mobile services as they’ve already found their place in the boardroom.

2.As with any product, it must be relevant and tailored to the end users. Simply masking the retail offering under a corporate banking banner won’t be enough.

3.Corporate banking is centered on roles and workflows. Take for example the wire/funds transfer between companies. An employee within the finance department might create the initial transfer instruction, but a few or even just one senior manager at a company will make the actual approval. The bottleneck in this process is the approver – as they need to be online to approve.

Sourced from: http://www.finextra.com/blogs/fullblog.aspx?blogid=6587

What are the Types of Pension Available?

Pensions have been entrenched in the American constitution for a long time. However, the Multiemployer Pension Reform Act of 2014 brought about needed reforms in that area. Unfortunately, the numbers are still mostly wanting; as seniors and retirees deserve the best too.

In the United States, employers play an essential role in helping workers save for retirement. About half of all privately employed people and most government employees are covered by some type of pension plan. Employers are not required to sponsor pension plans, but the government encourages them to do so by offering generous tax breaks if they establish and contribute to employee pensions.

Sourced from: http://economics.about.com/od/laborinamerica/a/pensions.htm

Currently, employees are encouraged to offer pensions by the use f tax breaks but not required to do so by law. There are many types of pensions available for choosing mostly by willing employers.

  • A defined contribution plan, on the other hand, does not promise a specific amount of benefits at retirement. In these plans, the employee or the employer (or both) contribute to the employee’s individual account under the plan, sometimes at a set rate, such as 5 percent of earnings annually. These contributions generally are invested on the employee’s behalf. The employee will ultimately receive the balance in their account, which is based on contributions plus or minus investment gains or losses. The value of the account will fluctuate due to the changes in the value of the investments. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership schemes, and profit-sharing plans.
  • A Simplified Employee Pension Plan (SEP) is a relatively uncomplicated retirement savings vehicles. A SEP allows employees to contribute on a tax-favored basis to individual retirement accounts (IRAs) owned by the employees. SEPs are subject to minimal reporting and disclosure requirements. Under a SEP, an employee must set up an IRA to accept the employer’s contributions. Employers may no longer set up Salary Reduction SEPs. However, employers are permitted to establish SIMPLE IRA plans with salary reduction contributions. If an employer had a salary reduction SEP, the employer may continue to allow salary reduction contributions to the plan.
  • A Profit Sharing Plan or Stock Bonus Plan is a defined contribution plan under which the plan may provide, or the employer may determine, annually, how much will be contributed to the plan (out of profits or otherwise). The plan contains a formula for allocating to each participant a portion of each annual contribution. A profit sharing plan or stock bonus plan includes a 401(k) plan.
  • A 401(k) Plan is a defined contribution plan that is a cash or deferred arrangement. Employees can elect to defer receiving a portion of their salary, which is instead contributed on their behalf, before taxes, to the 401(k) plan. Sometimes the employer may match these contributions. There are special rules governing the operation of a 401(k) plan. For example, there is a dollar limit on the amount an employee may elect to defer each year. An employer must advise employees of any limits that may apply. Employees who participate in 401(k) plans assume responsibility for their retirement income by contributing part of their salary and, in many instances, by directing their own investments.
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    An Employee Stock Ownership Plan (ESOP) is a form of defined contribution plan in which the investments are primarily in employer stock.

  • A Money Purchase Pension Plan is a plan that requires fixed annual contributions from the employer to the employee’s individual account. Because a money purchase pension plan requires these regular contributions, the plan is subject to certain funding and other rules.
  • A Cash Balance Plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance. In a typical cash balance plan, a participant’s account is credited each year with a “pay credit” (such as 5 percent of compensation from his or her employer) and an “interest credit” (either a fixed rate or a variable rate that is linked to an index such as the one-year Treasury bill rate). Increases and decreases in the value of the plan’s investments do not directly affect the benefit amounts promised to participants. Thus, the investment risks and rewards on plan assets are borne solely by the employer. When a participant becomes entitled to receive benefits under a cash balance plan, the benefits that are received are defined in terms of an account balance

Sourced from: http://www.dol.gov/dol/topic/retirement/typesofplans.htm