State Pension

[billybutcher]

@KarenLot

Don’t you think the fact that for quite some years now, most employers have had to offer a pension scheme to staff whose admin does not cost the employee, into which the employer has had to put 3% of salary (going up soon) and the employee 5%, is wonderful?

No, not especially.

[Geof_Cox]

Agreed. The privatisation of pensions by the Thatcher government in the 1980s was a tragedy that befell all UK future generations - one aspect of the development of a ludicrously top-heavy, exploitative financial sector that has pulled the UK economy out of shape ever since. (Not to mention being based on a fundamental misunderstanding of the nature of money!)

[Flocreen]

I have no objection to employee s and employers paying into a pension plan ,what I find objectionable is that employers can take a break from paying and leave the pension fund short of money.

[toryroo]

I like the Aussie system where we have compulsory Superannuation, this gets paid into your personal super account (I think at 9% now - employer paid) that you can manage, choose the investment stream etc. Of course you can’t touch it until retirement age but you know what you have and can add extra during your working life etc. This is on top of the state pension so the more you put in the more you get out at the end. Not reliant on employer / others in your fund etc.

[kirsteastevenson]

@toryroo

This is on top of the state pension

This is the key part. I don’t doubt for a single second that the idea behind the workplace pension is not to supplement the UK state pension but to eventually replace it. Push the entire expense on to individuals and employers. I have always worked on the assumption that by the time I, or the generation after me, got to pension age (which will probably be at around age 80 the way the UK government are going ), there will be no state pension for most as it will be decided it’s unaffordable. Some will scoff at that and say ‘they’d never do that’, but I don’t think it’s at all unrealistic.

[billybutcher]

I’m all for increased pension provision of course and workplace schemes “work” for many in providing for their retirement but they really are not a great way of solving the pension problem.

Admittedly it is nice to see an annual statement showing how your “investment” is growing. It is, however, worth thinking about how that growth is achieved.

In a zero sum economy my gain is your (or at any rate someone’s) loss. In practice the economy is not zero sum - it expands by the creation of money by governments so it is, in fact possible for everyone to win. Except they don’t. Either you get inflation (as in the 1970’s) and the gain is illusory or you get unequal distribution - tending to favour the already wealthy which is what seems to be happening at the moment.

The practical result is that in real economies pension funds can fail - we’ve seen some very high profile examples such as the Royal Mail and BHS. They can also be plundered by chancellors looking for a quick fix (hello Mr Brown).

They also don’t solve the problem of affordability - the economy has to perform well enough to pay people’s pensions whether it is the government or private investment firms doing so - but what it does do is reduce the efficiency with which they are paid as now not only pensions need to be paid but profits need to be made as well.

So you kind of end up back to the Ponzi scheme but with more complexity and layers of middle men taking their cut.

What it does do, of course, is enable the government to get the burden of pension provision out of its tax calculations so it can say “we’re a low tax government” - but it doesn’t make the necessity to put into a pension go away.

I also think the focus on “individual responsibility” is not necessarily helpful - it all too quickly encourages selfishness, introspection and many of the other problems we seem to have these days.

To be honest I should not call it a Ponzi scheme, even if that is technically accurate as there are too many negative connotations. Better to emphasise the positives of providing for retirees and social collective benefit.