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MSE News: Pensions shake-up 'to help half a million by Christmas'
Comments
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I think the whole point is that most people who don't already have a pension are either confused by the miriad of offerings or are too low paid to be able to put away enough money to make a difference.
I think that a more significant factor is the lack of trust. There are half a million members of FAS and PPF who lost all or part of their 'guaranteed' pensions when their companies went bust. The Government says they'll get 90% but it is a lot less than that when lack of inflation and other benefits are taken into account. These people will all be telling their friends and colleagues that you can't trust pensions, and these AE pensions don't even come with any guarantees, they're an investment.
Investments for pension have form too. There's around a million people who got burnt when the Government failed in its duty to regulate Equitable Life properly, who will also be putting out the word that pensions are not to be trusted.
On top of that we have the pensions mis-selling scandal. AE is going down that route with its 'one size fits all' approach. I mean, does anyone think it's a good idea for someone approaching retirement age, on benefits and with credit card debt to take out a pension instead of paying down the debt? But that is what will happen.
It will take more than celebrity endorsements and a big advertising budget to overcome the dead weight of experience out there in the community. IMO, the problem of getting people to save for old age won't be overcome until the injustices of the past have been properly addressed, there is some meaningful sharing of risk between all of the stakeholders, and the Government makes some binding promises on pensions being exempted from means-tested benefits.0 -
Eellogofusciouhipoppokunu wrote: »So are any investments where you don't just keep your money in cash. If you want to just put your retirement money into a cash ISA, then you're fully entitled to. Just don't expect it to keep up with inflation and expect to have to dip into it if you lose your job and need to go onto benefits (savings are used for means-testing, pensions aren't). Also expect to have much less to retire on, not just because of the lack of investment growth, but also because you are losing 50% of what could have been invested from the employer and tax man contributions.:)
That's a powerful argument for the low-paid not to save at all. I think that investment in an ISA makes more sense than a pension; you think the opposite. Both have significant risks. Neither look attractive to someone who is struggling to pay the bills with maxed out credit cards. People in that position should not have money taken from them and given back to their employer if they opt out in an effort to keep their head above water. It's immoral.0 -
That's a powerful argument for the low-paid not to save at all. I think that investment in an ISA makes more sense than a pension; you think the opposite. Both have significant risks. Neither look attractive to someone who is struggling to pay the bills with maxed out credit cards. People in that position should not have money taken from them and given back to their employer if they opt out in an effort to keep their head above water. It's immoral.
Are you talking about Cash ISAs or S&S Isas?
Why would people have money taken off them and given back to their employers? What are you talking about?0 -
Eellogofusciouhipoppokunu wrote: »Are you talking about Cash ISAs or S&S Isas?
Why would people have money taken off them and given back to their employers? What are you talking about?
I thought it was reasonably clear. ISAS can be cash or equity. Each person can choose the balance at will (within the limits for cash) according to their appetite for risk. There are similarly different risk options for pensions. I think that ISAs are more attractive for the low-paid because they have control of their money and can get at it if they need it. You disagree.
It is rational for someone with maxed out credit cards not to invest in either but to use the cash instead to pay down their cards. However, if they do that, they are likely to lose the employers' contribution. For employers, that is a payroll cost, and so over time it will be offset against pay rises. So in effect it is money earned by the employee, not given by the employer. The Government is saying to employees "If you do not join a scheme, we will hand this money back to your employer", thus depriving them of part of their income. I think that it is immoral to punish the low-paid in this way when they need all their money just to survive.
What makes it worse is that Govt gives £39 billion away every year in pension tax relief, 60% of it to higher rate tax payers, who will save for their old age anyway and don't need the incentive. If they limited the relief to basic rate tax, the rich would still benefit most, but there would be £23b available which could be used to ensure that the low-paid really did get a worthwhile pension. The contrast between the treatment of rich and poor is stark.
I think it stinks.
Hope that was clearer.0
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