state retirement

John_Strebe

Are there state retirement programs which match the employee's contribution and allow the employee to decide where to invest the funds? Can you explain why not if this does not occur.

CIS

There are no state schemes which allow you to choose where the money is invested, the money goes in to the treasury. where there AFAIK isn't any formal fund, the money is just invested or spent alongside the rest of the treasurys funds.

John_Strebe

Thanks for your reply.

ReportInvestor

The state does refund tax on pension contributions, including those into personal pensions.

But if the state added further to people's contributions why should employer A bother to contribute to your pension, if employer B can let the state do the same for my pension (funded by taxes on your employer)?

You, and others in company A, would soon be out of a job, and not even get your full pension entitlement because of your company's demise.

exil

Well, if you're contracted in to SERPS/S2P, the state is contributing IN A SENSE to your future pension. However it isn't actually paid into a fund, you're actually getting "credits" against future taxpayers (that you hope the - perhaps yet unborn -taxpayers will honour).

Now it would be possible for the state to get rid of directly funded state pensions and instead set up a fund, and pay all state pension contributions into it. Problems with this:-

- who would manage the fund? Not a job I'd care to take, managing the entire nation's
pension fund.
- what happens if there is a market crash? The government would have a sudden need for billions to cover the shortfall, and would have to borrow/raise contributions

Basically, having the pension paid from taxation makes the amounts needed easily predictable, and the govt can forecast how much it's going to need in 10, 20 etc years time - not something that would be easy to do if the state pension depended on market performance.

EdInvestor

John_Strebe wrote:

Are there state retirement programs which match the employee's contribution and allow the employee to decide where to invest the funds? Can you explain why not if this does not occur.

There are two state pensions: the Basic state pension and the Second state pension ( S2P), Both are pay as you go unfunded state schemes.

But it is possible to "contract out" of the S2P part into a private pension fund.The Government will pay rebates into this private fund and the holder has control of how it is invested.

So yes, it is possible.