Cancel Employer Pension?

jh2009

DB schemes arent ponzi schemes, as in most cases there is a fund accumulating. Its a matter of actuarial opinion really whether this fund or the predicted fund is enough to pay future and existing pensions. In ponzis someone pays in and pays out, and no investment is maintained.

As for investing in risky assets, pensions are long term investment vehicles so actually should do this. Returns should be judged long term, instead of short term as many in the media make the mistake of doing so when they report funding issues in schemes.

The comment about schemes taking holidays in boom times, is a valid point, but there were also laws that required companies in some cases to do this if surpluses got to high. I accept though in this case, that schemes shouldve maintained a contribution rate throughout, and this would have left the industry in a better position today than its in now.

BernardM

Why shouldn't government be responsible for providing decent pensions to men and women who during their lifetime have paid enough by way of national insurance contributions and tax to be entitled to a pension no less than the best occupational pension currently in existence.

Linton

BernardM wrote: »

Why shouldn't government be responsible for providing decent pensions to men and women who during their lifetime have paid enough by way of national insurance contributions and tax to be entitled to a pension no less than the best occupational pension currently in existence.

Arguably it does (or the full set of tax payers do) !! My rough calculations show that to buy an equivalent of the state pension on the open market would cost more than £100,000. This is rather more than the total NI someone on average pay would contribute in their full working lifetime.

dunstonh

Why shouldn't government be responsible for providing decent pensions to men and women who during their lifetime have paid enough by way of national insurance contributions and tax to be entitled to a pension no less than the best occupational pension currently in existence.

Whats wrong with the current state pensions? A person starting out now can expect to get around £7800 in state pensions (if employed) in todays terms. That is probably around £150k, in fund value for a guaranteed index linked pension if you wanted to provide for it in cash.

jh2009

Why shouldn't government be responsible for providing decent pensions to men and women who during their lifetime have paid enough by way of national insurance contributions and tax to be entitled to a pension no less than the best occupational pension currently in existence.

---

The current state pension isnt such a bad deal as the figures in other posts show.

To provide a high pension from the state to match that provided by occupational schemes after say 30/40 years service, no questions asked, would mean significantly higher taxes on not just employees but also for employers.

This would result in massively reduced private savings, as there would be no incentive to save if the state was already promising to look after you.

This would lead to the collapse of financial companies and shares as no one would bother saving for private pensions and other investments, which would then filter through to the economy into less investment in jobs/industry and result in mass unemployment meaning lower taxes being collected meaning the higher pensions promised are unaffordable and we return to the dark ages!

Generally therefore its far more sensible to have a mix of state/private retirement provision with the state pension simply a safety net for the poor/helpless leaving others with more income who want a more comfy retirement with an incentive to save and pay towards their own retirement needs.

jamesd

BernardM wrote: »

Why shouldn't government be responsible for providing decent pensions to men and women who during their lifetime have paid enough by way of national insurance contributions and tax to be entitled to a pension no less than the best occupational pension currently in existence.

Those cost something in the range of 25% of salary so your first task will be to persuade people to accept an increase in NI contibutions by about 20-25% of salary.

BernardM

http://www.npcuk.org/briefings/Myths.pdf

bendix

I've got to stop reading this forum.

It makes me absolutely despair to comprehend how financially illiterate the vast majority of the population are and - I'm sorry to say - 95% of MSE posters.

I just cannot grasp the concept that people seem at best disinterested and at worst woefully illinformed (and curious) about pensions - perhaps the most important financial issue in anyone's life.

bendix

BernardM wrote: »

http://www.npcuk.org/briefings/Myths.pdf

What exactly is your point?

It's already been pointed out to you that to generate the basic state pension would mean saving a pension pot of around £150,000, something which seems beyond the vast majority of the population.

If you're unhappy about the level of the pension, the answer is simple. Make your own provisions also.

It's called personal responsibility.

jamesd

The advocacy document also is outdated (ignoring the changes in pensions) and grossly misrepresents the facts with rubbish like "The accepted definition of poverty is having to make ends meet on less than 60% of median income. Today average earnings are around £520 per week. Therefore a weekly income of less than £260 is below the poverty line." The main errors there are distorting the income:

1. Average earnings. Average earnings are not average take-home living money.
2. So an income of less than 260 before taxes is not really as badly off as they suggest when, unlike the person on median earnings most of that 260 is completely free of tax.
3. 260 a week is 13,520 a year. About 10,000 is now tax free for a pensioner and tax on the rest leaves about 12,816 of income. I earn more than that but live on about that and I'm most certainly not poor, even while paying rent.
4. Paying rent. Many pensioners don't pay rent or a mortgage, so don't need around 400 a month that I spend because I do.

Claims that I'm living in poverty just because I'm actually spending what a pensioner on 260 a week who pays private rent would have to spend are bogus: I'm not.

5. Relative poverty means that you can make those on 60% of average earnings as wealthy as you want and they still will be able to claim poverty if everyone else has become better off at a faster rate. It inadvertently illustrates this when it says "In 1948 the basic single pension was £1.30 per week, today it is £77.45 – an increase of more than twice the rate of inflation". So what happened to the pensioners back in 1948? Did they starve to death? Die homeless on the streets? Or have we actually gone beyond real poverty and doubled pensions to improve quality of life beyond poverty?

Since I do live on the amount claimed as poverty I can answer that one easily: it's not really about poverty.

But there are still those living on way below that claimed level of poverty who are living on much less than is a good life and that is something worth considering, including helping anyone who isn't claiming the benefits they have paid for for others to claim them for themselves.

Also worth noting that the advocacy is for the basic state pension and largely ignores the SERPS/S2P earning-related pension. That's worth half as much again as the basic state pension to those who have worked for an employer all their lives.

If someone wants to read a less distorted picture of the pension system I suggest that they read the report of Lord Turner's Pensions Commission and then see what the government did about following its recommendations. To save the reading trouble: in essence it followed and is following the recommendations.

One reason I'm living at what is wrongly claimed as poverty is so that I'll have a higher pension income and won't have to rely on only the basic and earnings-related state pensions. I'm free to choose to do that extra bit of pension saving, living less well so I can live better later. So is anyone else.