MSE News: Pensions auto-enrolment delay 'a mistake'

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  • gadgetmindgadgetmind Forumite
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    CLAPTON wrote: »
    alternatively we could simply increase the state pension scheme and scrap NEST with all the associated costs

    The long-term intention is to shift the burden of supporting people in their old age onto the individual rather than the state having to heavily tax future generations to pay it.

    It also means that people tackle the complexity while young rather than having to try and claim complex means-tested benefits just as their marbles are starting to go missing.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • CLAPTONCLAPTON Forumite
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    gadgetmind wrote: »
    The long-term intention is to shift the burden of supporting people in their old age onto the individual rather than the state having to heavily tax future generations to pay it.

    It also means that people tackle the complexity while young rather than having to try and claim complex means-tested benefits just as their marbles are starting to go missing.


    but there is no way of shifting the 'burden' of old people onto themsleves, as the people working at that time have to support the economically inactive (i.e old people)

    sadly people misundertand how little difference there is between 'tax funded' pensions and 'profit funded ' pensions

    if there was a reasonable state pension for all there would be no complex means testing to trouble all those 67 year old marbleless people.
  • It would seem to me that we are between the devil and the deep blue sea when it comes to pensions. I am in my sixties, as is my wife, we have both had pension schemes running and both of the schemes have seen the pension companies taking their fees year in, year out, whether or not the fund has performed well or has actually lost money

    For us this has meant that if we had simply put the money under the mattress we would literally have been better off. We have actually lost money by investing in pensions

    The government is no good at running anything particularly well so the state pension is the best a bunch of well meaning amateurs can manage. Private pensions are literally not worth the investment so over all what is the best thing to invest in?

    For me it does not matter if the scheme becomes compulsory because of my age but to simply announce that everyone employed will contribute to a private pension simply means that there will be a lot of private pension companies rubbing their hands together with glee

    Legislation should be put into place so that the fees for running pensions are not a fixed sum but a percentage of the money the scheme has made that year. If private companies run a scheme that loses money then their income must reflect that, at the moment they continue to make money whilst the investors income suffers

    If they had masks and striped jumpers on it would not surprise me, it seems like legalised robbery to me and with government compulsion will only get worse

    With the government very strongly influenced by big companies the poor man in the street will continue to suffer as he has no voice. Every five years we can vote out one set of people who could not get the hang of running an economy and replace it with another set with much the same ideas, that does not seem to be power to the people to me

    I have seen this situation get steadily worse during my many years or perhaps we now can see and hear about the governments amateur dealings more easily than we could before. Mr Cameron refused to sign a treaty to protect our financial sector from European influence, from my point of view he refused to sign to allow the financial sector in this country to continue to fleece the poorer members of society and making pensions compulsory will have the same effect of making the rich richer and the poor poorer

    I have no answer to this but I a glad it wil not affect me

    Two answers I do have are: -
    1 To stop binge drinking start upholding the law which makes it illegal for pub landlords to serve drinks to people who are obviously already intoxicated. A few stiff fines and the rest of the landlords will soon get the message
    2 MPs expense - every time an MP receives a payment publish it on a website showing who got the payment, what he/she was paid for and how much. I am sure that newspapers would scrutinise the website on a daily basis and highlight any breaches. If MPs are honest and trustworthy then there should be no objections from them

    Here endeth the rant
    Only time will tell if I am right or they are wrong
  • Twelve years ago, via my then employer, I was enrolled in the company's personal pension scheme. Unfortunately, the pension is now worth less than the total sums of money paid into it over the 12 years, even before taking inflation into account. The last 3 years have been especially bad. The 2% or so management charge is eating away the pension money. In Japan, after the 'bubble' burst in the 1990's the Nikkei went from about 40000 to less than 10000 today. That may well happen here in the UK (and other western countries) as the economy is in a similar state (banks who lent too much to people who couldn't pay it back and ended up close to bankruptcy so stopped lending money to anyone). Extrapolating trends, I think that by the time of supposed retirement, not much of the pension money will be left. I wish I had spent the money rather than saving it. Better buy a house - at least you can live in it and save that way. In short, I don't see why people should be forced to enroll into a pension scheme. It's fantastic for pension providers and bonuses in the financial sector, but they are poor value for those expecting to receive a pension at the end of it.
  • gadgetmindgadgetmind Forumite
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    CLAPTON wrote: »
    but there is no way of shifting the 'burden' of old people onto themsleves, as the people working at that time have to support the economically inactive (i.e old people)

    That's why it has to be done slowly.
    sadly people misundertand how little difference there is between 'tax funded' pensions and 'profit funded ' pensions

    There's a vast difference between them.
    if there was a reasonable state pension for all there would be no complex means testing to trouble all those 67 year old marbleless people.

    That's part of the plan: remove much/all of the means testing, increase basic pension to around £140 per week, and get people to save themselves for anything extra they need on top of this.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • jamesdjamesd Forumite
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    john_m. wrote: »
    I don't see why people should be forced to enroll into a pension scheme.
    People aren't forced to enroll. They can opt out if they want to.
    john_m. wrote: »
    The 2% or so management charge is eating away the pension money. ... In Japan, after the 'bubble' burst in the 1990's the Nikkei went from about 40000 to less than 10000 today. That may well happen here in the UK (and other western countries) as the economy is in a similar state
    Nothing is forcing you to pay 2% if you don't want to. Just move the money somewhere else if you think it's too expensive to keep it where it is. Nothing forces you to invest just in the UK and you shouldn't be doing that. If your current place doesn't have non-UK investments, move the money to a place that does. If you don't know how to do it, get help from an IFA who does.

    You're not a helpless victim here. Do something about it if you don't like how your current choice of investments is doing.
  • edited 29 December 2011 at 11:35AM
    hugheskevihugheskevi Forumite
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    edited 29 December 2011 at 11:35AM
    Quote:
    Originally Posted by CLAPTON
    but there is no way of shifting the 'burden' of old people onto themsleves, as the people working at that time have to support the economically inactive (i.e old people)
    That's why it has to be done slowly.

    Economically, the key issue is that of active workers and the inactive. The active workers produce goods which are consumed by everyone, both active and inactive.

    Whether you have a State Pay-As-You-Go system or a private funded system only determines how the resources produced by active workers are distributed. Hence why the burden of ageing cannot be shifted.
    Quote:
    Originally Posted by CLAPTON
    sadly people misundertand how little difference there is between 'tax funded' pensions and 'profit funded ' pensions
    There's a vast difference between them.

    Fundamentally, there are very significant similarities which all lead back to that initial active/inactive distinction and everything after that is just about what method you use to distribute resources. You can further reduce the differences if you hypothecated tax revenue into a sovereign wealth fund to invest overseas and ran it as a funded State system. But there are huge differences in the administration.

    The Pension Commission First Report on page 253, figure 7.3 showed the cost of administering private pensions and State Pensions. They found annual Reduction In Yield of about 1% for personal pensions, 0.3% for occupational and 0.1% for State Pay-as-you-Go systems.
    Quote:
    Originally Posted by CLAPTON
    if there was a reasonable state pension for all there would be no complex means testing to trouble all those 67 year old marbleless people.
    That's part of the plan: remove much/all of the means testing, increase basic pension to around £140 per week, and get people to save themselves for anything extra they need on top of this.

    The new proposals will not remove much/all means-testing. They will significantly reduce the proportion entitled to Pension Credit, but looking across all means-tested benefits there isn't much change. This report from the PPI shows on page 60, table 19, that the proportion of pensioners entitled to any means-tested benefit will be 45% in 2050 under the current system, and 35% under single-tier.

    Under a single-tier proposal, you have a system that looks a lot like the 1978 system - an earnings uprated Basic Pension at an okay level, with a 2nd earnings related pension that is only for those in work and outcomes are proportional to amount contributed. That is a lot like how SERPS started out, but the change to State Second Pension, the boost for lowest earners and the significant expansion of credits changed SERPS significantly. But now the earnings related pension is provided by private providers, whereas SERPS was provided by Government.
  • jamesdjamesd Forumite
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    CLAPTON wrote: »
    but there is no way of shifting the 'burden' of old people onto themsleves, as the people working at that time have to support the economically inactive (i.e old people)
    It's entirely possible. All it requires initially is observing that the baby boomer generation is larger than the preceding and following generations, then drawing the obvious conclusion that the larger generation will have a lower burden per person than the following generation, so they can afford to pay more NI now to partially cover the costs of their own generation's retirement, smoothing the costs between generations. It may not be legal to charge different NI rates for different people so the whole working population could be charged the higher rate until most of the baby boomers have retired.

    Then you can observe that the currently retired and retiring baby boomer generation has arranged to have the inflation-linked increase in state pension increase at a higher rate than for the previous generation. And given the size of that generation it's even more expensive than it otherwise would be. So you could return to the previous indexation and eliminate the earnings link, which typically is 1% higher than RPI inflation.

    The state pension age could be increased quickly for those who are at the start of the baby boomer generation, a way of more specifically getting that generation to pay for its own costs. But this can be disruptive to individual retirement plans.

    Your observation that the working people have to pay for the retired is true but doesn't account for the different sizes of generations that is a significant part of the problem that we have to solve. This is the sort of thing and the sort of remedy that was considered by Lord Turner's Pension Commission that hugheskevi has referred to.
  • edited 30 December 2011 at 7:41AM
    coupleukcoupleuk Forumite
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    edited 30 December 2011 at 7:41AM
    Wasn't it the mid-90s when the Government at the time introduced a scheme where every company employing 5+ people had to offer workers (and administer) a pension plan provided by a 3rd party?

    How many people took up that scheme - very few.

    What makes anyone think that it will be any different this time round? There is a tiny contribution to be forced upon employers, who will simply claw it back in lower pay awards (if any). Employees will suffer as their contribution will have to be paid - but on lower income.

    IF this was such a good deal, why isn't the Government simply increasing NI by 4% (employees & benefit recipients) and 3% (employer). Oops, that would be a bit like an increased tax wouldn't it.

    Management rates would be far lower if they deposited all of our combined funds into a scheme(s). But, what would happen if it all went t*ts-up? They would have to fund it anyway. No, much better to get us to do it and then blame us for making the wrong choices.

    The vast majority of people in this Country do not understand pensions and have a huge distrust of financial institutions (and not just recently either). At least with a State Pension you know you've been paying in and you know you will get something back. Much better to stick to that system than to gamble on an unknown.

    That aside.....

    Let's face facts, anyone who goes into retirement in this Country and still owns assets at the time is a MUG.

    Sell your house and get into the rental market, stash away your money (anything above £16k at current rates) and get everything paid for when you retire - free housing, free council tax, free dentist, free pension guarantee, the list goes on.

    Too many have witnessed how the lazy are looked after in this Country - and have now decided to join them on the benefits gravy train.

    More people will opt-out of this new scheme and it will fall flat again - until they dream up the next one.
  • jamesd wrote: »
    It's entirely possible. All it requires initially is observing that the baby boomer generation is larger than the preceding and following generations, then drawing the obvious conclusion that the larger generation will have a lower burden per person than the following generation, so they can afford to pay more NI now to partially cover the costs of their own generation's retirement, smoothing the costs between generations.

    Which would be great if NI was set aside. In reality, as its used to fund current government spending and pay for current retirees (etc) in the expectation that future generations will foot the bill on the same basis, its not clear that this would solve the problem of the baby boomer generation retirees requiring a much larger spend from future workers than is currently the case with NI.

    The shift towards having individuals provide directly towards their own pensions in ways other than NI is a very sensible move away from the reliance on future generations to pay for benefits promised to current workers.

    In fact, anything which insulates individuals financially from the whims and pressures of the government of the day is almost certainly going to be a good thing.
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