It's not just the public sector....

CLAPTON

gregg1 wrote: »

And whose fault is that? The money SHOULD have been put aside by the Government to pay for the pensions (in fact there is still enough money to pay for these pensions out of what is paid in) but the Government have chosen to spend it elsewhere and now the public sector are paying the price for Government stupidity.

do be absolutely clear that if the government sets up a 'funded' scheme now then the amount of money available to the government will fall and they must still continue to pay current pensioners
this can only come from additional taxation

are you sure you want extra taxation at this time

RenovationMan

CLAPTON wrote: »

you are absolutely incorrect

all except the smallest firms are required by law to offer employees a pension scheme; this has been the law for years; most have zero take up from staff where the employer doesn't contribute anything

however the more recent legislation requires the employer to CONTRIBUTE (at least 3%) which is the change

if you are genuinely interested to know why there is virtually no difference between unfunded and funded schemes in terms of the burden on future generations I would be happy to explain

I accept is a counter intuitive but no less true and it worth learning about

I am genuinely interested to know why there is virtually no difference between unfunded Final Salary schemes and funded MONEY PURCHASE schemes* in terms of the burden on future generation, and would be happy for you to explain.

* which is what I am suggesting to replace existing FS pensions for new joiners.

Graham_Devon

I for one am glad they are rejecting the proposals.

Just read that, yet again, there is a concession for those over 52. I.e., none of the porposals will effect them.

It's always the younger people who are expected to pay for the mess.

If they are going to change it, don't bring ageism into play. Were all in this together, apparently, unless you are between 50 and 65.

RenovationMan

Graham_Devon wrote: »

I for one am glad they are rejecting the proposals.

Just read that, yet again, there is a concession for those over 52. I.e., none of the porposals will effect them.

It's always the younger people who are expected to pay for the mess.

The theory is that younger people have time to change their pension plans, whereas older people don't.

For instance, if you were expecting your company pension to fund 60% of your retirement, with the state pension funding 30% and ISAS funding the remaining 10% and then the government came along and reduced your pension to the point that it funds 50%, an older person may not have the years left to fund the 10% shortfall with additional savings invested and growing in the stockmarket before retirement.

The golden rule with pensions is to start early.

CLAPTON

RenovationMan wrote: »

I am genuinely interested to know why there is virtually no difference between unfunded Final Salary schemes and funded MONEY PURCHASE schemes* in terms of the burden on future generation, and would be happy for you to explain.

* which is what I am suggesting to replace existing FS pensions for new joiners.

ok

at any given time we can divide the population into two sections

a. the people who are economically active (i.e. people who work)
and
b. those that don't i.e. children, unemployed, sahm, pensioners, the idle rich, disabled etc

now all the products and services (gdp) are (obviously) produced by the people who work, so they must forego much of the fruits of their labour so that the non-workers can consume

now we don't have a barter system so we now need to talk about money

how is the distribution of the gdp between working people and the non working people?

basically in two ways
- by taxation so state pensions, public pensions etc are funded this way

- by the profits of pension funds ; so the working people have to produce sufficient profits to fund these schemes

the esence of the situation is the
the workers produce everything available for consumption
they have to give up some of this so pensioners can consume

it makes no logical difference to them whether this shows by reducing their salary via taxation or because they have lower income due to company profits

so if a 'funded' pensioner has 10k to buy goods and services and a final salary scheme pensioner has 10k too then all the things that 20k 'buy' has be be foregone by the working people who produce them

I say no difference but of course there is the perception and political issues about high level of taxation and less about high level of profits

in terms of the pensioners then there are significant differences in the risks of receiving their pensions

politicians of course don't like taxation but are relaxed about profits

so although the idea about funded schemes sounds attractive, the 'burden ' on future generations is the same for any level of total pensioners income

there are some real issues about whether funded schemes provide investment capital so that there is more investment than there otherwise would be, so gdp growth is higher than it would otherwise be and so the pie is bigger

I'm not sure myself whether this is valid or not; I guess it depends upon whether there is an investment deficit in our economy and the nature of pension funds investment


pesonally I favour a higher level of state pensions for all (linked to contribution levels) and the scrapping of occupational pensions
as the current system seems to have a few real winners and a lot of losers

RenovationMan

CLAPTON wrote: »

ok

at any given time we can divide the population into two sections

a. the people who are economically active (i.e. people who work)
and
b. those that don't i.e. children, unemployed, sahm, pensioners, the idle rich, disabled etc

now all the products and services (gdp) are (obviously) produced by the people who work, so they must forego much of the fruits of their labour so that the non-workers can consume

now we don't have a barter system so we now need to talk about money

how is the distribution of the gdp between working people and the non working people?

basically in two ways
- by taxation so state pensions, public pensions etc are funded this way

- by the profits of pension funds ; so the working people have to produce sufficient profits to fund these schemes

the esence of the situation is the
the workers produce everything available for consumption
they have to give up some of this so pensioners can consume

it makes no logical difference to them whether this shows by reducing their salary via taxation or because they have lower income due to company profits

so if a 'funded' pensioner has 10k to buy goods and services and a final salary scheme pensioner has 10k too then all the things that 20k 'buy' has be be foregone by the working people who produce them

I say no difference but of course there is the perception and political issues about high level of taxation and less about high level of profits

in terms of the pensioners then there are significant differences in the risks of receiving their pensions

politicians of course don't like taxation but are relaxed about profits

so although the idea about funded schemes sounds attractive, the 'burden ' on future generations is the same for any level of total pensioners income

there are some real issues about whether funded schemes provide investment capital so that there is more investment than there otherwise would be, so gdp growth is higher than it would otherwise be and so the pie is bigger

I'm not sure myself whether this is valid or not; I guess it depends upon whether there is an investment deficit in our economy and the nature of pension funds investment


pesonally I favour a higher level of state pensions for all (linked to contribution levels) and the scrapping of occupational pensions
as the current system seems to have a few real winners and a lot of losers

You seem to overlook the fact that most private pensions are paid from annuities which are not dependant on the sharemarket but are linked to the interest paid on government bonds (or gilts).

If you are talking about how a pension builds up while the employee is working, well this is a combination of employee & employer contributions, tax rebate and investment returns. The pension pot need not only be invested in UK or indeed EU shares, but can be invested globally. The pension savings can also be invested in government bonds (gilts) and corporate bonds which provide investment capital to companies, as indeed do company shares which is the reason that most companies become PLCs in order to get money to re-invest in their business.

The 'burden' of providing an investment return can therefore be spread across the globe and will help to fund the growth of corporations and fund the debts of countries.

Contrast this to the burden of providing a guaranteed pension spread only on the backs of a small population consisting of the UK tax payer and the UK government's increasing debts.

CLAPTON

RenovationMan wrote: »

You seem to overlook the fact that most private pensions are paid from annuities which are not dependant on the sharemarket but are linked to the interest paid on government bonds (or gilts).

If you are talking about how a pension builds up while the employee is working, well this is a combination of employee & employer contributions, tax rebate and investment returns. The pension pot need not only be invested in UK or indeed EU shares, but can be invested globally. The pension savings can also be invested in government bonds (gilts) and corporate bonds which provide investment capital to companies, as indeed do company shares which is the reason that most companies become PLCs in order to get money to re-invest in their business.



The 'burden' of providing an investment return can therefore be spread across the globe and will help to fund the growth of corporations and fund the debts of countries.

Contrast this to the burden of providing a guaranteed pension spread only on the backs of a small population consisting of the UK tax payer and the UK government's increasing debts.

what I'm talking about is the 'burden' on future generatiions

that is how much work must they do to support all the pensioners (well all non workers)

the way it's funded doesn't affect the simple fact that if pensioners are to consume then the workers who provide that consumption must forego that share.

you are focusing on the financial mechanisms and ignoring 'real' goods and services and who actually produces them.

the issue of the balance of payments is not all that clear cut,
the only increase in the levels of goods and services available for consumption within the UK is that overall balance of payments.

this is a relatively small amount and has been negative for some years (funded by borrowing which is already biting us on the bum)

although I'm happy to discuss annuities, balance of trade, funding schemes, they don't really affect the burden on future generations
although they do in practice determine the distribution of the retirement riches

RenovationMan

CLAPTON wrote: »

what I'm talking about is the 'burden' on future generatiions

that is how much work must they do to support all the pensioners (well all non workers)

the way it's funded doesn't affect the simple fact that if pensioners are to consume then the workers who provide that consumption must forego that share.

you are focusing on the financial mechanisms and ignoring 'real' goods and services and who actually produces them.

the issue of the balance of payments is not all that clear cut,
the only increase in the levels of goods and services available for consumption within the UK is that overall balance of payments.

this is a relatively small amount and has been negative for some years (funded by borrowing which is already biting us on the bum)

although I'm happy to discuss annuities, balance of trade, funding schemes, they don't really affect the burden on future generations
although they do in practice determine the distribution of the retirement riches

You're talking in riddles. Indeed I have no idea what on earth you are talking about. Frustrating really as I'm not sure if you're on a wind up, but hey ho. Hopefully other people can understand the difference between a pensioner who funds his own retirement (and therefore shoulders his own 'burden') and one who is funded by other people (who shoulder his 'burden').

CLAPTON

RenovationMan wrote: »

You're talking in riddles. Indeed I have no idea what on earth you are talking about. Frustrating really as I'm not sure if you're on a wind up, but hey ho. Hopefully other people can understand the difference between a pensioner who funds his own retirement (and therefore shoulders his own 'burden') and one who is funded by other people (who shoulder his 'burden').

yes it is a difficult topic which is why economics is difficult

try to think in terms of real things like goods and services rather than money (althoguh that's important too)
think about how those things come into being and the meaning of 'burden'

do you think that if you have a pension fund then future generations do not have to work for those things that you consume?

it's worth thinking about.



what makes excellent sense for a individual person doesn't necessarilly make sense when you look at the complete economy

Andy_L

RenovationMan wrote: »

Better to take the hit now rather than keep 'kicking the can down the road' (the phrase beloved by many on this board). Plus the country will not have a huge liability hanging over it with MP pensions like they do with FS pensions. The onus goes back onto the employee to worry about the performance of their pension pots rather than onto the taxpayer.

why should this generation (specifically me ) be the one that has to take the hit by paying tax to fund 2 lots of pension?