Pensions

Loughton_Monkey

CLAPTON wrote: »

Linton has provided the right answer : all pension provision is provided by future generations as they are the only one's that will be actually producing goods and services that pensioners will consume.

Unless you actual hoarde tins of beans, frozen meat etc then the working people provide for all pensioners needs.

I don't think that's exactly what he said. Payment of a pension, by definition, usually involves payment at a time the next generation is working.

Money Purchase schemes are without doubt paid for by the ultimate recipient, while he is working and being productive, and the recipient gets exactly what he paid for [less the usual charges....]. No more. No less.

Most Final Salary schemes do the same thing, with the exception that historically, it turns out these were consistently underfunded, and so the company (one or two generations later) has to pick up the shortfall out of current revenue. Whether that's hitting the shareholders or the workers is a matter for debate.

CLAPTON wrote: »

In any event those future generations are consuming the infrastructure that their parents have built up, been to schools and Uni's, gone on trains and buses, used NHS, used electricity and gas all that has been provided for them.

This indeed is a very relevant and intelligent point. It's not all about pensions, and a lot of my taxes went into such infrastructure that today's young workers are 'enjoying'.

One caveat, though, is the recent trend for government to use these sleazy PFI - "initiatives" [an oxymoron if ever I heard one] - which are to a large extent giving us all the use of infrastructure now, but the 'bill' will be picked up mainly by future workers...

CLAPTON

MFW_ASAP wrote: »

Pensioners don't need to horde tins of beans, they need to horde the means to buy the tins of beans.

The burden on future generations is not in the production of the tins of beans because this provides them with jobs and an income. It's having to produce the beans and then give them away for free to pensioners that causes the burden.

Pensioners with an income provide by past earnings will buy tins of beans produced by the future generation, transferring wealth from the pensioner to the tax payer.

Pensioners with an income provided by taxpayers will buy tins of beans produced by the future generation, taking wealth from the taxpayer and then giving a portion of it back.

no, this is a very common disunderstanding.

If that were so there would be no demographic problem with the aging population because we could simply print the money.

At any time the goods and services used are produce by the employed people.
They have to produce all these for all the people, the young, the old, unemployed and themselves.

Clearly they have to produce far more than they themselves consume if others are to have food, heating etc etc.

The more the old consume (or indeed the non working people) the less the employed people can consume even though they have created these goods and services.

The fact that some-one has lots of 'money' doesn't change the fact that the employed people have to produce all the goods and services but can't themselves consume them all themselves i.e. they have to work much harder than would be necessary to provide for themselves.


In practice we use 'money' as a way of distributing the cake.

Whether people have money will change who-gets-what but the existence of 'savings' or pensions doesn't change the amount of goods and service produced or by whom.

This is known to all economists although not widely discussed as it is a bit counter intuitive.

CLAPTON

Loughton_Monkey wrote: »

Money Purchase schemes are without doubt paid for by the ultimate recipient, while he is working and being productive, and the recipient gets exactly what he paid for [less the usual charges....]. No more. No less.

Most Final Salary schemes do the same thing, with the exception that historically, it turns out these were consistently underfunded, and so the company (one or two generations later) has to pick up the shortfall out of current revenue. Whether that's hitting the shareholders or the workers is a matter for debate.

no this is 100% wrong

what matters is the size of the economic cake and it's distribution amoungst the different categories of people.

The only people that actually produce goods and services are those people working.

The fact that during your own working working life you 'saved money ' (i.e. forgo consuming goods and services) to pay for the old and other non working people is very commendable and may morally entitle you to receive the equivalent in your retirement.

The facts of a booking keeping entry called 'pension' however doesn't nothing to reduce the demographics of an aging population

MFW_ASAP

CLAPTON wrote: »

no, this is a very common disunderstanding.

If that were so there would be no demographic problem with the aging population because we could simply print the money.

At any time the goods and services used are produce by the employed people.
They have to produce all these for all the people, the young, the old, unemployed and themselves.

Clearly they have to produce far more than they themselves consume if others are to have food, heating etc etc.

The more the old consume (or indeed the non working people) the less the employed people can consume even though they have created these goods and services.

The fact that some-one has lots of 'money' doesn't change the fact that the employed people have to produce all the goods and services but can't themselves consume them all themselves i.e. they have to work much harder than would be necessary to provide for themselves.


In practice we use 'money' as a way of distributing the cake.

Whether people have money will change who-gets-what but the existence of 'savings' or pensions doesn't change the amount of goods and service produced or by whom.

This is known to all economists although not widely discussed as it is a bit counter intuitive.

Sorry but you're talking nonsense. Saving money and investing it to help business grow is a million miles away from just printing money.

CLAPTON

MFW_ASAP wrote: »

Sorry but you're talking nonsense. Saving money and investing it to help business grow is a million miles away from just printing money.

I understand the problem with understanding the concept than the demographics will largely determine the size of the cake and that pensions will only determine its distribution (to a certain extent).


To the extent that new businesses are developed then that's a good thing but it's doubtful that pension saving are invested in new startups etc because for the regulatory pressures on pension funds.

nicko33

Linton wrote: »

All pension schemes ultimately defer 'pay' packages to the following generation, or at least those who work in the next generation.

Any money you do not spend immediately then, not just money you put into a pension?

CLAPTON

nicko33 wrote: »

Any money you do not spend immediately then, not just money you put into a pension?

a very good point:

yes indeed all savings are a 'burden ' on the future unless they are used to fund investment goods that increase productivity and so expand the size of the economic cake.

MFW_ASAP

CLAPTON wrote: »

a very good point:

yes indeed all savings are a 'burden ' on the future unless they are used to fund investment goods that increase productivity and so expand the size of the economic cake.

Which is what I've been saying and you've said is wrong.

CLAPTON wrote: »

To the extent that new businesses are developed then that's a good thing but it's doubtful that pension saving are invested in new startups etc because for the regulatory pressures on pension funds.

I'm afraid your analysis is outdated. Pension pots that are still being built up can be invested practically anywhere, including small companies and new startups. Pensions that are being taken no longer need to be converted into an annuity, but can go into 'drawdown' and remain invested in the same shares/funds/gilts that they were while the pot was being built up.

CLAPTON

MFW_ASAP wrote: »

You do realise you have just agreed with me and undermined your argument?



I'm afraid your analysis is outdated.

The issue of the demographic changes i.e. an aging population are very real and will not be resolved by pension funds.


The solution to the aging population will be multifaceted including working longer, using technology etc.

To the extent that pension funds invest in creating new industries or improve productivity that would not otherwise occur then that's a positive.

So that makes a very good case for further focused investment to improve future GDP but not a good case for pension funds.

However due the the heavy regulatory burden on pension funds it's very unclear to me that they invest in anything other than AAA rated products like gilts, ftse100 companies etc.

In addition one must ask if there is a lack of investment funds or do they merely fund government debt?



However the very important point remains that the money in pension funds doesn't of itself reduce the burden on the employed people.

The demographics aren't going away because we have funded pension schemes.

grizzly1911

MFW_ASAP wrote: »

Which is what I've been saying and you've said is wrong.



I'm afraid your analysis is outdated. Pension pots that are still being built up can be invested practically anywhere, including small companies and new startups. Pensions that are being taken no longer need to be converted into an annuity, but can go into 'drawdown' and remain invested in the same shares/funds/gilts that they were while the pot was being built up.

Is that not your personal enlightened choice and a relative minority of switched on people?

Is every Tom !!!!!! and Flora going to invest in that way or are they simply going to be enrolled in an employer "scheme" where their 6% or whatever gets "invested".