Pensions

MFW_ASAP

CLAPTON wrote: »

yes globally, the world does not currently have a shortage of working age people.


that of course does leave the Hamish solution (massive immigration) and the investment oversea solution.

So unless we consume a lot less now (or increase GDP in a very significant way) there isn't an realistic prospect of building a high level of net overseas assets.

You said "The world is an island so the logic applies globally". Why has this now changed? I thought the 'burden' was the competition between workers and pensioners for a share of goods and services. Now that you have conceded that in a global market, this isn't an issue, which 'burden' are you talking about now ?

CLAPTON

MFW_ASAP wrote: »

You said "The world is an island so the logic applies globally". Why has this now changed? I thought the 'burden' was the competition between workers and pensioners for a share of goods and services. Now that you have conceded that in a global market, this isn't an issue, which 'burden' are you talking about now ?

The principle of the size of GDP and how it's shared and the fact that the mechanism of sharing (i.e. funded, unfunded) apply to the world economy and the economy of a single country with suitable adjustments of imports/exports.


The specific issue certain western countries (and Japan) with an aging population brings the demographics into sharp focus.

If we are willing to accept additional large scale immigration (and assuming that immigrants will wish to come) then our demographic problems can be corrected at least for a time.


In world terms or individual countries the economic impact of the sharing proportions are unaffected by whether or not pensions are funded by private pension companies or by taxation.

Loughton_Monkey

CLAPTON wrote: »

By the 'cake' I mean the sum of the goods and services produced by the working people (lets call it GDP).

The point I'm trying to make is that e.g. if the share of the GDP that the pensioners and other non workers are given is say 40% then that leaves 60% for the people who do all the work.

Whether than share of 40% is distributed via taxation or through savings or pensions in whatever mix makes no difference to the employed people who actually produce 100%
but only receive 60%.

I'm sorry, but I still have to take issue with your thinking.

If we run with the example figures you quote, then we agree that at any one time, there are X workers in the population slaving away creating 100 units of GDP. They get to take home 60 units which they can now spend on anything they like, or even invest it somewhere for the future. OK?

Now let's run with agreement that 40 units of the wealth are indeed 'stolen' from them and distributed amongst the Y non-workers [mainly pensioners].

Now please read your last paragraph carefully and note what happens if those 40 units are (a) paid out immediately to the Y pensioners, or (b) invested and paid back to the X workers when they finally retire.

[please, please, let's not get bogged down in the practicality of how you would change from scenario (a) to scenario (b)]

Scenerio (a) has a major 'issue' [that I think we are discussing]. This is that 40 units of cash, divided by Y pensioners, gives them (say) £10K. The number Y and the number X are 'what they are' and are not necessarily related or correlated in any way. The ratio between the two numbers could be 1:1 so they are about equal. Let's assume X=Y.

Scenario (b) on the other hand, means that the 40 units are put away and invested, and ultimately divided by X. So the X worker bees are ultimately getting the 40 units back, that they themselves sweated to produce. You will get your £10K absolutely guaranteed.

But Scenario (a) also means that now we have a new generation sweating away [counted as Z workers] producing 100 units of wealth each, and in true consistency, 40 units are stolen from them to pay directly to the non workers - who are the original X workers above. Now because of demographic changes, it so happens that Z is a significantly smaller number than X. So there's no way you are going to get £10K, or anything like it. Either we have to cut you down to £8K, or maybe steal 50 (instead of 40) units from today's workers, or maybe borrow the money to keep your pension at £10K. All of these are unsavory.

Bringing in enough immigrants so that Z=X theoretically works, but doesn't necessarily create balance going forward.

So you can see it does make a difference as to whether the 40 units are dropped down straight away via taxation->pensions, or whether they were put into some sort of fund to be paid back to the creaters of those units of wealth.

So it is with private pensions. A company's staff fluctuate far more than does the population and you would see my above argument far more clearly if you were to consider Tesco paying their private pensions out of today's profits. Eventually it would fold.

As we all agree, we currently have all state pensions unfunded. We have most of the state employee pensions unfunded, and commercial enterprise has slightly under-funded schemes (but are slowly correcting that). Many other 'Personal Pensions' exist and by absolute definition, these are all 100% funded.

To make that quite clear, irrespective of state pension, many, many employees use their 60 units share of the GDP they create to invest in a [virtually] fully funded private pension. Often they are paid 55 units and the other 5 are put into the pension before they ever see it. But it's all the same.

Hence your earlier words just don't make sense:

So a 100% funded scheme imposes the exactly the same 'burden' as a 100% tax payer funded schemes if in both cases the pensioners enjoy the same standard of living (i.e. the goods and services) produced by the employed).

Every pensioner is getting the unfunded state pension [with all the problems as illustrated above]. But these additional funded schemes are totally independent of, totally on top of, and nothing whatsoever to do with state pension, and impose no burden whatsoever on today's worker bees.

I am enjoying a standard of living which for the last 8 years has been funded entirely by my own previous labour. Next year, I will enjoy a further £8K+ that is, in fact, funded by today's worker bees. Yes, if you took that from me, I would far from starve. But I will accept it graciously. At least I will not be a burden (like some) in the form of additional means tested benefits due to my wealth.

Were the state pension scheme to have been 'fully funded' from day 1, then the large change in demographics wouldn't create problems for pension funding. Yes, as hugheskevi pointed out, the sheer size of the fund might bring with it further issues.

And yes, there are more demographic issues than just pensions [such as health and social care] but that's out of scope.

nicko33

CLAPTON wrote: »

The point I'm trying to make is that e.g. if the share of the GDP that the pensioners and other non workers are given is say 40% then that leaves 60% for the people who do all the work.

I don't see the point of your point.

The non-workers are not "given" the 40%. The workers get something in exchange for it.
They get some tokens which allow them at some future point to be "given" stuff they don't have to make themselves.

so what?

CLAPTON

nicko33 wrote: »

I don't see the point of your point.

The non-workers are not "given" the 40%. The workers get something in exchange for it.
They get some tokens which allow them at some future point to be "given" stuff they don't have to make themselves.

so what?

The point is that

-all pensions are an imposition on the future workers

-it makes no difference whether pensions are paid from fully 'funded' pension scheme

or

whether they are funded from taxation

MFW_ASAP

CLAPTON wrote: »

The point is that

-all pensions are an imposition on the future workers

-it makes no difference whether pensions are paid from fully 'funded' pension scheme

or

whether they are funded from taxation

You keep saying this and when I ask you to explain it, you go off on a complete tangent about sharing of resources, when I debunk that tangent you then come back to the original point. Can you please stick with this and explain in simple terms why this is the case. Indeed, to really keep it simple, let's use me as an example:

I am working towards having a pension of about £20k per year, excluding the state pension. I will be mortgage and debt free and my home will be energy efficient. I will require zero benefits in retirement. My pension will be put into 'drawdown' and will remain invested in investment funds that are invested in UK small companies, FTSE 250 companies, new startups as well as global shares. I will draw an income from the dividends and any gains from my investment in British and global industries. My money provides these companies with the money to grow their business and in return I get a return from their profits (no profits, no return).

Simple question: How is my pension an imposition on future workers?

CLAPTON

MFW_ASAP wrote: »

You keep saying this and when I ask you to explain it, you go off on a complete tangent about sharing of resources, when I debunk that tangent you then come back to the original point. Can you please stick with this and explain in simple terms why this is the case. Indeed, to really keep it simple, let's use me as an example:

I am working towards having a pension of about £20k per year, excluding the state pension. I will be mortgage and debt free and my home will be energy efficient. I will require zero benefits in retirement. My pension will be put into 'drawdown' and will remain invested in investment funds that are invested in UK small companies, FTSE 250 companies, new startups as well as global shares. I will draw an income from the dividends and any gains from my investment in British and global industries. My money provides these companies with the money to grow their business and in return I get a return from their profits (no profits, no return).

Simple question: How is my pension an imposition on future workers?

A pension is a charge on the workers at the time that the pensioner is drawing their pension.

When I say 'future' workers that is in relation to people today who are 'investing' in pensions for future payments.

Every non worker consumes goods and services they do not produce and produce nothing in return.

People don't actually consume the pounds paid by their pensions, they consume real things made by others.

To describe the gap between what a worker actually produces and what he/she gets to consume I have chosen to use the words 'burden, imposition, charge' : you may use other words if you think more suitable but that's what I am referring to.


So in your case, if you are retired then you produce nothing.
You do however consume many things made by the employed people for which you give nothing in return.

The way that works for you if that you have a thing called shares and pensions which you exchange for a thing called money.

The 'gap' that the workers experience between what they produce and what they are given to consume is the same if you had no shares and no private pension but where simply given money by the state.

Loughton_Monkey

CLAPTON wrote: »

A pension is a charge on the workers at the time that the pensioner is drawing their pension.

When I say 'future' workers that is in relation to people today who are 'investing' in pensions for future payments.

Every non worker consumes goods and services they do not produce and produce nothing in return.

People don't actually consume the pounds paid by their pensions, they consume real things made by others.

To describe the gap between what a worker actually produces and what he/she gets to consume I have chosen to use the words 'burden, imposition, charge' : you may use other words if you think more suitable but that's what I am referring to.


So in your case, if you are retired then you produce nothing.
You do however consume many things made by the employed people for which you give nothing in return.

The way that works for you if that you have a thing called shares and pensions which you exchange for a thing called money.

The 'gap' that the workers experience between what they produce and what they are given to consume is the same if you had no shares and no private pension but where simply given money by the state.

???????

Is it just me?

Or does anyone else feel that standards must have slipped, even at the Devon School of Economics?

CLAPTON

Loughton_Monkey wrote: »

???????

Is it just me?

Or does anyone else feel that standards must have slipped, even at the Devon School of Economics?

You really shouldn't start on G&T this early.

MFW_ASAP

CLAPTON wrote: »

A pension is a charge on the workers at the time that the pensioner is drawing their pension.

When I say 'future' workers that is in relation to people today who are 'investing' in pensions for future payments.

Every non worker consumes goods and services they do not produce and produce nothing in return.

People don't actually consume the pounds paid by their pensions, they consume real things made by others.

To describe the gap between what a worker actually produces and what he/she gets to consume I have chosen to use the words 'burden, imposition, charge' : you may use other words if you think more suitable but that's what I am referring to.


So in your case, if you are retired then you produce nothing.
You do however consume many things made by the employed people for which you give nothing in return.

The way that works for you if that you have a thing called shares and pensions which you exchange for a thing called money.

The 'gap' that the workers experience between what they produce and what they are given to consume is the same if you had no shares and no private pension but where simply given money by the state.

Christ, this is the most circular argument I've ever had on MSE!

We're now back to globalisation and the debunking of your argument above. I refer you back to that discussion, which includes the rather nice map of the world I posted and you conceding that in a global marketplace we don't have the demographic problem.

As to your example about my pension. How can you say I contribute nothing when my pension is invested in the companies that employ the workers producing the goods (which gives them money to invest in their business) and my pension income is used to buy the goods and therefore pay your workers a wage?

How is that contributing nothing?