Andrew gets several things right. Economics, pensions, forced savings, means-testing and Mary Anne Sieghart is a moron. Go read.
More on Pensions.
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5 responses
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“Employees who are automatically enrolled into their employers’ pension scheme (as in the US) tend to stay there. Those who have to choose actively to join (as in the UK) often don’t bother.”
I wasn’t able to read the whole thing because the Times is subscription-only for people outside the UK. But this excerpt beggars belief. It’s the state’s problem if some people are too lazy to fill out a form? And we’re supposed to feel sorry for said idiots?
Tim adds: I can’t read it either as I am in Portugal but yes, that appears to be what Mary Anne is saying. As Andrew says, she’s a moron. -
Sorry all, I forgot that the Times has an odd linking/subscription policy, but yes, that was what she was saying, amongst other idiotic nonsense. It’s the state’s problem if people are too lazy, stupid, or unwilling to save for themselves. Ha. Good luck winning that argument with the middle classes.
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Do you guys have the equivalent of a 401Ks? If not maybe that would be part of a solution for the younger still working folks.
Tim adds: Not exactly the same, but yes, private pension plans and also company pension plans. A 401k would best be described over here as a defined contribution plan. What the company pension plan is moving towards (it used to be that they were defined benefit plans, now being dropped).
It is also true that until 1997, the year Nu Labour came to power, that we had the best funded pension system in Europe. No more alas. -
Sorry, that was me, Miss Adler, forgetting to stay in character. But it’s a good question none-theless.
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A lot of the proble with pensions is to do with the fact that a lot of plans until fairly recently were defined benefit (DB) – i.e. the company guarantees to pay you a % of your final salary on retirement, regardless of the size of the pension fund, stock market conditions, etc, so the company assumed a lot of the risk. Lots of these plans were extremely generous – and most public sector schemes are still like this, only guaranteed by present taxation, rather than past investment. Over the last decade, companies have slowly moved towards defined contribution schemes, which are like 401k’s in the US, so the employee has assumed the risk, rather than the employer. There isn’t really a pensions crisis as such with this sort of scheme, unless you count people not saving enough (which is just stupidity, bad advice, or a concious decision in some cases). Previously, companies were able to underfund their DB schemes in boom times because the investment returns made up the shortfall. Unfortunately, in bad times, they weren’t able to make up the funding gap, so there are pretty big liabilities out there, and some companies have gone bust owing money they don’t have to pensioners. Some companies also had a habit of raiding the DB fund to pay for other things, which isn’t entirely sporting (and I’m not sure if it’s legal, either…). It’s all a bit of a mess.
Tim adds: Agreed. Add in the raid on pension fund returns by Gordon, the public pensions actually being a larger liability than the National Debt and means testing meaning that the poor are positively dissuaded from saving and you’ve got our current mess.
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