I am intrigued by some early responses to ‘Making Pensions Work’ I have received on this blog and have read in some (typically abusive) commentary on the right wing blogosphere to which I do not link.
Without exception the commentary ducks the issue, which I find fascinating. The key issues that raises are:
OK, so, here\’s one of those \”right wing blogosphere\” things to which he will not link.
One quite gorgeous part:
c. I’m promoting a massive private equity bonanza. No I’m not. I’m promoting investment in new economic activity. The fact that those making this comment think this only arises through private equity venture capital investment is itself significant: they’re saying in effect that the larger quoted companies in the UK are actually unrelated in terms of their capital funding to the stock markets that supposedly serve their needs but which in reality act as casinos for speculation. And anyway, much of this money will go into government bonds and related products. So this is wrong.
No, really, having insisted that pensions must be invested only in the building of new productive capacity he\’s now saying that buying gilts to fund outreach diversity advisors qualifies.
Anyway, up to you, have a look at the two posts and see whether you think he\’s answered my \”typically abusive\” commentary.
Update: just spotted this as well.
b. The rate of return is not so bad. What? 1%
This in response to this:
This is simply nonsense.
As data published by the organisation promoting the City of London,
TheCityUK, showsxviii, the ten year rate of return on investment in UK stock markets was an average
loss of 2% per annum over the first decade of the twenty first century. This was also the global
average rate of return on shares in that decade.Yes, it’s the dividend yield. Which, at least at some points for FTSE has been 3%. You know, enough to take total returns to equity positive?
They refer (again) to here. Where those promoters of the City of London give us the index returns for the major stock markets. That is, they give us the capital return (or loss) on holding shares. So, what is not included in their number then?
Finally, we have an admission from Ritchie that he\’s made an error. A silly one too, one which someone with any knowledge of finance would have spotted when it was first mentioned over a drink, let alone when written down.
And I am accused of ducking the issue?
(Do note that he\’s not had the time to alter the original document yet.)
BTW, anyone want to tell us what the real yield to maturity (we need to maturity because Richard is telling us that we really should be having those nasty second hand markets you know) on gilts has been for the last 10, 20, 30 years?
Not to mention getting himself a little confused between ‘UK pensions get tax deferral’ and ‘UK pensions are a form of income deferral’. Your point was that pensions are the former (as opposed to ‘tax relief’), since noting that saving is the latter is both obvious *and* trivial.
‘Typically abusive’.
The man needs to look at the plank in his own eye, after calling me autistic a few weeks ago – see http://www.taxresearch.org.uk/Blog/2010/08/17/deserving-a-mention-to-show-the-unthinkable-is-now-thinkable/#comment-579447
Comment 19.
Can’t recall anything abusive on this site.
No apology from him, but a window into his fascistic, authoritarian mindset. If you don’t agree with him, you’re mentally ill.
@Adrian, yes – i saw that – nasty and uncalled for.
Any discussion with him starts with him advancing an assertion in the form of an argument, which he’ll defend once, then he says the argument is unimportant because as he learned as an auditor, commonsense is more important than either theory or fact, and what he has said is common sense, and if you don’t agree you’re being (favorite phrase) deliberately obtuse, or mentally ill. And if you challenge that, you’re abusive. it’s a fascinating mix of bombast and thin-skinned self-pity.
“he says the argument is unimportant because as he learned as an auditor”
Ah, but remember his thesis is that every single last Big 4 auditor is bent. And today he observes that small firm auditors are also incapable of doing audits properly (according to his interpretation of what their regulator has said, anyway)
As a former KPMG auditor, he’s quite clearly tarred by his own brush.
The only difference is that he’s demonstrably incapable of doing economics, tax, politics, accounting, corporate governance, or indeed any type of abstract or higher order thinking.
I think it’s autism.
I was interested by RM’s unequivocal statement in paragraph (e) of his response that “Pensions are not deferred income”.
I suspect that some feminist champions of the legal claim to equality of pension payment per unit time in retirement (as provided by DB schemes), rather than to mere actuarial equality (as offered by DC schemes) would be disturbed by that concession. Then again, tipping them off about RM’s backsliding really would be abusive.
It is a shame the authors do not know much about pensions and only a little more about rhetoric.
There is no fundamental compact.
It might be nice if there was one, but there isn’t.
Private pensions are a good thing.
State pensions are also good. It is one of the things a government can do better than the private sector.
We will muddle through and knock up some typically English fudge.
Basically no-one wants to see pictures of homeless old people freezing/starving on the streets.
So we will provide a payment that is just enough to prevent this happening on a large scale. It would be nice if it was at a more civilised level, but then that would involve a political judgement and so it will be avoided or passed to a committee.
We also do not like seeing fat cats getting even fatter and the current tax regs allow this to an extent.
The rules on higher earners will become more restrictive.
The current deficit issues lie with a number of companies and they will slowly fade. Some people may lose some of their pensions, but there is no point in issuing shares and giving them to the pensioners. The trustees can basically get all the companies profits the pension fund needs already.
If you wanted a nice pension at 60/65 you needed to have saved about 20% of your salary from age 20/25.
In real life this does not happen unless the government does it/ makes you do it, or your employer does it for you without really mentioning it.
Prospective members of NEST should note that 8% of band earnings is not 20% of gross income.
… so there will be lots of people with v.v. small pensions that are topped up by the rather disappointing state benefits.
“We also do not like seeing fat cats getting even fatter”
But we do like to take tax from them: the top 1% pay a quarter of all income tax. Spit in their faces, call them fat cats, then piss and moan because they leave and the rest of us have to make up the shortfall.