How to solve the pensions crisis

Interesting:

The proposal is to create a form of sovereign wealth fund by the amalgamation of funded occupational pension funds (“Pillar 2” pensions) in order to collectivise investment risk and provide a fund from which to pay an earnings-related pension (DB pensions are earnings-related by one variety of formula or another) to ALL citizens.

How cool. We’ve also already got one of those, called the state pension.

How well does that work?

15 thoughts on “How to solve the pensions crisis”

  1. Tim. You don’t understand. THIS proposal eliminates risk. Said risk being of making any money for the poor sod who is paying in.

  2. This is unimaginable but, I guess it makes some kind of sense. I was thinking that Fatf*ck was unimaginably stupid but he has managed to find someone else equally as f*ckwitted with whom to share what they laughably describe as “ideas”. The donkey he masturbates for Rocco has more intellect than the pair of them combined. As history shows, every hypothecated fund sooner or later just gets used for general government expenditure

  3. @dearieme, Ritchie must be dependent on the state pension as he wrote a blog recently saying he was still working at 63 and was planning to work until at least 70. My guess is that his private pension is all in gilts and that’s not working out well.

  4. I read that as a proposal to rob people of their savings. Is there a different interpretation?

  5. He really is a miniSpud, isn’t he? Uses adjectives like ‘non-sensical’, then gets all bristly when someone points out that it’s not actually non-sensical to anyone who understands pensions. Why would you do something as daft as compare current pension fund receipts to current liabilities?

    Just like Spud, he has a germ of a good idea but none of the emotional or actual intelligence to make anything of it.

  6. @Sam Jones – I am aware that various people have tried to engage the fat potato in a discussion about the £400k odd he has tied up in his mortgage-free house – basically why doesn’t he release some of that to live on rather than begging off of people who earn less than he does or whether he will be releasing it to invest in Green Bonds or even why £400k sat in a bank account is apparently evil because it could be used to build windmills while £400k sat in the value of his house wasn’t equally evil.

    He’s reluctance to engage.

  7. The State Pension is a fascinating thing, about which I know little. However, if you paid in all your life, mostly at the upper limit, and in retirement continue to work and/or have a respectable pension, you will do worse than someone who contributed little. The point is that it is paid gross, so you aren’t supposed to realise that it is taxed at a whopping rate from any other income you have. Therefore the £600 or so per month is actually only really around £360, and you need to be living in a tent with a poor diet for that to be enough.

  8. @Andrew C, agreed but a more basic point is why he seems to have no savings or pension. Or perhaps he has plenty and the appeals for funding and donations are pure egotism.

  9. @ Ecavator Man
    I hate to have to defend any state diktat BUT if you are paying 40% tax on your state pension you don’t need any more than I do (or possibly even less: I use Gift Aid to avoid higher rate tax).

    The state pension was invented by Bismark to provide an income for poor people who were too old for manual work. It wasn’t intended for us who have saved up to provide ourselves with an income during retirement.

    If you are paying 40% tax, the state pension is just loose change.

  10. Adapted conversation with my 84yo neighbour in a wheelchair while waiting for a bus:
    “If I had my way I’d abolish the winter fuel allowance, and stick £5/week on the state pension, pension credit and the applicable amount of benefit claims, so that those low down were no worse off”
    “But I like getting the lump sum in winter”
    “I think that the elderly are wise enough to budget for seasonal things, holidays, presents, fuel”
    “You want to take away my winter fuel allowance”
    You can’t reason with some of the old boys. He’s got good taste in carers though.

  11. Bloke in North Dorset

    Bongo,

    Ditto “free” TV licences for the over 75s. That discriminates against those who don’t want a TV licence. If the over 75s need the extra money them give it to them all in the form or a pension uplift and if they want to spend it on an expensive bottle of whisky or give it to their grand children that’s their choice.

  12. “Pillar 2” looks like terminology from the Swiss system. Which is creaking at the edges, like everywhere, but I think is maybe more salvageable than elsewhere. (Or rather, I hope it is!)

    Pillar 1: state, UBI-style, “keeping you alive”, slightly earnings related, but dramatically flattened. Pays out from people currently paying in (this is where the demographic squeeze is happening).

    Pillar 2: private work-related pensions. Bigger companies have their own pension funds, but they are run separately (no pinching). The rules are set by the state, down to specifying levels of diversification. You can get a monthly pension at retirement, or take the risk and go with a lump sum. This one is also feeling the pinch because of demographics, so the % rates of payout are set to diminish.

    Pillar 3: this is the one which is optional – there are special bank or insurance accounts you can take out, where you can save around 7000 CHF/an and benefit from a hefty tax deduction (though you lose some of it the day you recover it). These can be index-linked, invested, etc. and are really ‘yours’.

  13. The proposal is that all the decent pension schemes will be expropriated to fund the deficits in the duds.

    The Insurance industry has a concept called “moral hazard” which relates to the temptation to exploit opportunities to unjustly enrich at the expense of insurers and honest policyholders. This would apply to employers who knew that their underfunded pension schemes were guaranteed to be bailed out by those of more scrupulous employers who funded their schemes properly.

    Anyone who *chooses* to think can observe that Murphy’s idea creates moral hazard and thereby *increases* the risk of a pensions crisis in the future when it becomes clear that his “sovereign wealth fund” has become a ponzi scheme.

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