In the last few blogs, we have looked at the basis of pensions, what they achieve, the failings and what should be possible and lamentably even the simplest objectives are not met with little being done to correct the situation.
The system plods on in the same ineffective way giving an unacceptable outcome, resulting in few saving for retirement and expecting to live on benefit. Yet the Commercial and State benefits of a healthy and good contributive pension system appear ignored.
Pensions are not working and the logical steps are not being taken to correct this, these could be:-
· Treating Contributions as personal savings with all the associated rights and protection
· A universal defined benefit scheme in which payments are directly related to such savings
· Elimination of age dependency with individual self sufficiency
· Integration of State NI pension in such a scheme with separation from benefit aspects
· Defined growth targets and guaranteed outcomes
· Personal choice on retirement linked to pension pot
· Full evaluation of over 65 population effects and needs in such a scheme
In many ways Public Sector pensions are indicative and illustrative of what not to do, yet they are the largest defined benefit scheme with the majority of contributing members overall, exceeding all of the private schemes and therefore are an important part of the present pension system.
Yet they are run in a dictatorial manner as part of the bureaucratic machine in which member’s contributed savings and accumulated funds are ignored and the Employer’s contractual contributions treated as benevolence. The resultant system in which member’s funds do not exist is little less than highway robbery.
This of course has been the position with NI contributions for many years, resulting in the collapse to poverty and benefit levels of the State pension system. What should and could be an extremely viable contributory scheme with the build up of large and beneficial investment funds is now an empty shell.
In September its replacement scheme NEST will be launched, this is hailed as a new beginning to allow millions in work to save for their pension future. The fact that they have already been doing this all their working lives appears forgotten, in effect NEST increases NI pension contributions by 4% for members and 3% for Employers.
The scheme is being run by the State, supposedly independently, with the money in the loss making defined contribution scheme with no guarantee of outcome at retirement or how the money is used or “invested”. The sums could be large; there are 20 million in work not saving for retirement; 8% of the lower average wage of £20.000 gives an annual income of £32billion. This should yield twice the 15% return projected from NEST.
We have indicated in previous blogs what such levels of investment in the UK infrastructure could do to the economy, growth and prosperity. The likely outcome will be to boost economic growth of the Far East, Germany, Eastern Europe and S. America or for the money to disappear in the present gambling casino of the Stock and Financial Markets with little real benefit to members.
There has been little response to the drastic pension reform proposals outlined in blogs and sent in more detail to the powers that be. They are apparently too advanced to be readily taken in by an establishment entrenched in current practises, in which change is seen as impossible even though it is inevitable.
One hears incessantly about the ageing population, the need to save more, retire later and receive less, but no one apparently thinks the problem through to a logical and acceptable solution. Longer life can be met by existing saving levels; longer working is not needed and deprives youngsters of work; modest returns, like the tortoise and hare fable, can outstrip the present investment jungle.
There is sufficient money and contributions in the existing pension system; it needs to work more effectively with less erosion and waste; ownership as personal savings properly accounted for; invested and allowed to grow, could meet all retirement needs, together with the Capital social, structure and investment needs of the UK
Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport, Comment
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