Pension systems in general are not fair or
reasonable or give good value for money, unless of course you are one of the
lucky ones who have never paid in. The State goes to a lot of trouble and
expense to ensure we do not get ripped off by shops, Banks, energy suppliers
etc. but does not bother with pensions.
Yet it is the greatest rip off
ever with the State as the biggest offender, where else can you pay out for
over 40 years without any guarantee of getting anything in return and when you
do it is less than you paid in. the amount is dependent on what your children
or grandchildren can afford to pay in contributions or taxes.
The money you thought you were
saving has already been spent, without even time to touch the ground, it has
not been prudently put away to accumulate and grow into a good pension fund for
your benefit, but has been lost in the system, grabbed by a greedy Exchequer
for their own purposes.
Of course, it is supposed to be
put into a protected fund, but all Government Departments only work year to
year and are therefore are unable to even envisage savings, yet alone manage
them.
Public Sector pensions are even
worse, reputedly gold plated, they are nothing of the sort to the majority
average member in the NHS, teaching, police or fire, who pay large extra
contributions with poor return. Of course the elite part who pay little or no
contributions are well off and subsidised by the other members, whose
contributions rise to meet the unfair imposition.
Company and other private
schemes are run well and give a good return, but their income is taxed by the
State and they are being forced by stringent liability demands out of business
or into defined contribution schemes. These only have the contributions defined
but not the final outcome and lose money in real terms, the pension forecast declines
rapidly as you approach retirement, with original projections meaningless.
Unfortunately, retirement when
it comes cannot be delayed, you can’t sit on your pension Fund and wait for
markets to recover, in fact annuity values can change dramatically within the
time taken to have funds transferred and you can guarantee your existing
provider will give you the worst deal.
Annuities are out-dated and not
fit for purpose, any system that converts pension savings into a final
guaranteed income has got to be stable and deliver the same return over a fixed
period of time, otherwise they are pointless.
The basic investment in Gilts were supposed to have done this.
The money is there, good market
or other investments are there, so what is the problem. The main one is how
long will the member live and need to draw that pension? How much can you
afford to pay out without the Fund dying before the member?
This is a straight forward
calculation, comparing payment levels, population decline, possible investment
returns in actual cost terms to find the Fund v payment solution in final real
terms. In spite of pensioners living longer, a 4% income would allow a 6% to
8%payment in real terms, some twice existing levels.
Many Group schemes keep Fund
continuity through work and retirement, which allows funds to work more
effectively whilst minimising risk, giving greater returns due to the higher
income achieved, with greater continuity of investment. Income can meet over
two thirds of pension costs.
Therefore some form of defined
benefit scheme, where minimum outcomes are guaranteed is essential to plan any
form of reasonable retirement, to decide how much to save and for how long to
get the final income you need and deserve. It is your money and should be made
to work as hard as you do to earn it.
We need to return to the sane
pension world, where contributions and Fund are allocated to you alone, working
for your benefit, so that you retire with a pension Fund adequate to meet your retirement and elderly care needs,
with firmer guarantees on what it will achieve over your working life.
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