h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Blunkett is turning his attention to pensions.

http://news.bbc.co.uk/1/hi/business/4539843.stm

I've just heard on Radio 4 'world at one' that there is a proposal that if overall life expectancy rises before people retire, regardless of terms already agreed, they will have to choose to work longer or accept a reduced pension.

Is this fair?

Doesn't look fair to me, but such is life. That's what all the talk is about here in Germany. We aren't even sure if we'll get a governmental pension once we have reached the age of about 65 (63 for women, I think). They want us to work til the age of 70, hoping we'll die shortly after . Even our private insurances will be lower than expected, because the overall life expectancy is said to rise even more. In short : we'll be poor once we're old.

I do understand linking pension investment to life expectancy, but to change the agreement part way through one's working life seems unfair.

For the pension companies it's always a gamble, just how long retirement will last. My Grandad did well - he lived until he was 100, he was retired for as long as his working life!

Whether its fair or not its pretty much necessity isn't it?

Theres a few private IFA type pension providers now caught on to the problem of this, and some changes coming in from that front in light of some legal cases not too long ago in the USA regards employees sueing their company for the c**p performance etc of their PP... And, changing the terms of teh agreement you've got does seem highly unfair; but no more than banks, BS and credit card companys et chave been doing for yonks I decided agains getting a pension in favour for heading myself towards death before retirement age

You'll change your mind so go and get something going now. The earlier you start the better the benefits. Long term good old fashioned endowment policies have always been a good bet.

On another note I'm surprised nobody has taken on the fat cat city shysters who have for years been raking in massive bonuses, living high on the hog and doing it all on the basis of our savings and pension funds or our company pension funds. They haven't even turned around the Broon's £5bn raid on our pension funds. The pension fund managers and investment bankers performance has been abysmal interms of our pensions, but they stillseem to mange enough bonus for another Porsche or another flat to rent.

What exactly is the point of private pensions anyway? I mean what is the benefit regarding investing yourself or shoving all that money in a savings account and living off the interest?

CAuse interest rates are c**p (at the moment), and have been now for a fair few years, My savings are quite large and don't return that much in savings interest, even when rates were a bit highgher £158K plus only produced me enough interest per month (yes I had looked around and it was the best rate in teh UK for instant access monthly interest), sufficient money to pay my rent and naught else I spent most of it now on my house so get a bit of interst each month from the remainder Private pensions theoretially offer a higher return on the money invested

I guess because they've got a bigger sum of money to play with, plus they gamble on the fact that not everyone will live long enough to claim much.

I'm a bit confused by it all - I opted out of serps before I was even out of my teens, but recently I got a letter which said they aren't sure if that was the best thing and after 15 years I should consider opting back in. Now they're saying (again) that there won't be enough money for people to retire at state pension age, so what the hell is going on?

The history of pensions over the last fe decades in teh UK has been pretty bluddy awful all in all hasn't it? There was the big misselling thing in the late 80's early 90's, which people like my father got stuffed by; after twenty or thirty years of paying into a pension he's essentially left with such a negledgible payout as to be woth nothing.... Recently of course we've been caught by the low interest rates and poor performance of the stock market, which has obviously affeted every pension weather invested in shares or invested in other ways Although I said ealrier that I've not done anything for my own retirement as I don't plan to retire, although that is somewhat true, its not entirely the case; My main prepearation and investment is this building in which I'm sitting, even though we know house prices as they currently are are totally unsustainable over the long term and a lot of propery will undergo a 60% or more slash in its market value, we also know that in the long term, economic cycles being the cyclic things they are will put some if not all of that value back on at some point in the cuture, and as much as I quite like this house, if by the time i reach 70 or over, I feel energetic enough, there ain't going to be nothing to stop me floggin the place and getting a 100k plus of cash to go and drink myself to death in the nicest bar I can find

Just as a matter of interest how many branches are B&Q going to open ? 'Cos I think I'll be damn lucky to still be employed in my current position when I'm 60. Have the government heard about agism ? Though of course this is immaterial to them - akin to asking a priest for sexual advice.

The disability descrimination act, (1997, amended 2004) and the somethinaruther employment act (1975?) have or are to be used soon to apply to ageism in teh workplace. Though as a disabled person I can vouch for the fact that this will mean bugger all, as the disability descrimiantiion act is such as with all acts that in practise there is bugger all you can do when you beliee* or know* that descrimination has occured. As someone who personally filed a discrimination case against one of the most prestigious universitys in teh UK, I can say that the 'powers that be', just ain't interested, and won't follow them up if they think there is even the slightest* risk it won't work (slightest risk includign such things that the people you are filing the case against are very wealthy and would be able to put more money in to any court case than the government run authorities (the Disability rights comission in my case) 'Infamey, infaney, they've all got it infamey.'

I reckon I'm going to be one of those people who die 'in the saddle' so to speak. I paid into the Canadian government pension fund for eighteen years, but I've been told that unless you contribute for 40 years then you become ineligible. Well, since my aged mother cannot live on her Canadian government pension even though she lives in slum housing and has very few expenses, I don't think I'm missing out on much there. Though of course the Canadian government is not about to refund my eighteen years of contributions. . .

I've also not been contributing in Spain long enough to ever receive a government pension.

Private pension schemes have always seemed a rather dodgy investment since so many of these places end up going belly-up or there end up being scandals of execs embezzling the money put in, leaving pensioners with nothing at all. I'd rather stuff extra money in my mattress than invest in one of these things (she says, as if there was ever actually any extra money . . .)

The thing is, there is a massive global 'baby boom' population that is now coming up to retirement age. And now they are discovering there are no government funds to support them. Yet governments cannot ignore these people - the largest demographic group of people in the history of humankind. Can they?

This particular demographic group has been very influential in marketing and product growth since the 1950's. They consumed like crazy - creating a lot of industry and other businesses that benefitted from their input.

But what happens to them after they reach an age where they are no longer 'productive members of society'?

I mean, if I am personally aware of this huge demographic group, it seems unlikely that governments aren't aware. So, what have they been doing to ensure these people - these taxpayers - won't be just left out in the cold?

az

Now there you have one of the beauties of a government term only lasting 5 years - its always the next government's problem, and so doesn't matter.

Unless you get re-elected.


az

Well I notice governments do talk about the pension crisis, but I've never seen any of them lay out a coherent plan. Perhaps I'm not looking hard enough.

I can't see anything that can be done other than maintaining the working life/non-working life ratio as people live longer.

"Well I notice governments do talk about the pension crisis, but I've never seen any of them lay out a coherent plan. Perhaps I'm not looking hard enough."

I've worked for a governmental pension plan for over 20 years. We lost a ton of money in 2000 - 2002, like pretty much every other investor. Not good timing, with the baby boomers, like me, approaching retirement age.

As to a coherent plan, here's some of what we've got.


http://www.copera.org/PERA/about/latestnews.stm#Status

"This year, the Board secured legislation to increase the employer contribution rate, increase the age at which new members (hired on or after July 1, 2005) will be allowed to retire with an unreduced benefit, reduce the annual increase in retirement benefits for this same group, lower the interest paid to all member contribution accounts..."

YOu'll notice that the bits about making it harder to retire do NOT apply to people who've already started their working life. We've been going 'round and 'round with the poiticians on that one, but firmly hold the position that we've made a promise and will keep it.

NBY

Does this just transfer the money defecit onto future generations though?

"Does this just transfer the money defecit onto future generations though?"

Well, in the sense that the folks who are just now entering the workforce don't get as generous a retirement package as those who are just now leaving it, yes.

In the sense that the changes are designed to shore up the fund, rather than perpetuating a cycle of debt, no.



There are no perfect solutions for the long term that don't involve a fully functioning crystal ball and there are no perfect solutions for the short term at all.

The fact is, a pension fund can't really concern itself with short term market downturns. And yes, for a pension fund, three years is an extremely short time. The people running the thing have to concern themselves with the 20 year old entering the workforce today, who might live to be 100, which means actually caring about how well the fund will be doing 80 years from now.

NOT scaling back a generous pension plan when funds are short would be transferring the money defecit to future generations. If the pension wasn't scaled back a bit for those new workers now, their children would REALLY be in a spot when they started working.

OTOH, while I'd actually be willing to have my pension scaled back as part of a package which did that for everyone who hasn't actually retired yet, a lot of people wouldn't. In fact, a lot of people would go to court over it. They might even win, about half a million dollars later.

In effect, when a person enters the workforce and is told that her or his pension will be such and such an amont after working this many years, a contract is created between the worker and the pension fund. Breaking a contract because the terms no longer look quite as good as they did at the time it was entered into just doesn't work.

Gevernmental pension funds are interesting places to work. In good economic times, the politicians pass laws that increase benefits and encourage people to retire earlier, rather than allow the pension fund to become "overfunded" and have some padding for the bad economic times. Then, when the bad economic times come, those same politicians decide that it's a crisis brought on by mismanagement of the pension fund staff instead of a problem theat they created because a politician never met a dollar of someone else's money s/he didn't want to spend NOW.

If the politicians hadn't kept making the pension fund more and more generous and had, instead, left alone what was a perfectly reasonable pension plan, the shortfall wouldn't exist now.

I suspect that this is the case for the majority of public pension funds today.