Monday, June 12, 2006

Pensions under threat again

Ok I accept that pensions is a big issue and a big problem facing all of us. But this article in Saturdays Guardian worried me. We may need to raise the retirement age, we may need to contribute more and we may need to find ways of ensuring that everybody contributes to their future retirement fund and not just through the state pension provision. But the argument put forward by Christine Farnish, the chief executive of the National Association of Pension Funds worried me. She argued that "employers should be able to cut retrospectively benefits built up by employees in "guaranteed" occupational schemes." If this is what she believes then I wonder why she is the Chief Executive of National Association of Pension Funds which says on its website front page "We work to promote an environment where people can save for their retirement, with confidence, in the workplace. " I am not sure how retrospectively stealing pension funds which have already been earned is supposed to give people the confidence to save for their retirement through workplace pension schemes.

8 comments:

Tristan said...

you could take the view that its okay for Gordon Brown to steal from pensions so why not employers...

(I do agree with you though, that its wrong to take from such schemes - although if the companies were forced to set them up in a such a way by the government then I would feel less bad about them doing it, its the consequence of coersion then...)

(oh and that is speculation, I know little about pensions...)

Tony Ferguson said...

I know a little about pensions. I agree with your comment about Gordon Brown in that he is a significant chunk of the problem we now face. Companies are closing defined benefit schemes to new employees and in some cases to existing employees and forcing new or existing employees into defined contribution schemes. However, it is an important principle that what you have earned in a scheme is retained. Currently if an employer closes a defined benefit scheme completely then everyone in that scheme retains what they have earnt up until the closure date. So if they have accrued 15 years of defined benefits they retain those benefits even though they may now be paying into a defined contibution scheme

Nicola said...

I have always felt that pensions are the BIGGEST con that we are "intimidated" into buying.

Nothing a sucession of governments or Mr Brown has done has convinced me otherwise.

Tony Ferguson said...

How are they a con? Society in general and people in particular need to find some way of having a decent income in old age (assuming that we are not all going to work until we die because we will either be unwilling or unable to do so). That income can only be provided by the state through taxation or by the individual through personal or company pension schemes. As an individual a private pension scheme is certainly tax efficient (aside from Mr Browns tax grab on dividends). I have just set one up for my wife and it is great from a tax efficiency point of view. For every £100 she pays in the government adds £22 as an offset for her basic rate tax.

Nicola said...

And every penny you save will be taken away by a nursing home or local authority to pay for care that you have been paying into the system by tax and NI all your life.

Wiped out my fathers and now my mothers pensions and savings, and clocked up a £50 K bill agianst this house as well. Their modest sums meant that they had to pay for everything with no help whatsoever.

I dont find that an incentive at all.

Tony Ferguson said...

ah now I understand where you are coming from and I agree that our healthcare system acts as a disincentive to save for retirement. It is wrong that those that work hard and save hard get penalised and those who do nothing get it all for free. In the end though the money has to come from somewhere within the tax system if we are to make this sort of care free for all. Then it is down to what sort of society we want and what we want to spend our money on. How many billions are spent on maintaining our nuclear deterrent, how many billions will be needed to clean up the nuclear energy industry current and future. The government should do a zero based budgeting exercise and look long and hard at every item of expenditure to see whether or not it is necessary. Some government schemes seem designed to create havoc and waste money. Working families tax credits comes to mind. Scrap the lot (think of the savings on bureaucrats and computer systems, offices etc) and put it into raising the starting point at which individuals start to pay tax. Rant mode off - but likely to restart at a moments notice

Herman B. Hayes said...

It might be a bright idea for people to safe all the money that they need for retirement while they are working. Maybe you people should stop asking corporations and the government for a handout.

Tony Ferguson said...

I am not asking for a handout. I am happy to contribute to whatever scheme is available to make my own provision for my own retirement. Indeed if the legal position was that everyone made their own provision through savings etc I would do the same. However, I would have cocnerns about the poorest in society for whom such savings would be a bit of a pipe dream. My main point about this problem was the retrospective nature of the proposal because it was suggested that benefits which have already been accrued through payments into a scheme could be lost