Last month a British panel of the Great and Good issued a thumpingly big report on the state of Britain’s pensions system covering both the private and state networks of provision. In short, the report said that we are living longer, have fewer children, and hence pensions systems which were constructed in the middle of the last century are buckling under the strain. It is all now a fairly familiar story and likely to prove one of the most ticklish political domestic issues in Europe and north America for the next few years.
But consider this – if we are living longer and able to live healthier lives for longer, and this is causing certain strains to emerge in pension provision, then how do the doomongers square that with the claim that we face all manner of threats to our health? One can barely open the pages of a newspaper or turn on the television without being regaled about all the horrible risks out there, obesity being the latest issue, but by no means the last.
Well, for all our supposed problems, something wonderful has happened to the health of most people in modern industrial nations these past few decades. (Clues: modern medicine, drugs, decline of heavy manual labour, greater awareness of healthy diet, dangers of tobacco, etc). I appreciate that stating such a thing in today’s culture of gloom is unfashionable, even reckless, but there it is.
Maybe I’m just being blase, or even niaive but I have my doubts that pension crisis is as bad as is being made out.
Ok so people are investing proportionly less in their pensions than seen before. But more people own there own houses than ever before. And good proportion of those will have paid off their mortgages by the time they retire meaning firstly they’re main financial outlay has disappeared and secondly they have a large source of capital should they need it.
It may be that the pensions industry may be in crisis but that we all face a poverty stricken old age seems excessive
It is always good to remember the purpose behind the cries of “the sky is falling!”, regardless of the subject matter. Invariably, the development of these neverending crises requires “immediate and drastic action” by the only agent capable of marshalling the resources needed—the national government.
If, theoretically, a problem was NOT a crisis requiring an immediate and society-wide solution, then, perhaps, it might be acceptable to allow private citizens to work out remedies without resorting to legislative or court ordered mandates.
Of course, admitting such a possibility would cause numerous statist Aunt Pitti-Pats to feel the onset of the vapors, so that must not ever be allowed.
In this, as in so many of life’s little puzzles, it is a good idea to ask the age old question, “Qui Bono?”
The reason for ‘the sky is falling’ type pensions predictions is to get the ordinary working slob to put money aside for his old age. Thus £millions more for the red-braces fund managers to cream off in commissions and bonuses.
It seems to me that the old idea of pensions has to be discarded. Some people lucked out and got to spend 30 years pottering about, but is this a realistic expectation?
Scumble has a point. I have a hard time imagining myself ever being able to afford to retire. It seems as if any investments I make with what little money I have left after tax will be taxed into insignificance. So I’ll just keep working to pay for the handouts providing for other people’s retirements instead.
If the looming pensions crisis is as grave as the government says, it behoves it to encourage self-destructive behaviour such as smoking, drinking, drug-taking, dangerous sports, eating Big Macs, etc. Anything to kill off more people as soon as their lives as producers are over. Free NHS euthanasia will remove the fear of pain while dying: much cheaper than long-term care.
Let ciggy packs be festooned with such slogans as Viz’s T-Shirt: “Let’s Face It… You Could Be Hit by a Bus Tomorrow. Go On– Have a Fag.”
We can no longer tolerate our rulers not ordering us to enjoy ourselves.
I’m not sure how the pensions work over there, but here in Norway, land of social democracy, it seems most people only have the standard social security pension. That pension is a direct redistribution; what is paid in is again immediately paid out. In 67 there were 3,9 payers per pensioner, in 2003 2,6, and the estimate is 1,6 by 2050. The money the government gets from the oil is to remedy this, to be turned into a pension fund (what is not used to cover the deficits). The pension system itself is also undergoing change.
But! What I wanted to say is that as for the life expectancy rate, my mother always says: “Ha! Those making that rate now is the people that came home to dinner and took a nap after that. Just you wait until my stressed-out generation turns old. We’ll be dropping like flies, I tell you.”
There is no pension crisis. There are no pensions. This is all a myth. The government pensions that people are promised they will receive upon retiring are a fiction. The money just isn’t there. Upon retiring, in the future, people will receive ever diminishing and insignificant pensions.
The only real fact about pension plans is the money taken (taxed) away, now. The promise of a future pension is a pretext, an unfulfillable promise.
So, if anyone is worried about his finances at retirement, he should take care of himself by some private saving or investment, and not rely on government plans.
A good example of government pensions can be seen in Russia, whre many millions of pensioners receive maybe 30$ a month. This is the future awaiting all european government pension plans.
So, if anyone is worried about his finances at retirement, he should take care of himself by some private saving or investment, and not rely on government plans.
Amen to that, pay taxes on the dividends and capital gains now, because there is no telling how they will restructure how you spend your amassed personal wealth (and annuities are scams anyway). Sticking it in a pension (particularly if an employer is not matching it) is a bigger gamble than a day at the races.
The problem as it seems to me, is that more people are reaching adulthood, the deaths between 1-3 years used to rather large and skewed the curve toward a lower average life expectancy. There was also a bubble, as more births survived, life got easier, continuing to birth large numbers of children became unnecessary for the average person, and so a bubble developed, more of the births when larger families were common survived, and that generation decided not to have as many after them.
Also, these people, as adults, in general are less healthy than they used to be. So we have a double whammy, a bubble population growing older and generally, fatter. Medicine got them over the hump at the early stage, kept them humming until old age and creeping diseases could set in (instead of relatively instant deaths).
The problem? Nothing, other than the notion that much of this ‘progress’ was brought about by Statism. But, at the end of the day, nothing was truly improved, just abated a decade or two on the backs of the collective. It is up to individual and/or parents to decide how to conduct their lives and the care they put into it. The solutions to improve life start at the individual level and can be pulled through the market. What we have today is still the fact that each individual ultimately faces their own decline and death, the existing system binds us all together and prevents the individual from determining the best course of action for themselves.
And whether it is a crisis or not can perhaps be more starkly drawn here in the US (I’m not acquainted with UK systems). We pay FICA taxes which include old age and medicare to the tune of 15.3% of earnings. That money is replaced by treasury securities and spent, adding to the overall debt, conditional, yes, but certainly a present value, actuarial calculation says that it is at least 3.5-4 trillion dollars at the moment. That is technically an addition to the money supply, diluting current money value and the credit market, interest etc etc. And will only grow as the bubble hasn’t even really hit yet, that is to be within a decade or so. The overall debt, which will be made up 50% of this type, is projected to be 10 trillion by 2009, and upwards from there. One year’s GDP in debt, and likely to climb, and that is only in present value dollars. As the debt continues to grow, the government will be stimulated to dilute money even more as time goes by (of course this simply a confiscation of savings – an oblique form of taxation).
The end result, no matter how detailed you want to get, is that the future generation or two are going to have to work more and for a longer period of time, to make up for the ‘promises’ the collectivists have made. And that assumes that the economy from which it is to be taken hums along at the same clip, which I’m assuming will not. Caught between a rock and a hard place, the government is going to have to become much more assertive in its gathering and sharing to make good on whatever they can. It’s not going to be pretty.
The US Social Security system is an overextended Ponzi scheme that has no chance of surviving into the post boomer generations.
While it has been a fairly good deal for my parents’ generation, the basic pension scheme can’t survive the coming demographics, much less the medical and other extra funds that have been set up with it.
My advice to my kids has been to buy stocks in companies that treat aging illnesses and provide funeral services. My guess is there’s one more boom left in the boomers. On our way out the door we can at least provide some wealth creation for the carefully attuned.
I credit longer life and better health to the prevalence of television, which keeps one away from harmful exercise and dangerous outdoor air and sunshine.
Does Britain have 401(k) or IRA (or equivalent) retirement alternatives? I’m just curious.
Steel, what we have in Britain are a variety of tax-deductible savings regimes. If you are a member of a firm with a company scheme, you can increase your own savings through additional voluntary contributions, and also put money into tax-deductible vehicles called Individual Savings Accounts.
The UK government is proposing to sweep away the existing morass of tax codes and create single regime allowing people to build up tax-free savings up to a certain amount. It is not perfect by any means but even the present Labour govt. understands the need to boost savings.
Of course, all savings should be tax-free, period.
The French government checked into waging an anti-smoking health promotion campaign, but decided it couldn’t afford pensions for longer-lived nonsmokers.
When I smoked, I joked, “I’m just doing my bit to save Social Security.”
When demographics drive FICA rates higher and higher, to up to 50% of earnings, I believe we will see a subtle generational warfare break out. There will be resentment against the old folks who are able-bodied, perhaps wealthy, and younger, poorer, hard-working families who underwrite their lifestyle. It will be the greatest *reverse transfer of wealth* ever seen.
Watch rationing of health care for the old folks start happening. No one will want to off their own folks, the decisions will be made by government or insurance companies. “Managed care decisions.”
That’s why we in the USA won’t crack down on illegal or legal immigration, we need the young, fertile, and productive/reproductive to save us. Hispanic and Muslim immigrants have higher birthrates. I’d rather learn to speak Spanish than wear a chador.