Your pension is not as safe as you think
September 15, 2004 3:06 AM Subscribe
How safe is your pension? (UK) 'Nine million people in this country, young and old, pay a slice of their wage into final salary occupational pension schemes. But Channel 4's economics correspondent Liam Halligan reveals that most people don't realise they have no legal right to that pension money whatsoever. And some people have lost the lot.'
Think Britain's social safety net is more secure than that of the US? Think again.
Related :- Pensions Theft, a campaigning website set up by pensions activists, some of whom lost their pensions when their company went bust.
Think Britain's social safety net is more secure than that of the US? Think again.
Related :- Pensions Theft, a campaigning website set up by pensions activists, some of whom lost their pensions when their company went bust.
plep, have you been talking to amberglow? This post mirrors a lengthy (and eye opening) conversation I had with him about how some US firms have been cancelling pensions. I didn't realise the problems related to pension ownership are the same in the UK.
posted by davehat at 3:54 AM on September 15, 2004
posted by davehat at 3:54 AM on September 15, 2004
plep & amberglow were out last night ;-)
Think Britain's social safety net is more secure than that of the US? Think again.
Company/occupational pensions are different to 'Britain's social safety net'. The state pension, currently around £79 per week IIRC, is funded from the National Insurance contributions which also funds Unemployment Benefit & the like.
Company pensions (where offered) are either voluntary or compulsory as a condition of employment. NI is compulsory & charged on everyone's wage over around £60 a week although to can transfer part of your NI contributions onto your own private pension.
The problem with some UK pensions really came to light with the death of Robert Maxwell and with aging population in the UK (as in many countries) the state pension is set for big changes as it will have to cover far more people than it was originally designed to. Two separate problems. Apparently Tony Blair is coming up with the big solution. A lot of people in the UK are investing in property as pension security.
Regarding the FPPed article, this is a legal loophole that needs to be closed pronto. Worth pointing out that a lot of people paying into pensions are in public services (armed forces, police, civil service, NHS, education etc. [link]) whose pensions are guaranteed by statute so won't be sold off or closed so maybe the figure of 9,000,000 quoted in the article is slightly misleading.
The UK might fall short of the security of countries like the Netherlands & Sweden but it's a hell of a lot more secure than the US. It comes down to that old argument over paying less tax or providing more social welfare. The UK seems to be straddling somewhere between the US & a chunk of western continental Europe.
From having had many conversations with USians about employment conditions I'd have to be very picky about what kind of job I'd work in the US as the lack of security (job, medical, pension etc.) and lack of holiday doesn't make many propositions that attractive.
posted by i_cola at 4:01 AM on September 15, 2004
Think Britain's social safety net is more secure than that of the US? Think again.
Company/occupational pensions are different to 'Britain's social safety net'. The state pension, currently around £79 per week IIRC, is funded from the National Insurance contributions which also funds Unemployment Benefit & the like.
Company pensions (where offered) are either voluntary or compulsory as a condition of employment. NI is compulsory & charged on everyone's wage over around £60 a week although to can transfer part of your NI contributions onto your own private pension.
The problem with some UK pensions really came to light with the death of Robert Maxwell and with aging population in the UK (as in many countries) the state pension is set for big changes as it will have to cover far more people than it was originally designed to. Two separate problems. Apparently Tony Blair is coming up with the big solution. A lot of people in the UK are investing in property as pension security.
Regarding the FPPed article, this is a legal loophole that needs to be closed pronto. Worth pointing out that a lot of people paying into pensions are in public services (armed forces, police, civil service, NHS, education etc. [link]) whose pensions are guaranteed by statute so won't be sold off or closed so maybe the figure of 9,000,000 quoted in the article is slightly misleading.
The UK might fall short of the security of countries like the Netherlands & Sweden but it's a hell of a lot more secure than the US. It comes down to that old argument over paying less tax or providing more social welfare. The UK seems to be straddling somewhere between the US & a chunk of western continental Europe.
From having had many conversations with USians about employment conditions I'd have to be very picky about what kind of job I'd work in the US as the lack of security (job, medical, pension etc.) and lack of holiday doesn't make many propositions that attractive.
posted by i_cola at 4:01 AM on September 15, 2004
:)
The TUC is also campaigning on this issue.
For people who are 'outsourced' (i.e. those whose department is sold to another company), the TUPE legislation also does not cover pensions (whereas it does cover salary and most other terms and conditions), at least if you work in the private sector (public sector employees are protected, however).
posted by plep at 4:15 AM on September 15, 2004
The TUC is also campaigning on this issue.
For people who are 'outsourced' (i.e. those whose department is sold to another company), the TUPE legislation also does not cover pensions (whereas it does cover salary and most other terms and conditions), at least if you work in the private sector (public sector employees are protected, however).
posted by plep at 4:15 AM on September 15, 2004
But the central problem is that the nine million of us currently contributing don’t actually own our final salary pensions. Our money is vulnerable not only if our company goes bust or is taken over, but even if the bosses simply decide they want to break pension promises just to save money.
I don't have the details (corrections are welcome), but the likely scenario is this
1. money for pension remain in the capital of the company as long as the employee works there
2. that money is given to employee if he quits before the company fails
3. meanwhile the money is still part of capital of the company and, in event of bankrupcy, workers get only a fraction of their pension money
if the bosses simply decide they want to break pension promises just to save money
Anyway, while important legal details may vary, I believe the main problem is rooted in the massive propaganda that there is a need to either reduce your pension near to poverty levels(otherwise the State will collapse) or to expose your pension (read, money that's sitting in your pension fund) to the enormous risks associated with unrestricted market economy.
The main risk of an unrestricted, unregulated market economy is that while you don't enjoy any profit (or some dime is thrown at you to make you feel good with a lot of glassing like"you're contributing to a better future" bullshit ) you're subject to all the risks of enterprises.
In other words, you lose if company wins and you lose if company fails because 1. if the company wins, you get only a fraction because you were not entitled to get more then a fraction (even if you took an enormous risk) 2. if the company loses, you just hit the bottom as if you were a stockholder (mmmmhhh Walmart "associates" run to mind)
The mantra of diversification, quite often used to instruct you NOT to invest in a single company/fund/scheme is going into the toilet as welll, because all the investments you, as a consumer, have access to are the hi-risk low premium that no sane investor would ever touch with a pole.
I guess the first much much needed realization is this : there is no such thing as a "market force" or "invisible hand" leading your investment to do good to society or to do good to you (and only you). "The market"may be formed by few companies who are into the business of taking money out of you. Why ? For a simple reason - it is much much easier to SCAM in a unregualted market then to invent something good, find new ways to produce goods.
On a tangent: goddam were are the ol communist..they weren't better then today right wing pundits but at least they were vociferious and battling, provinding some much needed "get smart you moron" kick in the ass.
posted by elpapacito at 7:12 AM on September 15, 2004
I don't have the details (corrections are welcome), but the likely scenario is this
1. money for pension remain in the capital of the company as long as the employee works there
2. that money is given to employee if he quits before the company fails
3. meanwhile the money is still part of capital of the company and, in event of bankrupcy, workers get only a fraction of their pension money
if the bosses simply decide they want to break pension promises just to save money
Anyway, while important legal details may vary, I believe the main problem is rooted in the massive propaganda that there is a need to either reduce your pension near to poverty levels(otherwise the State will collapse) or to expose your pension (read, money that's sitting in your pension fund) to the enormous risks associated with unrestricted market economy.
The main risk of an unrestricted, unregulated market economy is that while you don't enjoy any profit (or some dime is thrown at you to make you feel good with a lot of glassing like"you're contributing to a better future" bullshit ) you're subject to all the risks of enterprises.
In other words, you lose if company wins and you lose if company fails because 1. if the company wins, you get only a fraction because you were not entitled to get more then a fraction (even if you took an enormous risk) 2. if the company loses, you just hit the bottom as if you were a stockholder (mmmmhhh Walmart "associates" run to mind)
The mantra of diversification, quite often used to instruct you NOT to invest in a single company/fund/scheme is going into the toilet as welll, because all the investments you, as a consumer, have access to are the hi-risk low premium that no sane investor would ever touch with a pole.
I guess the first much much needed realization is this : there is no such thing as a "market force" or "invisible hand" leading your investment to do good to society or to do good to you (and only you). "The market"may be formed by few companies who are into the business of taking money out of you. Why ? For a simple reason - it is much much easier to SCAM in a unregualted market then to invent something good, find new ways to produce goods.
On a tangent: goddam were are the ol communist..they weren't better then today right wing pundits but at least they were vociferious and battling, provinding some much needed "get smart you moron" kick in the ass.
posted by elpapacito at 7:12 AM on September 15, 2004
thanks, plep--and yes, this post is because of that conversation we had, davehat. After plep and i spoke about it, I was worried you guys didn't know stuff you should...unfortunately.
posted by amberglow at 6:07 AM on September 16, 2004
posted by amberglow at 6:07 AM on September 16, 2004
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In terms of investing money for retirement, property is looking like the best bet. There are a great many obvious problems with that, however.
posted by cell at 3:40 AM on September 15, 2004