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Wednesday, 17 July, 2002, 10:50 GMT 11:50 UK
Do you understand how your pension works?
A review of the pension system is proposing radical changes which could cut the amount of money people expect to receive when they retire.
A government-appointed report - by Alan Pickering, the former head of the National Association of Pension Funds - says company pensions may no longer have to rise in line with inflation or pay benefits to widows.
Mr Pickering's ideas are an attempt to ensure that employers continue to run pension schemes for their staff.
What can be done to protect final salary pensions? Do we need a radical reform of the pension system in the UK? Should people be encouraged or compelled to save more for their retirement?
This debate is now closed. Read a selection of your comments below.
Are we not now reaping the benefits of Maggie Thatcher's legacy. Where the state silver was sold off so that a minority of the population could make some quick money by buying back state industries that we already owned. It is time people woke up in this country and demanded a full overhaul of the taxation system and welfare system that is presently in place. At present you are forced to pay in, however, you are not guaranteed any return.
If you pay nothing, you will be handsomely rewarded.
Who in their right mind thinks this is fair?
In the Nineties the robber company accountants dipped into the pension funds when there was a "surplus". Now there isn't a surplus. A few CEO's and financial directors should go to prison for their negligence with our pension funds. At the very least there should be a law keeping the size of the directors' pensions linked to those of the workers.
When the time comes I'll probably be too weak and fragile at 7O+ when the age limit rises, to be able to claim my State pension at the post office. The brain may still be active but will outlive the worn down body and bones from extended working years unless someone also invents a body strengthening serum!
Edwin, consider yourself lucky you'll have a house to sell to pay for your retirement. The way house prices are going there's gonna be millions of us who not only have no pension but also have no home and are destitute at 65. No matter how miserable things get there's always someone worse off!
The idea "we can't afford" decent pensions is a political con. This is the fourth largest economy in the world; UK corporations make billions in profit every year. Why don't we tax those profits to provide a decent retirement for the workers who created them?
My pension provision is simple - I put money in a savings account. There are no fees, and even if the rates aren't very high (and it's taxed), at least it can't drop in value, unlike stock market 'investments'. Well, unless the pound gets devalued that is...
As a UK resident for 53 years I feel entitled to comment on the pension shambles.
So we are all going to work till we are 70? Where will the jobs come from, considering the high level of over 50's unemployment?
Are the promoters of the new retirement age going to work till they are 70? Don't think so!
Why is future pension policy to be set by Civil Servants who retire at 60 on non-contributory, index-proofed pensions paid for by the taxpayer? Why not let it be set by the silent majority who struggle to find any spare income to save?
At 44, I earn £85 a week. Where exactly is my pension going to come from, now that I cannot expect my partner's kindly donated pension provision if I outlive him? Yes, I am prepared to work until I drop if anyone will employ a granny. Or should I become jobless and single now as there is no incentive to save or be a couple?
The whole of our welfare system needs to be reviewed. There is just not enough money going in to continue to pay out benefits at the level we currently do. However, why should those who work be penalised? Unless you're on a big fat salary there's nothing left after paying the bills to save. There are people who live on state benefits all their lives and get pensions. (I worked in conjunction with the Benefits Agency and dealt with many people who had been claiming what was unemployment benefit for over 20 years). I am a woman in my mid-fifties and although I have two children I have always worked. I've paid NI contributions and Income Tax so why shouldn't I expect a decent pension.
I have always tried hard to save from my wages. I do not eat out much, and do without unnecessary luxuries, so that I can try to provide for my own future (because I know I will get nothing from the State). I am 30 but am currently in my 5th job after graduating, and long ago gave up on company pensions, which robbed me every time I moved jobs. I would be horrified that I should be forced to relinquish control over my own finances, and hand over my future to a bunch of complete strangers. I'm afraid people have got to start taking responsibility for their own futures, and accept that maybe they can't retire at 55.
So we should force employees to pay a contribution towards a pension scheme? Good idea. What should we call it - National Insurance?
To be honest people the MPs with their guaranteed pensions and the CEOs of companies don't give a damn about your pensions along as they get a nice fat pension pay off. We should have a law change which states that within a company every employee should receive the very same pension scheme. This is prevent the top management from agreeing special pension deals for themselves with total disregard for their employees.
My comments are more general than specific.
There was a time, pre-Thatcher, that this country's leaders understood that a society bonded in a two-way process: it looked after you and you looked after it. But for nearly 25 years we have seen public services cut and told it is up to us. You want good education, medical attention, decent transport, liveable pension, you pay for it (and now rubbish collection!). It really is no surprise that people feel such little identification with politicians claiming to be working for our good, and therefore end up living more anti-social lives.
This country is not rich enough to support the old/poor/weak to the extent that it currently does. I think we need to take a lesson from poorer countries and not expect anything from the state. Pensions for all is an expensive luxury which this country just can't afford. Old people should live with their children rather than expecting a handout from the state.
Does my memory deceive me? I seem to remember that company pension funds so awash with money during the 1980's that the then, Tory, government allowed them to take "pensions holidays" and not make contributions to the fund. In the light of the current crisis was this not criminally short-sighted? Companies that took advantage of favourable circumstances in previous years have a moral duty to make recompense when times are less favourable. There is certainly no justification for penalising future pensioners further.
How can people be expected to subscribe to a pension fund when they know that some time in the future a government will just take it all off them in some way or other. We have to be able to trust both pension admin people, employers and governments. At this moment do you?
How am I supposed to put money on a pension when my salary is £15,000 p.a and I live in London? Rent alone is half of my salary. I have some savings, but the interest rates are so low it's hardly worth the effort.
Yes, I put money into it and someone else gets rich!
The company I work for has changed hands three times in six years. Each time we have had to change pension scheme and each time we have lost out because we have had less than the required two years in the schemes. Don't anyone try to make me have a company scheme, from now on I will make my own arrangements.
I have been a teacher since 1973 and at the moment I am applying for early retirement on health grounds; because I have not always been in permanent work and have often done supply work or short term contracts, I thought I had covered myself by taking out a private pension with the a well-known scheme which will mature in 2012. I do not feel at all secure with the present system and I think all those of us who have worked for 30 years or more at least deserve some guarantees for our future.
Yes, I know how my pension works. I give them money, and they tell me that they want some more.
J Rhodes, Wales
I think the government should force companies to pay into a government pot that is used to pay a decent pension, then people will have faith that the money will be there in future. It is terrible that when people move jobs their pension is decimated time and again.
The whole area of pensions in this country is a disgrace. We are told that our state pensions will be worthless - so what happened to our money deducted by successive governments from our wages for years to fund our pension.
Tez: You asked what happened to the money deducted from us by politicians. Simple, it was all spent immediately! Today's pensions are paid from today's taxes, tomorrow's pensions will be paid from tomorrow's taxes. That's why there's a problem - people are living longer and don't want to save more or pay higher taxes. The most humane solution I can think of is a massive increase in inheritance tax. The dead do not feel the pain of taxes. The money has to come from somewhere.
David Owen, UK
I fully understand how my pension works. What I do is put my hard earned cash into a scheme for the next 30 years only to be told that it's worthless at the end!
I used to work for a firm that had a final salary pension plan. Quite a few employees would not join the scheme because they thought that if they had additional income when they were pensioners they would not get the extra state support given to basic pensioners.
Let me see if I've got this right. In order to increase pension take-up Alan Pickering thinks that they should start to decrease in value the moment you start drawing on them and that they should not provide an income for a dependant widow or widower. I'm not surprised that on the same day Consignia thinks it can increase competitiveness by charging £14 for what is currently normal service, and the government unveils plans to charge for refuse collection on a bulk basis and honestly thinks this won't lead to an increase in fly tipping. We will only get cohesive government when we get cohesive thinking.
The only answer is a properly resourced state pension scheme including a generous basic pension and a worthwhile earnings related second pension (which cannot be opted out of). This should be paid to all at 60. Obviously National Insurance contributions and/or Income Tax will have to go up to pay for this.
An employer's pension, or other private pension, should be just the icing on the cake.
The first thing to be done is to address the imbalance between final salary and PPP schemes. Both should be scrapped and a new common pension scheme brought in with compulsory contributions.
B Thompson, UK
Take all pension funds beyond the sticky fingers of companies. Bring in a moratorium on the closure of final salary schemes. When companies say "we can't afford it", they really mean "we don't want to pay for it. This is unacceptable. Finally, compel all workers to put 10% minimum of gross salary into a pension. Employers can't be expected to foot the entire bill.
If people are being coerced into contributing to private schemes, they should only pay a reduced amount of national insurance. Furthermore, perhaps final salary pension schemes might not be such a drain on company coffers if these companies didn't pay ridiculously overpriced salaries and bonuses to inept CEOs and directors.
Tax rises and pay freezes make it harder and harder to pay for one's own pension. Much of the tax rises are going into very expensive index-linked final salary pensions for public sector workers (eg police). Also, little action has been taken to protect those with private pensions over mismanagement of the funds, eg Equitable Life.
John G blames previous governments, I blame this one. A year or so ago they raided the pension funds to the tune of
£5 billion by abolishing tax relief on dividends paid into pension schemes. 'I'm alright Jack' ministers and public sector workers were not affected as our taxes were increased to pay for their index-linked pensions.
John G, London, UK
It is not just that final salary schemes are being closed to new people! I paid into such a scheme for nine years and now have been told it is being closed, I lose my guaranteed pension, and was given a matter of a few weeks to find another scheme to transfer the value into (a value significantly below what would gain me the promised level of pension). There seems to be nothing I can do about this!
Val Robertson, Bradford, England
Pensions are an outdated product and the only ones profiting from them are pension fund managers. We need to see pensions where we can get a lot more cash out of it (rather than the paltry 25% allowed currently) and where annuities are not a compulsory purchase at the ridiculous prices they are offered at currently. More flexibility is the only way pensions can be a valuable product in future.
The biggest problem with pension provisions, certainly in the private sector, is too many people retiring too early. Employers have often found it cheaper to get rid of older staff by enforcing retirement. People live longer and have children later in life. Mortgages, university costs for the children etc pile up later in life, leaving little spare cash to save for a decent pension at 60/65. The answer is for the age of retirement for all those born post-1940 to go up to 70, with, perhaps, an option for a higher pension if the retirement is delayed to 75. This is no different than offering people retirement at 65 when pensions at this age were first introduced.
It's all very well people saying that individuals should save more but for young couples living in the south east it's difficult finding any extra money to save - and with low interest rates for savers it's not going to be worth much more when we retire anyway.
Why do the press and trade unions think that people have a right to a final salary pension? It is a benefit paid for (by the most part) the employer and he has the right to withdraw it. If individuals took a bit more responsibility to plan for their future we might not have to listen to the constant griping of "we want.."
I've never trusted the long term survival of pension schemes and have avoided contributing to any. Many years ago I formed the view that I'm better placed to manage my own long-term finances properly and reliably than trusting the job to a corporate pension scheme. Unfortunately for the millions who have been sucked - or suckered - into such arrangements, I appear to have made the right decision.
Let us not forget that this government who are now throwing their hands up in horror at the lack of personal pension provision in the UK are the same people who were all to happy to dip their hands into the pot when the stock market was higher and introduce taxes on pension funds a couple of years ago. This was a disgraceful thing to do and they should be reminded of it at all times and asked to explain themselves.
Higher taxes for the current generation and less favourable tax of pension savings have meant that we are heading in the WRONG direction regarding pensions. I contribute into a private pension fund that has been decimated in recent years by higher personal tax, fund-management fees, reduced stock exchange values, and reduced profits - some of which created by businesses having to put more aside to pay for lucrative company pension schemes, thus impacting on profits and the return I get on my pension-pot. The solution: force companies to end company pension schemes, scrap tax on pension fund dividends, scrap forced annuities, tell everyone under 50 (in a graduating scale) that they will not get a state pension, and refund a higher amount of NI contributions.
Mark Davies, UK
How about the Chancellor puts a few pennies of his fuel tax billions into the pension fund?
It should be legally compulsory for anyone earning over the age of 18 to have a pension. I expect to have to completely provide for myself once I retire at 75. If something isn't done (and soon), there will be another major pensions crisis when my generation reaches retirement age, never mind the 40+ generation who are being affected by the current crisis.
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