News EU Stability Pact: Why Germany & France Exempt?

[GENIERE]

Nereid:

Unfortunately, few people in the US or in the EU seem to have chosen to make good retirement plans which do not depend on social security payments. No doubt there are many reasons for this. You say "any sane person would not rely on the government to provide for them ...". Sadly, hundreds of millions do. What's your plan to convince them that they're insane?

I need no plan as the privatization of social security is well underway throughout the world. Even Sweden has gone that direction. Chile’s privatization experiment has worked so well, that the World Bank endorses it. Chile’s retired citizens enjoy more than 11% return on their investment.

Hopefully President Bush can get privatization legislation for the US enacted in his next term.

 

[Nereid]

That's good to hear GENIERE.

To what extent to you think these privatisations will defuse the 'retirement income' timebomb in Sweden, Chile, and the US?

Adrian wrote: However, lower income earners are encouraged by our taxation regime NOT to save a penny. If they save a reasonable amount for retirement, all their state pension gets stopped! So, the only sound economic policy for the bottom 30-40% is to spend, spend ,spend!
Utter madness!

This may not be as crazy as it seems. If you do the calculations, you'll see that the state will not be able to provide anything other than a token pension when you retire, unless taxation rises to well over 60% for those who are in the workforce then. Switching the source of retirement income to either companies or individuals (or both) makes sense, in that context. However, encouraging personal savings (for retirement) would seem more sensible than 'spend, spend, spend' signals.

AFAIK, there's a quite significant tax benefit - to folk in the UK at all income levels except the very lowest - if they make personal contributions to an approved pension plan. Are you saying this signal isn't clear?

 

[selfAdjoint]

In the US we have IRA's and employer-helped 401-K's which are investment plans where the income doesn't have to be reported until you retire or reach 70, when your income is expected to be small, and their contribution will not reach the marginal brackets. I expect my own bracket to be only about 10% this year.

 

[Adrian Baker]

Originally posted by Nereid
This may not be as crazy as it seems. If you do the calculations, you'll see that the state will not be able to provide anything other than a token pension when you retire, unless taxation rises to well over 60% for those who are in the workforce then. Switching the source of retirement income to either companies or individuals (or both) makes sense, in that context. However, encouraging personal savings (for retirement) would seem more sensible than 'spend, spend, spend' signals.

AFAIK, there's a quite significant tax benefit - to folk in the UK at all income levels except the very lowest - if they make personal contributions to an approved pension plan. Are you saying this signal isn't clear?

I agree about getting private pensions and not depending on the state, but it isn't just the pension, it is the whole raft of social security benefits that go with it, all of which are means tested. At present, anyone earning a fair amount above the minimum wage will not be able to afford a private pension that pays as well as free benefits.
So, people who are earning a good wage can live well, spend it all and retire comfortably on benefits including pension. Those who struggle and save up for their retirement will do less well!

The only sound financial advice to about 1/3 of the population is to spend everything they have before retiring. The present Tax and benefits system is obviously in need of serious reform.

I'll find out some figures on this for you.

 

[GENIERE]

Nerid -

That's good to hear GENIERE.

To what extent to you think these privatisations will defuse the 'retirement income' timebomb in Sweden, Chile, and the US?

I think in Chile it still is under funded, as the investments require time to grow and accumulate interest. Chile’s government may still partially support it through public funds.

I guess it would take a carefully designed system about 15 years to support itself, so it is important for young people to push hard on their government to realize a secure retirement.