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Who started the pension system

  1. Jun 6, 2005 #1
    Who started the pension system and why should people get money even when they are doing no work/retired?
     
  2. jcsd
  3. Jun 6, 2005 #2

    russ_watters

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    I don't know where it came from, but a pension is a form of deferred compensation. You aren't getting paid for nothing, you are getting paid late for work you did when you were young.
     
  4. Jun 6, 2005 #3

    Art

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    Although military pensions date back further the first state provided old age pensions were introduced for the first time in Britain in the 1908 budget of Herbert Asquith's government after some years of debate. The first payments of between 1s and 5s (at that time there were 20 shillings in £1) were made on the 2nd Jan 1909 to all citizens over 70 years of age.
    The reason for their introduction was to alleviate extreme poverty. In order to finance the scheme for future generations a compulsary national insurance contribution scheme was introduced whereby a % of each worker's salary was stopped at source from both employer and employee for investment in the pension scheme.
     
  5. Jun 6, 2005 #4

    BobG

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    Like Russ said, pensions are deferred compensation. If people were able to manage their own money effectively, they would have been better off being paid that money while they were working. Seeing as how it's hard to maintain discipline when the car breaks down, the plumbing breaks, or some other crisis hits, most workers felt they were better off with enforced savings and their return being paid out as a pension - or at least they believed in their unions which got the pensions.

    Considering the pension bailouts of some large companies, like United Airlines, I'm not sure the workers could have done much worse managing their own money.
     
  6. Jun 6, 2005 #5

    Pengwuino

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    Ha, most peopel cant maintain the discipline an hour after htey wake up :D.
     
  7. Jun 7, 2005 #6

    SOS2008

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    I was watching Jack Nicolson as Jimmy Hoffa this weekend (speaking of things that happen to pension plans).

    I am curious what other PF members think about government employees who are able to retire within 20 years (they don't have to wait until a certain age, e.g., 65) who are guaranteed a pension, compliments of the tax payers--unlike other Americans.
     
  8. Jun 7, 2005 #7
    Personally I'm all for people who hold certain types of jobs receiving more benefits than others unfortunately the ones I favor tend not to receive that much in the way of benefits. Teachers for example are quite important to our society and they provide a service that isn't exactly "marketable".
    I have similar ideas about people in the medical field. Doctors definitely get paid pretty well for the most part but that's because they charge a great deal. If they didn't have to pay so much for their schooling then perhaps it wouldn't be necessary to charge so much. The idea of changing medicine over to a more socialist structure financially speaking probably has quite a few problems that would need to be dealt with though and I really haven't a clue how that would work out.
     
  9. Jun 7, 2005 #8

    SOS2008

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    Yes, I agree about the type of government job, for example ones in which life is risked (high-stress), like law enforcement. But others, such as postal worker, etc., I don't feel early retirement is justified.
     
  10. Jun 7, 2005 #9
    Law enforcement is another good example. They do get some pretty decent benefits for the most part. That might be dependent on who they work for though I suppose.
    I understand what you mean about Postal Service jobs. There is a difference in that it's federal though. Police have to depend on the capacity of the city to pay them and give them benefits which wont be on par with the fed.
     
  11. Jun 7, 2005 #10

    Pengwuino

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    Oh god yes. Both my parents are/were government workers. My mother retired after i think only 15 years and gets like 90% pension and my dad has been worken for about 20 and hes shooten for 100% pension (100% of highest year's salary for yearly retirement payments) and retiring at like 55. They'll be the first ones to tell you that government retirement absolutely sucks the government's revenue like crazy (at least here in California for county and state employees)
     
  12. Jun 7, 2005 #11

    BobG

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    Being a military retiree, I'm a little biased. I'd say it's a great idea.

    Military retirement isn't nearly as generous as California's. You get 50% of base pay. Since a lot of active duty military pay are tax free allowances (housing allowance, food allowance), that winds up being roughly around a third of your military pay.

    Still, since you're still young enough to get a higher paying job than you had in the military, that winds up being money to invest for retirement rather money you have to live on.

    Provided, of course, you had a job in the military that actually had a civilian counterpart. There are some who actually need that money to supplement the pay from their jobs, and then it doesn't stack up to quite so generous a retirement plan.

    But then again, the ones in the more technical fields gave up more by staying for 20 than the ones who wouldn't have found a better job in the civilian world, anyway.
     
  13. Jun 7, 2005 #12

    SOS2008

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    Like law enforcement, military service is one in which individuals put their lives at risk for society, so I see this differently.

    It is all the other government employees, such as postal workers or what have you that are able to retire early (in their 50s) with guaranteed pensions, while other Americans have no such luxury. This is what I question, especially in view of current debate about Social Security, and assuming it continues, the age continues to be increased.
     
  14. Jun 7, 2005 #13

    Art

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    But if the militery were really committed to their job then they wouldn't survive to get a pension. They'd have died heroically in battle - Like John Wayne always did. :smile: jk
     
  15. Jun 8, 2005 #14
    An interesting article on this topic today:

    "Big pension plans fall further behind"
    By Albert B. Crenshaw
    Washington Post
    Updated: 12:48 a.m. ET June 7, 2005

    http://www.msnbc.msn.com/id/8124321/

    Here is an idea. Not only can Americans transition from guaranteed pension plans to 401(k) with no promised benefit, but they also can transition from guaranteed Social Security to private retirement accounts with no promised benefits. Oh wait, I think that idea has already been proposed.
     
  16. Jun 8, 2005 #15

    Pengwuino

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    No promised benefits indeed. Oddly enough however, the most successful state (government) pension funds rely on stock market investments...

    Guess what people dont know wont hurt them.... until there retired....
     
  17. Jun 8, 2005 #16
    Correct about pension plans and the stock market. I was joking, but then it is not a joke that Americans are losing guaranteed benefits, one of which may be Social Security.
     
  18. Jun 8, 2005 #17

    BobG

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    Why do you say Social Security benefits are guaranteed? Benefits paid depend on what taxpayers want the government to pay out. With the baby boom retiring, taxpayers will pay some pretty high taxes if they want the government to keep benefits as they are.

    Fortunately, the government has been collecting a surplus to help cushion the impact of having to pay out a rapidly increasing amount of money. Of course, like some private companies, they have 'borrowed' that money to meet operating costs. They'll pay it back as needed through the taxes the government collects. Eventually, taxpayers will decide they won't accept any higher tax rates and only politicians willing to cut benefits deeper than their opponent will get elected.

    Guaranteed private company plans rely on the solvency of a single company - if it goes belly up, so does your retirement. And I think quite a few company executives are cursing their predecessors - it looked so good to a company's bottom line when they were paying low wages today in return for high benefits that most likely would be paid by some other executive years later. The 'guarantee' comes from the PBGC and was paid for by insurance premiums paid to the PBGC by the companies. The PBGC never pays out full benefits for the retirements it picks up. Its principle aim is to make sure retirees get at least a portion of their promised retirement. As you noted, even with only insuring a portion of promised retirements, the PBGC looks like it is having trouble meeting the obligations it had to pick up.

    With 401(k)'s, IRA's, etc, the return isn't guaranteed, either. The stock market experiences quite a few short term swings and one that occurs during retirement can be pretty painful - sure, it will swing back up, but retirees were spending a bigger percentage of their retirement savings than they planned on during the down swing. But, when you consider your money is invested over a 20 year period, short term swings don't have much affect on accumulating that money in the first place. Even with ill timed down swings in the market during retirement, the overwhelming likelihood is that your own retirement plan will pay off better than Social Security.

    In general, I think a government guarantee is safer than a private company's guaranteed pension plan, but there are no absolute guarantees. You cover as many bases as possible (not bank on only one source for retirement income) and hope for the best.
     
  19. Jun 8, 2005 #18

    loseyourname

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    I've always made a habit of spending my excess money on friends and acquaintances of mine. That way, when I'm broke, there are a lot of people out there that owe me. Silly anecdotes aside, your best bet, aside from loan-sharking, is probably government bonds that take at least 15 years to mature. If you have the means, however, the smartest thing long-term is to spend whatever money you don't need buying up property. My dad bought a house a little above his means back in '89 and it's appreciated by almost $400,000 since then. Even though the high mortgage payments meant he didn't have a ton of spending money, when he sells the house in a year or two when my little sister graduates from high school, he'll have supplemented his income by an average of about $30,000 a year over the last 15 years, which isn't bad for someone making $60,000 a year.
     
  20. Jun 8, 2005 #19

    Pengwuino

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    It really should be a guarantee... anything your forced to pay into by law should mean a guarantee... IMHO of course
     
  21. Jun 9, 2005 #20

    SOS2008

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    So true about investment alternatives to the stock market. The large pension plans/401(k) accounts (individuals grouped together) can't move quickly, and if/when there is a movement it causes a ripple that can be negative. The best way for individuals to make money in the stock market is to be a day trader, but most people can't or aren't comfortable with doing this.

    How private accounts would work versus Social Security was brought up some time ago in an earlier thread. It seems the private accounts would be managed the same as pension plans/401(k) as a group with poor/risky returns -- otherwise the alternative would be for individuals to manage their own accounts like day traders. Details about private accounts have never been made clear, which is probably why most Americans have not been comfortable with Bush's proposal.

    What ever is done, I agree with the comment that most people don't have the discipline to save on their own, so mandatory withholding/investment of some kind is needed. I've said it before that the so-called "trust fund' should be separate and off-limits to government "borrowing" and should be interest bearing per guaranteed instruments, such as bonds etc. I agree with the Dems that SS could be made solvent by removing Bush's tax cuts for the wealthy, keeping the inheritance (death) tax in place, indexing based on income (not prices), and IMO to stop deficit spending on very expensive military invasions like the war in Iraq. An increase in taxes and/or cuts in benefits are not necessary.
     
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