Tuesday, December 12, 2006

For Pension Scheme read Tax Scheme

So the government has decided to go for a single pension scheme. Its not compulsory yet - but don't rely on that continuing.

Whoever is the 'sole operator' is going to be in a position of immense power. If the government appoints the operator will the government also guarantee the pensions. ( Hint the answer starts with n and ends with o ).

This looks like the nationalisation of pension schemes to me.

"People will not be allowed to transfer money into or out of the new system from existing pension funds because this would undermine efforts to raise overall savings levels, the White Paper document said." - according to Reuters.

Does this look like National Insurance to anyone else ?

Employees and employers contribute to that. What is to stop a government in the future borrowing from this national savings scheme - say to meet civil service pensions of those who retire at 60 on final salary pensions ?

Of course they'll deny this - to start with. All I can say is remember Argentina and the grabbing of private pension there to pay civil service salaries. ( Do you really think that wouldn't happen here ? )

Who will decide how the money is invested - you can almost hear government ministers talking about the people's priorities - ie substituting for state spending. Given that all state spending these days is called investment - its not hard to see some of this money going astray. Even if it starts well ( as with the National Lottery ) - government just can't resist pots of money that are easy to identify and they have some influence over.

What this is, is a spectacular tax rise - sold as a pension. If they cared about pensions they would remove Gordon Browns GBP 5 Billion/year stealth tax on pensions and pay a decent basic pension - not just to the public service aristocracy.

Also see Argentina's more recent experience here ....

Update: The Daily Telegraph reports the following today (Weds 13 Dec)

"Actuaries and a prominent member of the Government back benches forecast another "pensions mis-selling scandal" similar to that which caused insurers to pay out £14 billion compensation during the past decade.

However, a technicality in the White Paper wording means nobody will be able to complain to the Financial Services Authority (FSA) if they are unhappy with the new pension.

Ros Altmann, a governor of the London School of Economics and a former adviser to the Treasury, said: "Because the new Personal Account is not being defined as a personal pension but as an occupational pension, consumers will have much less protection."

You have been warned !

Tag Pension, Tax+Rise , NuLabour.

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