So what happened to the finance spivs when we all wised up and ditched our endowment mortgages? Or sadly only most of us did. Some poor souls who believed the lies that if they only gave it a full 25 years it would all come right lost their homes, their wealth pissed away in Balls Brothers and the champagne and lap dancing clubs. After the endowment scam I guess they split 50/50 - half of them went into selling double glazing, the other half into running pension funds.
The ones running pension funds quickly dropped back into their old endowment mortgage ways; prudent savers and small-time investors are always easy prey for the finance spivs. Well, they may have to look for alternative rip-offs; Frank Field's Work and Pensions select committee, in a final and welcome parting shot for both Frank, whom I have long held in some regard, and for the current parliament, is seeking to force the finance spivs to be honest with their customers.
Reporting the moves, the Telegraph feels a little proud of itself.
The Telegraph ran a two-year campaign to secure action to lower fees, having exposed how hidden pension charges cut savers’ retirement funds by as much as half over a working career. It led to charges on auto-enrolled pensions being capped at 0.75 per cent a year from 2015. However the MPs’ new report has suggested the charge cap needs to be reviewed by the Department for Work and Pensions in 2020 after failing to have the predicted impact.Now, with an inevitable Brexit looming, the finance spivs will be looking for another outlet for their talents, another well to drain to meet their insatiable demand for cheap sparkling wine, flash cars and fast women. Well, lads, I'd recommend you learn German. And invent a new offshore, EU-external, tax efficient savings product for the thrifty Germans who are sitting on billions that would do far better invested in the UK - less your skim, of course.
Glück Auf!
27 comments:
Yes, I could tell a similar tale to your own, Raedwald.
UK tax laws being what they are, some people were willing to take the no-returns hit in order to process their income through a tax-free device, and the good, old-fashioned cynics knew this.
That's particularly true of well-paid people who can live on savings as they approach retirement, and bung most of their salary into a pension fund. I think that many company AVC schemes typically gave 0.1%.
I'm not sure what the system is in Germany, but I gather that France has - or had - a state-organised defined benefit arrangement, so the people don't need to touch scams like this.
I had two endowment mortgages. The first paid off with a nice residue and the second came in a thousand pounds short. However I had paid of the mortgage by then so it didn't matter either way.
Some 25 years earlier the difference between an edowment and repayment mortgage had been calculated as being £6.50 over the full term, clearly based on the idea that everything would stay unchanged for 25 years.
In terms of pensions rip off I hold local Council Tax payers to be some of the biggest victims.
Councils generally have fully-funded schemes for the defined benefit aspect of their pensions, just like banks and other private sector companies often do, well, for the management at least.
The armed forces pensions are paid directly from taxation on the other hand.
Dave, do you object to the fact that council officers, as part of their remuneration, get a pension? Once upon a time almost all UK employees did, so fight for the restoration of that, not for the deprivation of those whose contracts are being honoured at present.
Don't be a mug, for the Politics Of Envy dear boy eh?
@Cheerful
"fully funded" means load whatever is required onto taxpayers. Do you seriously believe it could possibly mean anything else.
So are their otherwise generally mediocre salaries too, which are adjusted to market, to take account of the pension benefit.
So someone worth £60,000 p.a. gross gets say, a £45,000 p.a. salary, with a £10,000 employer's contribution and a £5,000 employee's.
These jobs are open to anyone with the right qualifications, e.g. in town planning, or in public health, to apply. That is what they cost.
You could have studied and applied too.
Your point is, Mark?
@Cheerful
Please answer the question I asked and the point Dave_G raised.
How are government/civil service pensions funded?
You know the answer, as do I, but please enlighten everybody else.
People working in the private sector fund their own pensions and have likely lost the final salary version as an option - not by choice either.
Why 60% of 'my' council tax goes to subsidise others pensions when I have zero recollection of councils doing that for mine remains a mystery. Not.
At least my previous employer paid their bit from the profits we helped them make - not just assumed some gullible taxpayer would stump it up. And then we had Gordon Brown..........
Similarly council jobs tend to be more lucrative for actual pay than equivalent jobs in the private sector - this has been proven.
The days of comparatively 'low paid' council jobs are well gone. Same goes for individuals performance in those roles, sick pay etc.
You wouldn't get the same discretion in a private employment situation.
It's obvious that all direct council employees are funded by the taxpayer. So what? So are most teachers, NHS doctors, policemen, firemen, the military and so on, and so are their pensions. DB pensions are by no means confined to the public sector either.
It you are envious of their jobs, then why did you not gain the necessary qualifications yourself and apply for them?
Most ordinary people across the Channel still have some form of defined benefit pension, as they used to in the UK. The fact that people voted Tory here, and allowed them to destroy their means of protecting their Ts & Cs, i.e. trade unions and decent employment contract law, is no reason to attack those who are better placed in the jobs market and so able to retain theirs.
Why are those on the Right such lamentable suckers for The Politics Of Envy? In fact, for those of the rest of the Seven Deadly Sins?
@Cheerful
Answer the question we actually asked.
How are government pensions funded? (hint, look at the dictionary definition of funded)
Mark, please don't trot out the economics-for-five-year-olds line that "the private sector pays the public sector salaries and pensions". It seems like that's where you're going.
They are both parts of the same economy, and both do cash value operations if you analyse it properly. The clue is in the word "sector".
If there were no infrastructure, health, education, justice, government, defence, or security, then there would be no private sector.
But this is all off-topic, and on your hobby horse. My original point was that in some countries people are not forced to hand over their money to these brigands, maybe not in Germany for all we know.
@Cheerful
Like a dog returning to it's own vomit, you just can't help projecting (how many times have pointed this out to you!)
But it is economics for five year olds which you don't seem to undestand (or I suspect, don't want to).
Taxes pay for the governmental sector, where else does "government" money come from?
The answer to that is borrowing, and if you hand out final salary pensions linked to salaries which are not driven by the market value (are "climate change" advisors and the thousand and one other non-jobs really worth what they are given) and just employ more and more, what can you do but print money to "pay" for it?
There are enough real world examples of where this can lead: Venezuela? Zimbabwe?
I took out my mortgage in 1989. I was offered (vigorously) an endowment, I chose a repayment. An endowment was not compulsory.
These brigands operate pretty well everywhere, and certainly in Germany. Wasn't it Goldman Sachs who took 300 million or so from Greece to fiddle their books for Euro entry and the German authorities accepted it?
Who were the brigands there. I can't tell
Germany operates a mandatory, state-run, Final Salary system.
The scheme is based on the pay-as-you-go (or redistributive) model. Funds paid in by contributors (employees and employers) are not saved (or invested) but are used to pay current pension obligations.
Civil servants in Germany do not pay any contributions themselves but their salaries are correspondingly lower than those in the private sector.
Recent changes to the system mean that from 2012 to 2023 the retirement age will go up to 66 by 2023.[2] From 2023 the retirement age will be increased by two months each year, until 2029, when the mandatory retirement age reaches 67. Each missing year results in a 3.6% reduction in the pension entitlement.
The state scheme is financed by a payroll tax known as "social security contributions". The rate in 2012 is 19.6% of pay up to the social security contribution ceiling of €67,200 (Western Bundesländer) and €57,600 (Eastern Bundesländer). The amount is paid half and half by employer and employee contributions.
The amount paid to retirees is based on average salaries. The German pension insurance agency publishes the value of each year’s contribution (remuneration point). This is then multiplied the number of years contributed and the percentage of the average salary earned during the person's lifetime. The average pension in 2012 was €1,263.15 per month. The maximum pension for someone having earned twice the average salary (€64,200) would be €2,526.30
You can supplement this with a voluntary arrangement too if you wish, but the British Tory-voting pushovers might want to reflect on the last two lines.
I don't think that there'd be much of a market for the tinpot crap that people are conned into using here.
Of course, it ain't just the private sector that screws it's customers. Anyone with national insurance stamp will know what it is to be reamed by the government.
@Cheerful
I think that's called a ponzi scheme
Not to be disrespectful but 'fuck the Germans and their pensions'.
The issue is one of Local Councils effectively extorting the Council Tax payers to fund their pensions when the same does not apply to the residents that have to fund theirs independently.
It's not fair and should be stopped. This will place the burden where it belongs - with those that benefit from it, just like those in the Private sector have to.
There's nothing special about Councils - anything they deliver could be done by a private-based system if the will was there. We don't get a choice, either with the services provided or the extortion of funds to finance their inefficiencies, exhorbitant wages, 'fake' jobs and/or gold-plated pensions.
Read about French pensions, and weep again, oh my little green ones. And the Dutch, and...
And Greek
Who elected Cummings?
A ponzi scheme is not underwritten by a nation to make up any shortfall in outgoings v. incomings, and nor does it admit to what it is doing, otherwise, yes, Mark. Those are the two elements of its fraud, however.
So the comparison is banal.
Yes, who indeed, AP?
@Cheerful
Public sector pensions ARE underwritten by the general taxpayer either through direct taxation or by being lumbered with the interest on the remorselessly rising borrowing.
How do the French or Dutch pensions about which we are weeping differ?
Mark. Yes, the unfunded ones are. That is exactly what I said. That is why they are NOT ponzi schemes as you wrongly claimed. Read my comments properly.
The position of the Right is that Final Salary pensions should not be available for ordinary people. I am pointing out that they are still considered to be entirely normal in large areas of the European Union, and that the people there are not forced into the clutches of spivs either, as Raedwald correctly states that they are here.
I would settle for the return of National Savings Index-Linked Savings Certificates.
Investment is a gamble, and where do the gains come from? There was a time - late 80s or 90s - when maturing 25-year endowments yielded six times their target amount... thanks to inflation and loose monetary policy.
Most people, I suggest, would be happy just to know that if they saved money it would hold its value. Thrift, not speculation.
I have read what you said, please do me the same courtesy.
Final salary pension schemes, defined benefit or whatever you want to call them guarantee a pension based on the final salary and years of contribution.
Contributions invested in the markets can't really do this anymore, hence the closure of many such schemes.
Taxpayer backed ones can - until the money runs out/currency that is being borrowed starts to tank.
The EU can have all the final salary schemes it wants and you can adopt this tone of sneering condescension to your hearts content but it doesn't change the underlying reality.
The rising borrowing in many EU countries, of course is in Euros adding to the problems of this manifestly non-optimal currency area, making it ever more non-optimal
The whole Eurozone is in the hands of spivs who make "ours" look like del boy. It has been since day one.
How do you think it's going to end?
@Mark: a major problem for funded final salary schemes is that the huge government debt means interest rates are pushed right down so bond yields are negligible, and the funds rely on bonds to provide the guaranteed income. Until we have debt forgiveness or some magic way to pay our way out, we can't afford to let rates rise and so we're stuck in that trap.
@Sackerson
Unfortunately that is the case. It's one reason why money goes into equities and property pushing those up.
Mark, if a nation such as Germany chooses to operate a universal, unfunded FS scheme, where the social security contributions do not match the pensions being paid, then it will have to fund the shortfall by taxation, borrowing, or by whatever.
However, that is simply public spending, just like any other. But because people on average work for a longer period than they are retired, even with an ageing population, it appears that Germany does not as yet have that problem.
There is, it seems to me, no stronger argument against such a system, than there is against a state-funded military or justice system.
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