So the Govt's attempt to force pension trustees to invest (our) pensions in light of state priorities (i.e. more UK-based investments made by UK pension schemes) has been defeated in the Lords.... for the pretty obvious reason that this would badly compromise the fiduciary duties of trustees towards members of pensions schemes.
But, Labour has pledged to try & get a similar measure back into the pensions bill in some way;
they've got their eyes on (y)our pension.
@ChrisMayLA6 Another item on the list of "why see how other countries deal with it if we can create our own bodge job"?
Pensions in the UK aren't pensions (in the sense they provide a monthly income until you die), they are savings accounts, and treated as such.
A real pension fund should do the same as a state pension: you pay in, and get an income in return. Some get less then they paid in, some get more.
Some pensions still are; I have a mainly defined benefit pension that does act as a pension, and certainly civil service pensions still do... but yes, increasingly the defined contribution schemes are much more like savings accounts (but with some tax advantages, but more investment risk).
@ChrisMayLA6 Dutch pensions are all in pensioen funds (mainly large insurance companies), which do the investing. And they have an obligation to their clients, in terms of ROI, not to the government. They are not in the business of gambling with other peoples money, on the contrary, they are tightly regulated to make sure pensions aren't in any danger.
And yes, there are tax advantages too, with the idea the income derived from it is taxed, so in the log run the government doesn't lose out.
@ChrisMayLA6 But treating it as savings and taking your pension as a lump sum doesn't really exist. It is technically possible, but it is very highly taxed, so virtually nobody does it.
Also, pensions aren't transferable like your NI contributions aren't. When you die, it ceases to exist. You can't leave your pension to someone, like you can with a savings acount.
It depends on how the pension is set up; one of the aspects of changes to inheritance tax rules in the UK was how it treated pension pots.... and in the UK you can take 25% of you pension pot tax free (as far as I recall)
@ChrisMayLA6 The term "your pension pot" is already an indication it is essentially personal savings, not a pension.
When you pay your NI, nothing is labeled as "yours". You contribute to a single large pot, from which all pensions are paid. You have no claim to individually paid NI.
And for a private pension, the system should be exactly the same.
But it isn't - private pensions are essentially listed in scope to certain workers, but for defined benefits schemes do work in a similar way to your preference; defined contribution schemes are much more individualised
@ChrisMayLA6 I know, hence my remark that reform is needed.
The entire current system is still geared towards "money makes money" instead of pensions being a social system supporting people in old age.
@nusher @ChrisMayLA6 Which is another indication it is a saving, and not a pension.
Pensions don't have a personal entitlement, there is nothing marked as "yours". A pension pot is a generic pot the pension income of all participants is paid from.
@nusher @ChrisMayLA6 Which is exactly why a reform is needed. A state pension shiould not be linked to work, and not to earnings. It should be the same for everyone. "Don't work, don't eat is so very Victorian".
For a private pension things are different, as there is a relation between the amount you pay in, and the monthly pension you can draw from it.
Public sector pensions are imho the same as private pensions, and should be kept in a pension fund, separate from any government interference.
@annehargreaves @ChrisMayLA6 True, and it is the same with state pensions in most countries.
Countries that used to have a "pot", like Belgiums "Zilverfonds", have long been plundered by policians for short term gains.
From a financial point of view, it wouldn't be logical to keep a pot either, banks or pension funds also don't physically keep your money.
It goes wrong if it starts resembling a Ponzi Scheme, which is what is going to happen without reform, with an aging population.
yes sorry should have made clear the previous reply was about private pensions where the trustees have responsibility for investments - the UK's state pension, as you note, is not funded, other than via current taxation
I figured that pensions might be safe until the rent-seeking classes had monopolised the property market by buying up all the boomers' homes, but patience, if not greed, doesn't seem like a natural habit for these people, so you're probably right.
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