The Pensions UK report is relevant to everyone. It will feed into the Pension Commission and so should thinking of people like David Warwick and Andrew Young, who feature in this blog.
And so is this comment from Andy Young, a former actuary to the DWP when at GAD.
I think that that is what the Pensions Commission is doing, at least I hope it is. For their is very little reason for most commercial organisations to spend time on the poor.
We did of course have a Government pension called the Second earnings related pension scheme (SERPS) that set out to pay income to everyone working – whether they were in a workplace pension scheme or not. Companies with workplace pensions could contract out of SERPS and pay it themselves and they got a rebate of national insurance for doing so.
Then it wasn’t just companies but individuals who could have their national insurance payments paid into a personal pension (they didn’t pay less national insurance but they got a proportion of their NI payments into their pot instead of a pension.
And so popular was “contracting out” by employers and employees” that the Government was to cut down the payments from SERPS from the original vision of Barbara Castle in 1978. It changed its name in 2002 to Second State Pension (S2P) and it withered to a point that in 2016 it closed and the State Pension took over a single system going forward. You can read all about it and the intricacy of moving from one system to another from this link.
If not the dismantled SERPS – then what?
Andrew Young (quoted above) believes that the state (not commercial companies) should have charge of providing a second pension to those on low incomes. He has talked to me and many others of a CDC scheme run by the Government that is funded using a defined contribution from the Treasury – organised by the DWP and paying an earnings related pension.
The point is that it does what Sweden does and what the FT reports the Germans want to do and pays benefits from a central fund. Of course there are differences between systems. The Germans talk about putting a backstop in met by the tax-payer when the markets can’t pay the promised pension (for instance). I imagine that a funded state CDC scheme would not have this but nor would it be a commercial venture and as a state pension arrangement it would have great appeal to those who see pensions as the job of Government.
I don’t suppose that many wealthy people will consider this important and to them it isn’t. But if we are to have a pension system that pays earnings related pensions to those on low wages, a state funded pension scheme makes a lot of sense to me.