Compulsory Work based Pensions

[KDave]

What are people's thoughts on this scheme. It's not new, but the scheme is soon to be extended to include 18 year olds earning over 10,000 a year. Good or bad? Why is it being forced on employers when workers already pay into the state pension, and what does that signal? 

Who benefits really? 

[shawy2510]

Is it actually compulsary?

My dad has just had to enrol me on 1 but when I received the paperwork it says that you do not have to pay into it if you do not want to.

[KDave]

It is for employers to offer them yes. Workers then have the choice to opt out.

[shawy2510]

Employers have to enrol you into it but its then upto you if you pay into the scheme which your boss will also then pay into.

[reidpj]

  Personally, I'm not sure that the Government - given that the economy needs people to spend in order for it to function and/or to grow - should be encouraging people to save (mind you, I'm not entirely convinced that economic growth is necessarily a good thing).

[Augustus1]

18 year olds will certainly need to save for old age, as there will be no state pension for them IMO , and that's why it being forced on the young ones/ employers , but I also believe the 18 year old should be able to opt out of the state pension if perusing their own . and yes I know  the current contributions  pays for the current pensions , but by the time any 18 year old gets anywhere near pension age I will be long gone and wont care!!

dean.m

[Martlet]

The employee will really benefit from saving even a small amount over such a long and if they get in from 18 they'll never notice the small amount amount missing from their take home each week.  The difference from starting 10 or 20 years early is staggering (because compound interest). 

The compulsion is on the company to offer the pension and contribute if not opted out.  Can be a burden for small companies though, essentially its going to come out of wages for many. 

[Xander]

After reading many horror stories on some forums I think I would rather give coinbase a wide berth. 

Are there any reputable UK traders like coinbase who deal with UK clients and their bank accounts direct?

[ilovesilverireallydo]

6 hours ago, Xander said:

After reading many horror stories on some forums I think I would rather give coinbase a wide berth. 

Are there any reputable UK traders like coinbase who deal with UK clients and their bank accounts direct?

Wrong thread maybe? 

[Xander]

1 hour ago, ilovesilverireallydo said:

Wrong thread maybe? 

I probably put my pension post in the crypto thread...I had a long day.

[KDave]

Clearly there is a problem that no one in power is admitting, we can't afford the state pension (probably all public pensions) and you all need to save for yourselves. I am completely fine with this as I have long suspected there would be no pension from the state and I would be on my own, it's the way everything is nowadays. 

The problem is as Dean points out, everyone working is already paying for a pension through NI tax - not our pensions but the already retired. Why are we now paying twice? It's because the money has already been spent and then some. Politically it's more palatable to lie and keep stealing than it is to be honest and say we can't afford any of it.

Then when the time comes they can say to us oh well you have your work based pension so you don't qualify for universal pension credits. All that NI went on the nhs which you didn't use either 

[reidpj]

We can afford anything we wish to afford - so long as it's priced in £.  No UK taxes are, at the moment, hypothecated; we do not, at the moment, contribute, via NI, into a State pension pot, nor do we pay present State Pensions out of any pot.  The money (currency) that funds State Pensions is created, as is all Government spending, out of thin air (the so called 'magic money tree), and as the Government can create as many £'s as it desires without going bankrupt (yes, it really is impossible for the UK Government to default on Sterling), then there is an infinite amount of £ available to pay State Pensions.

How much Sterling is created  via spending (and where it is spent), and how much is destroyed via taxation and borrowing (and who pays said taxes) is purely a political decision.  There will always be enough Sterling to spend on anything the incumbent Government wants to fund; be it State Pensions, the NHS, Defence, Education, the DUP, Social Housing, subsidising MP's living expenses, etc. etc.

It is: Spend then Tax; not, as 99% of the population has been led to believe, Tax then Spend.

 

[KDave]

An interesting perspective. Sterling is a unit of exchange so yes we could print as much as want and do a Zimbabwe. However, the pool of goods is finite, so all you do with the magic money tree is inflate the number of units chasing the real goods. End result is everyone gets an equal number of sterling for their pension that buys a packet of crisps a week and nowt much else. Not a solution, but certainly an option. 

[reidpj]

I did not suggest that the UK Government should spend money into existence willy-nilly, without having a plan to destroy it (via taxation and/or borrowing) should the need arise.  No UK Government ever has, nor ever will IMHO, be so irresponsible.  I believe that if you read up on Zimbabwe, Venezuela, etc.  you may come to the conclusion that their hyper-inflation was the result of 'externalities' rather that their respective Government's fiscal policies.

The facts are that Government spending creates money (currency) - the money (currency) does not exist before the spending takes place;  the Government does not have an income; nothing is paid for via taxation (or borrowing).

If the Government deems it necessary (to curb inflation, etc.) they drain money (currency) out of the economy via taxation (and/or borrowing).  There is no correlation between the amount the Government spends and the amount it taxes (and/or borrows).

The Government decides how much it spends into creation, what the created money (currency) is spent on, how much of the created money should be destroyed via taxation (and/or borrowing), and who should bear the burden of said taxation. All of which are political decisions.

Not a penny of NI contributions go directly into a pot to provide present or future State pensions - no UK taxes are hypothecated.  All Government Spending (for whatever reason) is created, and destroyed, equally.

 

[KDave]

There isn't a pot being saved I agree, though it's hard for people to accept this in my experience. It's the politics that confuse people, they think they have 'paid in all my life' and are owed something. They have been miss sold national insurance imo, not that they had a choice but to buy. 

But in regards to the rest I am intrigued as I have not heard this idea before. Please correct me if I misunderstand, are you saying that the government can spend what they wish so long as they tax enough or borrow? A backwards way of saying, they need to raise taxes or borrow to spend?

Does it matter then, which way around this happens because to me it appears not. 

The logical end result is the same, they can't spend more than they take, thus they can't just pay everyone a pension as a political decision. Not without consequences, aka high debt to GDP and spending more tax take servicing interest payments or borrowing more to do so. As I say, one way out is to inflate aka Zimbabwe, the other is stop paying for things they can't afford, aka no state pension for me and you.

[reidpj]

I'm saying that the Government can spend as much as it needs without having to tax nor borrow.  It taxes, and borrows, for myriad reasons; none of which have anything to do with revenue raising - e.g. Taxation is used to give £Sterling value.  Here in the UK we can only pay our taxes in £Sterling (not Bitcoin, Euros, Dollars; sheep...), so companies and individuals must obtain it in order to pay said tax (thereby giving it value); as you have already pointed out, taxation is also used as a tool (unsuccessfully at the moment) to control inflation.  Professor Richard Murphy's 'The Joy of Tax' explains the true uses of taxing and borrowing much better than I ever could - I do not agree with his politics - he's a left wing Remainer - but he truely understands how money really works.

If successive Governments hadn't spent (created) more money than they destroyed (taxation), then there wouldn't be any currency in the system.  The National Debt is the total of all the deficits (the difference between what's been created and subsequently destroyed).  Therefore, any attempt to pay down our Debt, can only result in less currency being available to use in the economy, which in turn would shrink; in fact, in order for the economy to grow (which is not driven by personal debt) more currency is needed not less (Government must spend more than it taxes/borrows).

 

[Martlet]

 

12 hours ago, KDave said:

Clearly there is a problem that no one in power is admitting, we can't afford the state pension (probably all public pensions) and you all need to save for yourselves. I am completely fine with this as I have long suspected there would be no pension from the state and I would be on my own, it's the way everything is nowadays. 

That's not true, that no one admits to this problem, they have been talking about it in finance and political circle for at least 20 years that i'm aware of, telling us that we aren't saving enough nationally or privately for pensions to continue as they are.  Just no one is listening, pensions is not sexy and not a vote winner, though talk of it reducing is a vote loser.  So we have the pension age rising and not compulsory employer pensions to try to address the problem.  Not enough really,your conclusion is right, don't rely on state pension. 

[Martlet]

1 hour ago, reidpj said:

I Professor Richard Murphy's 'The Joy of Tax' explains the true uses of taxing and borrowing much better than I ever could - I do not agree with his politics - he's a left wing Remainer - but he truely understands how money really works.

If you agree with his harebrained idea of economics, you agree with his politics, because the system he advocates is a method to engineer a government controlled, socialist economy.  Though even McDonnell rejected Murphy's ideas, and gone with good old fashioned borrowing to fund his state largess.  

[KDave]

Spend first or tax first it doesn't matter. The books must be balanced or there are consequences. Tax gives sterling compulsory demand, repayment of state debt with interest and inflation give the desire to lend and borrow, all of it gives the confidence that it has value. Perception of at least, that's all that matters. None of this changes the fundamental problem we are facing - the books must balance and just don't. 

As for Keynesian economics increase currency supply to create growth - I can't agree. Can anyone honestly look at the currency supply today compared to before 2008 and still argue that increasing the currency supply creates growth? Boom and bust yes. Not growth. Growth occurs without state monetary intervention, state intervention creates misallocation and distortion and the mess we are in now. 

Like I say, the state pension is unaffordable, growing the debt to keep the lie going is not a solution and only making things worse. Alas, the nature of the pension and democracy itself, those receiving it today don't need to worry about tomorrow's problems so on we go. 

[reidpj]

25 minutes ago, Martlet said:

If you agree with his harebrained idea of economics, you agree with his politics, because the system he advocates is a method to engineer a government controlled, socialist economy.  Though even McDonnell rejected Murphy's ideas, and gone with good old fashioned borrowing to fund his state largess.  

That's his politics you don't agree with - namely the People's/Green Quantitative Easing; it's politics because it involves how the Government spends the money it creates.  His considered explanation of how currency is actually created, and what taxes, and/or Government borrowing, are used for, has absolutely nothing to do with politics.

[reidpj]

47 minutes ago, KDave said:

Spend first or tax first it doesn't matter. The books must be balanced or there are consequences. Tax gives sterling compulsory demand, repayment of state debt with interest and inflation give the desire to lend and borrow, all of it gives the confidence that it has value. Perception of at least, that's all that matters. None of this changes the fundamental problem we are facing - the books must balance and just don't. 

As for Keynesian economics increase currency supply to create growth - I can't agree. Can anyone honestly look at the currency supply today compared to before 2008 and still argue that increasing the currency supply creates growth? Boom and bust yes. Not growth. Growth occurs without state monetary intervention, state intervention creates misallocation and distortion and the mess we are in now. 

Like I say, the state pension is unaffordable, growing the debt to keep the lie going is not a solution and only making things worse. Alas, the nature of the pension and democracy itself, those receiving it today don't need to worry about tomorrow's problems so on we go. 

I'm sorry, but I really don't understand why the Government's books (re. Sterling) have to balance.  Where would all the extra currency (needed for growth) come from?.  If it were Tax then Spend, the economy would, also, be short of much needed circulating currency as the Government would have to wait for the tax to be paid before it could spend it.

Remember: Contrary to popular belief; the Government's budget is nothing like a household/business budget.  The Government can never run out of Sterling; it can never go bankrupt in Sterling; the National Debt never has to be repaid in the usual sense (in fact, if it ever was there would be no Sterling left to be used for econonomic activity).

I'm not advocating that the Government actually ups its spending; that would mean that, due to the, unnecessary (IMHO),  subsequent tax hikes, I would have to start paying my fair share (can't be having that now, can we? ?): I'm just stating that the Government can spend what it wants on what it wants.

[Martlet]

10 minutes ago, reidpj said:

That's his politics you don't agree with - namely the People's/Green Quantitative Easing; it's politics because it involves how the Government spends the money it creates.  His considered explanation of how currency is actually created, and what taxes, and/or Government borrowing, are used for, has absolutely nothing to do with politics.

It is entirely political. Take it back to basic principles.  In normal view of economics, there is economic activity within the population that generates demand and supply, requiring currency to trade different labour and services, government takes a cut of this.  This is bottom up, based on individuals needs and wants.  Murphy proposes that government creates money, spends it creating supply and demand for services and other economic activity flows.  This is top down, and is fundamentally statist. 

[reidpj]

18 minutes ago, Martlet said:

It is entirely political. Take it back to basic principles.  In normal view of economics, there is economic activity within the population that generates demand and supply, requiring currency to trade different labour and services, government takes a cut of this.  This is bottom up, based on individuals needs and wants.  Murphy proposes that government creates money, spends it creating supply and demand for services and other economic activity flows.  This is top down, and is fundamentally statist. 

I've no interest in what Murphy proposes.  I have already stated that I don't agree with his politics.  I'm Mr Libertarian extraordinaire. I'm a 'dyed in the wool' neo-liberal.

[KDave]

4 minutes ago, reidpj said:

I'm sorry, but I really don't understand why the Government's books (re. Sterling) have to balance.  Where would all the extra currency (needed for growth) come from?.  If it were Tax then Spend, the economy would, also, be short of much needed circulating currency as the Government would have to wait for the tax to be paid before it could spend it.

Remember: Contrary to popular belief; the Government's budget is nothing like a household/business budget.  The Government can never run out of Sterling; it can never go bankrupt in Sterling; the National Debt never has to be repaid in the usual sense (in fact, if it ever was there would be no Sterling left to be used for econonomic activity).

I'm not advocating that the Government actually ups its spending; that would mean that, due to the, unnecessary (IMHO),  subsequent tax hikes, I would have to start paying my fair share (can't be having that now, can we? ?): I'm just stating that the Government can spend what it wants on what it wants.

Additional currency isn't needed for growth, the economy grows regardless, more goods and services are produced with more people producing goods, or productivity leverages up thanks to technology advancing or some beneficial adjustment in process, and when it does so while circulating currency supply remains the same, each unit of currency buys more of the increased supply of goods or services. Deflation, which is a good thing, unless you have large amounts of debt measured in currency, and your goods or services you need to sell to service your debt are falling in price. Everyone else is winning, getting more for their labour. The economy is real things and services being made sold and bought, not how much currency is being made by the government.

I agree with you that the government can spend what it wants and creates the currency. The government must balance it's books or face the consequences as mentioned in my last post. It's not chicken and egg tax or spend, its balance or default. Sure we can borrow and run a deficit but we pay for that in interest payments. Then we reach a point where we can't afford both, so it's chin off the pension or default. Not sure how else to put it. 

[shortstack]

If it was compulsory it would be a form of tax there for illegal 

it's compulsory for the employer to offer its employees a pension scheme but no obligation on the employees part to join it