Boomer life according to the economist

[otolith]

OoopsVoss said:

otolith said:

Or, had that been done in 1977 with the equivalent amount (a little over £1400), a near £20k pot which could buy an index linked annuity at 65 returning almost £20 a week... Long term compound interest calculations always look a bit less impressive after inflation.

Bottom line is that one generation got a free pension, and another generation is eventually going to have to pay for two, if the scheme is to be unwound.

Multi post become annoying - but maybe I was a bit subtle. The point of kickstarting the pot is placebo effect - its only a kickstart - contribution for 45+ years of working life is mandatory - I did say that.

For a vast sway of people at 21 saving or having 8K is an impossibility when they are beginning on the life journey. Its a bit of a cultural reset.

Yes, I get the idea. Brown tried it with Child Trust Funds.

[OoopsVoss]

otolith said:

Yes, I get the idea. Brown tried it with Child Trust Funds.

Yes, very similar. One thing here - is to try and wrap it up with appropriate financial education and knowledge. Its assuming too much that people can start to self manage their investments - but kick starting them on the road to concepts like compounding and risk / return would be a important (IMHO). The problem we have with auto enrolment now, people opt out when things are tight and they can't see the long term value (especially as the future projections are just poorly put together and explained).

Even if I think this is possible, I'm not sure it will ever get done - there is no interest from politicians to do so. Fixing something for good, makes the politicians redundant - ergo their self interest won't allow it. Keeping people at each others throats and only promising a solution (not delivering) keeps politicians employed.

[otolith]

It's a hard sell. Gen Z already feels hard done by. Telling them "You must pay for the pensions of the generations before you. But you must also pay for your own pensions, so that the generation after yours doesn't have to pay for you" - might not go down so well. The only people likely to vote for that haven't been born yet!

[havoc]

Sheepshanks said:

It might have been me that said that, but it does need to have been a decent level job, and one that they spent pretty well their whole working life in.

My wife did 20yrs in a part time CS admin role - her pension is £3K/yr. The average public sector pension in payment is £4K/yr. I get more from 4yrs in my first job 40yrs ago.

Statistics are wonderful things, but so is maths.

I don't know the hours your wife worked, but let's say it was 50% time as a simple start. And most final-salary / DB schemes work on # of years served over a nominal total (e.g. /60 or /80).

...so if she'd spent all her working life (40 years maximum), working full time, she'd have got 4x her current pension (double-hours, double years), so £12k/year pension for an admin job which I'd wager only paid her £20-25k a year full-time-equivalent. That's a 50% pension...and that IS bloody good.

Her equivalent, working in the private sector and probably only getting 10% more salary, would probably have put away somewhere between 4%+4% and 8%+12% (least and most generous DC schemes I've heard of). Split that and call it a very generous 14% total contributions (above average - avg e'er contribution across all industries is a farcical 4.5% right now), on say £22k p.a., and that employee would be able to buy an annuity of around £6k at today's prices. HALF the pension your wife gets. Drop that 14% down to 10% and the annuity is ~£4,300, or not much more than 1/3 of the public-sector equivalent.


That's sort of the point - public sector pensions are 2-3x as good as the equivalent private-sector pension. And if you retire on time, with current life-expectancy forecasts, that's 15-25 years of being c.2x as well off. Worse, that's ALL funded by the current taxpayer, NOT by previously-invested money.

[98elise]

Sheepshanks said:

cheesejunkie said:

ChocolateFrog said:

As someone previously pointed out on this thread. Women approaching pension age who've had a middling CS career suddenly start to get a whole lot more attractive.

If you're of a certain age .

I'm alright I married an NHS worker. I joke she's my pension. It sometimes doesn't result in a thump.

It might have been me that said that, but it does need to have been a decent level job, and one that they spent pretty well their whole working life in.

My wife did 20yrs in a part time CS admin role - her pension is £3K/yr. The average public sector pension in payment is £4K/yr. I get more from 4yrs in my first job 40yrs ago.

Similarly I did my first 8 years in the armed forces, and was an NCO when I left. My pension will be £2800 a year (last time I checked). It's actually reduced in real terms from the projection when I left. I was also paid less than civilian equivalents!

My private company pensions have beaten that hands down. The best I had was was a 5% contribution + 10% match from the company. Tax meant that 5% was costing me 3% of my take home. Then add 20 years investment growth and compounding and its a nice sum.

[OoopsVoss]

otolith said:

It's a hard sell. Gen Z already feels hard done by. Telling them "You must pay for the pensions of the generations before you. But you must also pay for your own pensions, so that the generation after yours doesn't have to pay for you" - might not go down so well. The only people likely to vote for that haven't been born yet!

Thought they were all about the future and stuff. What about the environment? Sounds like Gen Z are just the next lot of Boomers stealing from Gen Rhubarb (or whatever future generations are called).

That's partly why the bribe exists. But hey, if they think you can turn off the state pension overnight; they are in for a shock. The only fair way out is a decades long fix. You won't ever get a fair / smart workable solution otherwise. Tapering won't work, they can't even get benefit tapering correct and people INTO work - let alone when dealing with pensioners who cannot generate an income stream. Also lots of Gen Z in the SE really have little to moan about, due to inheritance.

[otolith]

OoopsVoss said:

otolith said:

It's a hard sell. Gen Z already feels hard done by. Telling them "You must pay for the pensions of the generations before you. But you must also pay for your own pensions, so that the generation after yours doesn't have to pay for you" - might not go down so well. The only people likely to vote for that haven't been born yet!

Thought they were all about the future and stuff. What about the environment? Sounds like Gen Z are just the next lot of Boomers stealing from Gen Rhubarb (or whatever future generations are called).

That's partly why the bribe exists. But hey, if they think you can turn off the state pension overnight; they are in for a shock. The only fair way out is a decades long fix. You won't ever get a fair / smart workable solution otherwise. Tapering won't work, they can't even get benefit tapering correct and people INTO work - let alone when dealing with pensioners who cannot generate an income stream. Also lots of Gen Z in the SE really have little to moan about, due to inheritance.

They would have to be really thick to fall for the bribe, though, it will cost them a huge amount over a working lifetime. And not so much stealing as a rewriting of a social contract such that they still have to look after the previous generations but will not themselves be looked after in return. The only winners are the generation which benefited from the state pension but did not fund one, and the losers will be the generation which funds one but doesn't get one.

[OoopsVoss]

otolith said:

They would have to be really thick to fall for the bribe, though, it will cost them a huge amount over a working lifetime. And not so much stealing as a rewriting of a social contract such that they still have to look after the previous generations but will not themselves be looked after in return. The only winners are the generation which benefited from the state pension but did not fund one, and the losers will be the generation which funds one but doesn't get one.

You don't fund your own pension, it comes out of general taxation / borrowing.... Its funded by ALL tax payers currently - whether you've paid tax a day or a lifetime. Your giving them 47 years notice its going, not pulling it overnight.

Next you'll be saying we shouldn't invest in green.....

[Sheepshanks]

havoc said:

...so if she'd spent all her working life (40 years maximum), working full time, she'd have got 4x her current pension (double-hours, double years), so £12k/year pension for an admin job which I'd wager only paid her £20-25k a year full-time-equivalent. That's a 50% pension...and that IS bloody good.

It’s - depending on your POV - better / worse than that. FTE salary when she left was £18K.

[Condi]

otolith said:

They would have to be really thick to fall for the bribe, though, it will cost them a huge amount over a working lifetime. And not so much stealing as a rewriting of a social contract such that they still have to look after the previous generations but will not themselves be looked after in return. The only winners are the generation which benefited from the state pension but did not fund one, and the losers will be the generation which funds one but doesn't get one.

Why shouldn't the current boomers pay for it when they die via much larger IHT, close down the loop holes and exceptions so it's hard or impossible to avoid it? As Turbo says, it's only luck that they were born in that generation anyway, and the inflation house prices have been paid for by people younger than them so they should have no issues with skipping 2 generations to rebalance the social contract.

[xeny]

Sheepshanks said:

It’s - depending on your POV - better / worse than that. FTE salary when she left was £18K.

Keep in mind the pension is likely indexed, so appropriate comparison is the current salary in the role (if it exists).

[cheesejunkie]

Condi said:

otolith said:

They would have to be really thick to fall for the bribe, though, it will cost them a huge amount over a working lifetime. And not so much stealing as a rewriting of a social contract such that they still have to look after the previous generations but will not themselves be looked after in return. The only winners are the generation which benefited from the state pension but did not fund one, and the losers will be the generation which funds one but doesn't get one.

Why shouldn't the current boomers pay for it when they die via much larger IHT, close down the loop holes and exceptions so it's hard or impossible to avoid it? As Turbo says, it's only luck that they were born in that generation anyway, and the inflation house prices have been paid for by people younger than them so they should have no issues with skipping 2 generations to rebalance the social contract.

Good luck getting agreement with that in this crowd. If they're dead they're not paying it. Their benefactors are. I'd agree they should be taxed accordingly and it would go along way to remove the discrimination caused by inherited wealth. But politically unacceptable due to who votes, I think that will change and hence my comments on deal with it before it becomes a bigger problem.

OoopsVoss is talking macro economics and I'm no expert there. I do know keep fking people over and you're going to get a reaction, it doesn't require any expertise to know that.

[Panamax]

cheesejunkie said:

OoopsVoss is talking macro economics and I'm no expert there.

Few people are, and it's all made up anyway. It's not as if scientific testing has proven the robustness of economic theories, which tend to change with time and place in any event. It's a bit like a preacher telling you "the Bible says". It might have been be relevant when it was written but time and circumstances move on.

cheesejunkie said:

I do know keep fking people over and you're going to get a reaction, it doesn't require any expertise to know that.

Hole in one.

[otolith]

OoopsVoss said:

otolith said:

They would have to be really thick to fall for the bribe, though, it will cost them a huge amount over a working lifetime. And not so much stealing as a rewriting of a social contract such that they still have to look after the previous generations but will not themselves be looked after in return. The only winners are the generation which benefited from the state pension but did not fund one, and the losers will be the generation which funds one but doesn't get one.

You don't fund your own pension, it comes out of general taxation / borrowing.... Its funded by ALL tax payers currently - whether you've paid tax a day or a lifetime. Your giving them 47 years notice its going, not pulling it overnight.

Next you'll be saying we shouldn't invest in green.....

I understand how it works. Current taxpayers fund current pensions on the understanding that future taxpayers will fund theirs. The system was set up paying out to people who hadn’t paid in. To unwind it, you need a generation to fund current pensions and get nothing back in return.

You are suggesting that politicians should say “Vote for me, I’m going to change the system so that you still pay for current pensions but will also have to pay for future ones for yourselves”. I don’t see that getting many bites.

[Biggy Stardust]

havoc said:

Statistics are wonderful things, but so is maths.

{edited for brevity}

That's sort of the point - public sector pensions are 2-3x as good as the equivalent private-sector pension. And if you retire on time, with current life-expectancy forecasts, that's 15-25 years of being c.2x as well off. Worse, that's ALL funded by the current taxpayer, NOT by previously-invested money.

Public sector workers will never accept just how good the pensions are compared to the private sector.

"I worked bloody hard for it!" (doesn't everyone think that?)
"I know a CEO who got lots more than this" (cherry-picked outlier examples)
"It's not a lot of money" (for short-term, part-time low-grade employment)

[NRS]

otolith said:

I understand how it works. Current taxpayers fund current pensions on the understanding that future taxpayers will fund theirs. The system was set up paying out to people who hadn’t paid in. To unwind it, you need a generation to fund current pensions and get nothing back in return.

You are suggesting that politicians should say “Vote for me, I’m going to change the system so that you still pay for current pensions but will also have to pay for future ones for yourselves”. I don’t see that getting many bites.

They’re already starting to slowly do that, are they not? With the 2%? contributions companies have to do for you. This will be with the aim of slowly trying to reduce public spending on pensions in future.

OoopsVoss said:

cheesejunkie said:

I just read your more recent post and I'm too lazy and think it would be better signal to noise to reply to both at once. Why should getting rid of the state pension be a goal? The rest of it I tend to agree with but question that part.

Because longer term its saddling future generations with costs. far better each generation provisions for self. For years the state pension has been miss-sold as a savings scheme - its not; its smoke and mirrors optics that'll get you jailed in the private sector. Eliminating the cost of pensions is worth about 3% of the national debt - do that each year and you have a lot of additional borrowing capacity or you just divert the existing tax income to investment opportunities.

If Govt budgets continue in deficit and compound debt, servicing costs become too high (they are paid our of taxes) and you in a debt spiral. We need to get serious about control of deficit and rebuilding our investment capability. Solving regional wealth / opportunity inequality needs at least 500bn to 1trillion of spend or proper investment.

Where will that funding come from to pay for the big spending? It will in theory pay for itself but that will take a long time to come through, and worst case it fails again and you have spent even more.

You say talk of tax on boomer wealth (houses, IHT etc is not right, yet most wealth is concentrated in their generation - partly completely naturally as they have had their whole life to build wealth. But also because of the demographics and policies discussed previously that aren’t being repeated. So if we should not go after that wealth who is going to pay for the massive costs of levelling up across the country?

[havoc]

Biggy Stardust said:

Public sector workers will never accept just how good the pensions are compared to the private sector.

"I worked bloody hard for it!" (doesn't everyone think that?)
"I know a CEO who got lots more than this" (cherry-picked outlier examples)
"It's not a lot of money" (for short-term, part-time low-grade employment)

(or in the case of the NCO who got out after 8 years - "Final" salary means based on the salary you left on. If you leave early, it's based on a low salary and a low fraction of that salary because you only put in 8 years service not 40)


I know a handful of teachers and they were all up in arms a little while back about the changes to their pension scheme, which meant they had to put more in.

Trying to explain the economics of it vs a DC pension and how good it still was went nowhere - they were ALL angry and militant and in denial about the state of the country's finances and how unaffordable DB schemes were.

These are allegedly intelligent people. Or rather, they ARE intelligent people, but not necessarily financially literate / without their blind-spots. Hell, it's only because 90% of people in this country ARE financially illiterate (at least when it comes to pensions) that the current and pending private-sector-pension car-crash - where millions of people suddenly realise they're going to be broke in retirement - hasn't become bigger news.



Still, could be worse - we could be France or Greece where public debt continues to pay for unaffordable pensions at ridiculously early retirement dates, kicking an even bigger bill down the road to future generations.

[NickZ24]

ChocolateFrog said:

The lottery of life was won being born in the 50's.

Lottery of life? Most people made it by halfway austerity.
If they'd spend on Starbucks, vacations, cars, and eating out as much as the current gen do well no wealth would have been there.

[borcy]

I wonder what the knocks on effect would be if, as people are perhaps suggesting, the public sector pensions matched the private sector?

[OoopsVoss]

NRS said:

Where will that funding come from to pay for the big spending? It will in theory pay for itself but that will take a long time to come through, and worst case it fails again and you have spent even more.

You say talk of tax on boomer wealth (houses, IHT etc is not right, yet most wealth is concentrated in their generation - partly completely naturally as they have had their whole life to build wealth. But also because of the demographics and policies discussed previously that aren’t being repeated. So if we should not go after that wealth who is going to pay for the massive costs of levelling up across the country?

You have heard of debt, correct?

For the umpteenth time, the UK has one of the lowest debt to GDP burdens in the G7. It has borrowing capacity that others do not.

Depends on how you count it, UK debt to GDP is between 100-108% G7 average is around 125-130%.

As long as you spend it right and cut your cost base to help fund it, you can run high than history debt to GDP ratios.

And wealth is concentrated regionally, should we tax London more?

C'mon, lose the dogma and look at the world without prejudice.