Make pensions personal

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As the Government ploughs on with making occupational pensions compulsory – unless the individual opts out, which lots will – our old defined benefit (DB) schemes get clobbered again and again. The EU wants new rules that would force employers to pump in lots more money, and the one marked effect of QE has been to cut yields on Government debt, which is what schemes hold.

Occupational pensions – outside the public sector – belong to an age when lots of people spent large proportions of their working lives with single employers. The old DB schemes screwed people who didn’t stay put, and had to be dragged kicking and screaming into offering respectable transfer values. The people who scored were those who stayed put and got big salary increases late in their working lives.

Since people move around so much more in this day and age, I wonder if it is not time to forget occupational provision altogether. Would it be simpler if we stopped pussyfooting around and insisted that individuals started putting something away for their old age? Then would it be better if employers were forced to make matching contributions, so that if the employee saved five per cent the employer would have to at least match that contribution?

The snag of course is that at the point of retirement the value of a fund depends on annuity rates. Would it be so expensive for the Government to guarantee a minimum annuity rate?

I really don’t know, but messing around with the detritus of history doesn’t seem to be getting us very far.

Euro doom & gloom, will we see recovery?

We are nowhere near the endgame of the euro problem. The Dutch government has fallen apart, and France is about to elect a President who wants to spend more money: this in a state that hasn’t balanced a budget in the last thirty five years. No-one believes that Spain can meet the targets set by its European masters. Greece is, post default, just about as ugly as it was before.

Hollande, the likely French president, is not alone. He has a soulmate in Ed Milliband, who also thinks that, having created a problem with too much debt, we should solve it with more debt. He clearly subscribes to the notion that if you owe the bank a tenner, you have a problem, but if you owe the bank a billion, the bank has a problem. He is leading in the polls, with a programme that would more or less guarantee a sharpish hike in UK interest rates. If an election was imminent, I would be well scared.

It is no surprise that the UK economy is more or less flatlining. But the news around the world – and we are part of a global economy – is not too bad. China motors on, and the US is looking better. I guess we will recover, but don’t hold your breath.

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