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Should the government stop interfering in the pensions market ?

jimmmy

Its costing the citizens of the country tens of billions to
(A) pay high pensions to its own employees
(B) give tax relief to everyone who takes out a private organised pension.

Given the current budget defecit of 25,000,000,000.00 euro this year alone, this position is unsustainable. Employees should have to pay the full cost of their pensions. No tax relief or subsidies from now on. If they want one, they pay the economic cost of it, private or public. This will level the playing field. People can decide to put their savings in a post office or bank, in stocks or shares, or property, or unit linked funds...whatever. People would still be entitled to normal old age pension.

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The_Conductor

While you're at it- why is the PRSI contributory old age pension only 3 Euro more than the non-contributory means tested old age pension? Surely after working your arse off for 40 years you deserve recognition of it?

3DataModem

jimmmy wrote: »

Employees should have to pay the full cost of their pensions. No tax relief or subsidies from now on.

OK - as long as they don't have to pay CGT or income tax on the benefits at the other end.

jimmmy

3DataModem wrote: »

OK - as long as they don't have to pay CGT or income tax on the benefits at the other end.

Everyone who looks after their own pension ( who has invested in a buy to let property for example ) at the moment has to pay CGT and income tax whenever due....as well as stamp duty buying the property for example. Why should govt employees get subsidised pensions, many politicians huge pensuon, and tax breaks given to those who buy private pensions from pension providers ?

3DataModem

jimmmy wrote: »

Everyone who looks after their own pension ( who has invested in a buy to let property for example ) at the moment has to pay CGT and income tax whenever due....

Not true. If you set up a small self-administered scheme and hold the property as an asset of the scheme you don't have to pay income tax or CGT either.

If you have a property that you bought for a pension you should take some advice and do the same... save you a lot of money. If you're not going to do that then it's nobody's fault but yours.

jimmmy wrote: »

Why should govt employees get subsidised pensions, many politicians huge pensuon,

It's part of their benefits package. Same as the great pension in the banks, or the free mobile phone, or cheap gym membership. It's part of their deal.

If you think politicians get paid too much then vote for ones who'll agree to reduce it (e.g. socialist party etc).

jimmmy wrote: »

and tax breaks given to those who buy private pensions from pension providers ?

As I said above, you don't have to buy a pension from a pension provider to get huge tax breaks. You can just set up a scheme in trust and all the assets attract the lovely tax breaks.

Why doesn't everyone do this? Answer:

you can't touch the money till you retire.

jimmmy

The fact is most people who do own investment property do pay income tax and c.g.t. if they sell it....and they did pay income tax ( on the deposit ) and stamp duty when they bought it. ( plus vat on professional fees etc ). Accountants who try to give varying advice on how to pay these taxes / how to manage it all will charge vat on that not inexpensive service. Many of these landlords are now in negative equity and cannot sell their empty properties. Do govt employees ever face such problems with their pensions ?

Yes, you can try to justify the huge pensions the government give themselves and their employees as "part of their benefits package"...but my point is the country cannot afford this massive "benefits package" to be given to one section of the community any more.

NewDubliner

jimmmy wrote: »

Employees should have to pay the full cost of their pensions. No tax relief or subsidies from now on.

The contributory social welfare pension is subsidised out of current expenditure as the cost bears no relation to the PRSI contributions originally paid in.

In a way, public pension schemes work like insurance plans. Those who don't survive to collect are partly subsidising those who do.

But let's go with your idea. Private pension plans for all. Where would people invest the money? Who would be responsible for guaranteeing it is managed in a proper manner and that excessive fees are not extracted? How to avoid your investments being asset-stripped? How to avoid the government raiding the funds in a recession?

It might be a better idea to have lots of children in the hope that some of them, at least,might support you in your old age. (If you're nice to them....).

jimmmy

NewDubliner wrote: »

In a way, public pension schemes work like insurance plans. Those who don't survive to collect are partly subsidising those who do.

Public sector pensions are not anything to do with those who don't survive to collect are partly subsidising those who do. The ordinary citizen of the country - the non public servant - is paying the taxes that pay the public service. Without those taxes, the government would have no income. Ireland inc earns its money and pays some of it in tax to the government to run the country, provide the infrastructure etc.

NewDubliner

jimmmy wrote: »

Public sector pensions are not anything to do with those who don't survive to collect are partly subsidising those who do. The ordinary citizen of the country - the non public servant - is paying the taxes that pay the public service. Without those taxes, the government would have no income. Ireland inc earns its money and pays some of it in tax to the government to run the country, provide the infrastructure etc.

You're correct, although you omit that private sector salaries are paid for by others too. For example, the people who work in the supermarket where you buy your groceries. Without mark-up in supermarkets, there would be no salaries.

But, I'm responding, with due respect, to your proposal that everyone should rely on a private pension plan, pointing out that the merits of social plans and highlighting the risk of trusting to pure capitalism to provide for your retirement.

The_Conductor

jimmmy wrote: »

Public sector pensions are not anything to do with those who don't survive to collect are partly subsidising those who do. The ordinary citizen of the country - the non public servant - is paying the taxes that pay the public service. Without those taxes, the government would have no income. Ireland inc earns its money and pays some of it in tax to the government to run the country, provide the infrastructure etc.

The public sector also pay taxes, and provide services that in many cases the private sector is unable or unwilling to do, such as Gardai, teachers etc- so its not fair to suggest that the private sector is the only wealth generating sector- and that the taxes paid by the private sector are the sole funds running the government........

The average public servant along with paying the selfsame PRSI as all Class A PRSI contributors, also pays between 8 and 10% of gross pay, along with the public pension levy, into a number of different superannuation schemes.

Without the taxes the private sector pay- the government would not function. Without the services provided by the public sector- the private sector would not function. Its very much a symbiotic relationship.

S.

BroomBurner

Why would anyone want to get rid of the tax incentive for having a private pension? Talk about shooting oneself in the foot.

The_Conductor

BroomBurner wrote: »

Why would anyone want to get rid of the tax incentive for having a private pension? Talk about shooting oneself in the foot.

Its irrelevant as a incentive longterm- as you have to pay tax when exiting. Its a handy way of saving a lumpsum- but the taxman gets his pound of flesh in the end.....

NewDubliner

smccarrick wrote: »

Its irrelevant as a incentive longterm- as you have to pay tax when exiting. Its a handy way of saving a lumpsum- but the taxman gets his pound of flesh in the end.....

Don't forget the fund-managers.

Having just seen peoples pension funds wiped out, it's a brave person (the OP) who suggests the abolition of the Social Welfare pension and that everyone should depend on private pension plans.

BroomBurner

I think perhaps the OP may have bitten off more than he could chew with this one.

In fact, looking at his posts, his real intent may have been to start a new "I hate the public sector and their lovely pension" row.

The_Conductor

NewDubliner wrote: »

Don't forget the fund-managers.

Having just seen peoples pension funds wiped out, it's a brave person (the OP) who suggests the abolition of the Social Welfare pension and that everyone should depend on private pension plans.

Tell me about it- my parents were relying on dividends from BOI shares, which have lost 99% of their capital value, and are unlikely to pay a red cent for several years to, thats if it actually manages to survive as a going concern......

The_Conductor

BroomBurner wrote: »

I think perhaps the OP may have bitten off more than he could chew with this one.

In fact, looking at his posts, his real intent may have been to start a new "I hate the public sector and their lovely pension" row.

I think the penny is beginning to drop that the grass may not be greener on the other side....... The big problem the public sector have is they never dispute the bizarre and often wholly inaccurate reports in the media- which the public at large then accept as gospel truth. I am jealous of any public sector employee employed prior to 1995- their rights are wholly different to those of anyone employed anywhere in the public sector since. This distinction is rarely alluded to in the media.

jimmmy

BroomBurner wrote: »

Why would anyone want to get rid of the tax incentive for having a private pension? Talk about shooting oneself in the foot.

It may surprise you that others think of the welfare of the country first. The relief costs the country billions.

jimmmy

BroomBurner wrote: »

I think perhaps the OP may have bitten off more than he could chew with this one.

Do you think the renumeration system / pension system in the country is as fair as can be ? Lucky you.

jimmmy

NewDubliner wrote: »

Don't forget the fund-managers.

Having just seen peoples pension funds wiped out, it's a brave person (the OP) who suggests the abolition of the Social Welfare pension and that everyone should depend on private pension plans.

Read the original post again. You misread it
"No tax relief or subsidies from now on. If they want one, they pay the economic cost of it, private or public. This will level the playing field. People can decide to put their savings in a post office or bank, in stocks or shares, or property, or unit linked funds...whatever. People would still be entitled to normal old age pension.

NewDubliner

jimmmy wrote: »

Read the original post again. You misread it
"No tax relief or subsidies from now on. If they want one, they pay the economic cost of it, private or public. This will level the playing field. People can decide to put their savings in a post office or bank, in stocks or shares, or property, or unit linked funds...whatever.

Why would anyone want to invest in banks, stocks or shares?

jimmmy wrote: »

People would still be entitled to normal old age pension.

Why? The normal old age pension that you refer to is subsidised out of current expenditure and its retention is inconsistent with your proposal:

jimmmy wrote: »

Employees should have to pay the full cost of their pensions. No tax relief or subsidies from now on. If they want one, they pay the economic cost of it, private or public.

jimmmy

NewDubliner wrote: »

Why would anyone want to invest in banks, stocks or shares?

People could also invest in gold, property, art or fine wine if they wanted. If and when there is a rebound you may regret you did not invest in different sectors of the market. Do you think the national pensions board put all its eggs in one basket ?

NewDubliner wrote: »

Why? The normal old age pension that you refer to is subsidised out of current expenditure :

out of current taxes

NewDubliner wrote: »

and its retention is inconsistent with your proposal:

Its not ; if it applies to all. There must be a safety net ( means tested or not - that is a different argument ) to avoid some people starving.
"No tax relief or subsidies from now on. If they want one, they pay the economic cost of it, private or public. This will level the playing field. People can decide to put their savings in a post office or bank, in stocks or shares, or property, or unit linked funds...whatever.People would still be entitled to normal old age pension. "

NewDubliner

jimmmy wrote: »

People could also invest in gold, property, art or fine wine if they wanted. If and when there is a rebound you may regret you did not invest in different sectors of the market. Do you think the national pensions board put all its eggs in one basket ?

Somebody just stole all the eggs in case you have not noticed.

Explain the ethical difference between paying people pensions out of taxation and paying people pensions out investments. In either case, somebody else pays. It's always somebody else's money.

jimmmy

NewDubliner wrote: »

Somebody just stole all the eggs in case you have not noticed..

And who is most affected by the eggs being stolen ...private sector or public sector ? I know some people almost suicidal having worked all their lives damn hard ( harder than the 6 hours 27 minutes a day the c.s. works net ), little holidays , etc and who are coming up to retirement age and who now have little or nothing left. They are not public servants.
And who was appointed to oversee things ? - were they not people paid by the government - regulator and politicians + central bank ?

NewDubliner wrote: »

Explain the ethical difference between paying people pensions out of taxation and paying people pensions out investments In either case, somebody else pays. It's always somebody else's money.

If a person has invested in the investments themselves ...and they repaid or get a return at a future date...it is their money. At the moment that is taxed eg if someone buys a "buy to let " property ( rightly or wrongly - that is a different argument ). Fair enough. Why should some of that tax go towards subsidising those who get huge public service pensions, or those who took out a company pension ?

NewDubliner

Let's set aside your attacks on the PS and deal with your proposal.

jimmmy wrote: »

I know some people almost suicidal having worked all their lives damn hard and who are coming up to retirement age and who now have little or nothing left.

Why would anyone want to invest in the same way they did?

jimmmy wrote: »

If a person has invested in the investments themselves ...and they repaid or get a return at a future date...it is their money.

The source of the investment is money which they got by charging extra for their products and services and the 'return'....how is that generated exactly? Who pays for that?

jimmmy

NewDubliner wrote: »

Let's set aside your attacks on the PS and deal with your proposal.
Why would anyone want to invest in the same way they did?

Who is "they" that you refer to ? Those foolish people who had no option of a public sector pension, and who foolishly slaved long hours to put money away in banks, stocks, shares, property, art, stamp collections or
the post office savings....just to pay for their rainy day in old age or to pay for their kids education .... you ask "Why would anyone want to invest in the same way they did? " You work that one out for yourself.
You are quite right of course. Everyone should aspire to a big public sector pension ( not to mention the sick pay benefits etc along the way ).

NewDubliner wrote: »

The source of the investment is money which they got by charging extra for their products and services and the 'return'....The source of the investment is money which they got by charging extra

What do you mean " The source of the investment is money which they got by charging extra "....if someone flips burgers and makes a living that way, or works in an American multinational assembling widgets, or milks cows 7 days a week, or works in a shop for the minimum wage or not much more....they earned that money fair + square, so what is your question ?

NewDubliner

jimmmy wrote: »

Those foolish people.....

You proposed that everyone should invest in the stock market etc, even though you admit that many people have lost a lot of money as a result. Why would you want more people to lose money in this way? If you're going to propose an alternative way of funding pensions, propose one that works.

jimmmy wrote: »

What do you mean " The source of the investment is money which they got by charging extra "....if someone flips burgers and makes a living that way, or works in an American multinational assembling widgets, or milks cows 7 days a week, or works in a shop for the minimum wage or not much more....they earned that money fair + square, so what is your question ?

They earned the money invested in their pensions by charging over and above their basic living costs. The employer contributed too by inflating prices. The customers are paying their pensions. Why should you have a problem with paying public sector pensions, when you're quite happy to pay your bank manager's pension and that of the people who serve your junk food?

Now explain this bit you mentioned earlier about 'return on investment', you've been very evasive about how this works and who picks up the tab for it.

jimmmy

NewDubliner wrote: »

You proposed that everyone should invest in the stock market etc, even though you admit that many people have lost a lot of money as a result..

People can save in whatever they want to : be it the stock market, post office bonds, bank deposits etc. There are relative risk free options at the moment too you know.

NewDubliner wrote: »

Why would you want more people to lose money in this way? .

I do not want people to lose money in any way.

NewDubliner wrote: »

If you're going to propose an alternative way of funding pensions, propose one that works.

Diversified investment has always worked over long time periods.

NewDubliner wrote: »

Why should you have a problem with paying public sector pensions, when you're quite happy to pay your bank manager's pension and that of the people who serve your junk food?

Public sector pensions cost many many billions each year to fund. I can shop around for my bank to do business with, or indeed not use a bank at all. I doublt the average waiter who serves food has a pension, or certainly not one as generous as a public sector pension. What a food waiter or bank teller does with their own earnings is their own business. If they overcharge me I can always go elsewhere.

Now New Dubliner, you have still not made any attempt to answer the questions from posts back:
And who is most affected by the eggs ( you mentioned ) being stolen ...private sector or public sector ? And who was appointed to oversee things ? -

BroomBurner

Jimmmy, stop using veiled attempts at getting a discussion going just to bring it back around to how much you hate the public sector.

And get your facts right about the public sector also.

jimmmy

BroomBurner wrote: »

Jimmmy, stop using veiled attempts at getting a discussion going just to bring it back around to how much you hate the public sector..

The public sector is a very important part of our political infrastructure. The country cound not function without a public sector. We all need ( at some time or another ) schools, hospitals, police / Gardai, roads etc. Some of my best friends work in the public sector.

BroomBurner wrote: »

And get your facts right about the public sector also.

You clarify what facts I got wrong so : I suggest you go for the ball, not the player.

The_Conductor

The public sector is not in fact part of our political infrastructure- it is nominally wholly independent of the political infrastructure (much to the chagrin of politicians).

The original question posed- is 'Should the government stop interfering in the pensions market'. The obvious answer is no- were the government to stop all interference in the pensions market people would stop planning for their old age and simply rely on the social welfare infrastructure to fund their old age.

PRSI contributions are amalgamated into a central kitty for all pension disbursements and employment insurance payments. This central kitty is not funded- its run on a 'pay-as-you-go' basis. Its been in a deficit situation for the last 18 months, and its acknowledged it will be bankrupted by the end of 2009. Thus- contributory and non-contributory pensions, along with dole payments will have to be met from day-to-day borrowing going forwards. The intention of the fund administered by the NTMA was to act as a means of drawing an annuity for covering future payments (I don't think the intention was to draw on this fund before 2020).

The contributory OAP and the non-contributory OAP are both government measured and government interference in the market. They act as a distortion by removing the necessity for an employee to provide for their future.

Public sector employees pay their Class A PRSI contributions, the same as every other PAYE employee, along with making seperate superannuation contributions of ~8% and now a pensions levy too. Lower paid public sector employees do not get anything whatsoever in lieu of their contributions- the first 22,880 of salary is reckonable solely for a PRSI related contributory OAP- which is automatically deducted from a public servants pension (irrespective of whether they are entitled to claim it or not- under the 2002 Act). This is the principle argument that the CPSU- who represent the lower grades in the civil service, have against the pension levy. If you talk to higher paid people in the public sector- while they disagree with the levy- for the most part they would agree with a pay cut in recognition of the straightened times we are in. This was decided against- as the government didn't have the balls to do it. It would impact on existing public sector pensioners whose pensions are linked to current public sector salaries. They got benchmarking (on their pensions) on the way up- surely its only fair that they get a reciprochal reduction on the way down again?

Moving away from the public sector and its pensions- certainly people can save- wheresoever they choose, but the fact of the matter is- people don't (save). They borrow and spend money they don't have. Private sector debt is already well in excess of 200% of GDP, and rising. It is a sad reality that we have to clear our debts before we can save- and at current rates of repayment- private sector debt will never ever be repaid. When you factor deflation into the equation- our personal debts increase by 2-4% outside of any interest or other payments, on an annualized basis.

People rely on their contributory pension for their retirement, in the main. This is funded on a pay-as-you-go basis. The fund is bankrupt. Those are hard facts. The government has to borrow to pay its weekly payments to pensioners (and social welfare payments to recipients etc). Pull this net from under their feet and a vast tract of the population will be in penury.

S.

jimmmy

smccarrick wrote: »

The public sector is not in fact part of our political infrastructure- it is nominally wholly independent of the political infrastructure

Apologies if I did not choose my words carefully - what I mean is it is part of our infrastructure , which everything depends on. Society as we know it could not function without schools, hospitals, roads, Gardai etc.

smccarrick wrote: »

The original question posed- is 'Should the government stop interfering in the pensions market'. The obvious answer is no- were the government to stop all interference in the pensions market people would stop planning for their old age and simply rely on the social welfare infrastructure to fund their old age.

So you think nobody would set aside a few bob for a rainy day / the future, save money, invest in private pensions, accumulate savings, invest in property (there would be no rental market ), buy a few shares etc ? I thought us Irish were quite fond of saving...witness our hunger for eircom shares / property etc

smccarrick wrote: »

Moving away from the public sector and its pensions- certainly people can save- wheresoever they choose, but the fact of the matter is- people don't (save).

Oh yes they ( many people ) do. Even those who do not can still ( rightly ) get the old age pension.