The pension system is the biggest evil ever invented.

Discussion in 'Business & Economics' started by georgi_zlatev, Aug 31, 2015.

  1. georgi_zlatev Registered Member

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    44
    The pension must be prohibited the way they are today.The pension model is socialist.The pension insurance is collecting in funds which invested the money in companies and the risk is distributed among all who paid this insurance.The people must not paid pension insurance but the money they receive they must to invest at their own risk.In this way public companies will be motivated to earn more profit.Not having such insurance people will be much interested where to invest their money whether In stocks,bonds or land to became a farmer after years.Now people with this pension system are irresponsible.They are so irresponsible so that they do not want to have even children.They think that somebody else must pay their pension in future.The public companies shall also be more concerned in making money.Destroying this pension system people will be motivated to start small businesses and to became farmers and they shall wanted to have children.This pension system is in favour to big companies because they get the money of the pension funds.
     
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  3. georgi_zlatev Registered Member

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    The present pension system is two types.First is called income and expenditure and all pension insurance that are coming in is spend for pension.This is bad to spend all the money for the pensioner.The second type is capital.In this case the pension insurance is spend for bonds and stocks.This type is better but the problem is that the bonds and stocks are toxic and the money for pensions are coming from incoming pension insurance not from the investment in stocks and bonds.Or this type is functioning as the first type.That is why I think that everyone must decide what to do with his pension insurance and that today’s pension system is socialist.
     
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  5. spidergoat pubic diorama Valued Senior Member

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    Socialism is good.
     
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  7. joepistole Deacon Blues Valued Senior Member

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    I saw this post a few days ago and decided not to respond in part because it is so nonsensical. It lacks coherence. But, since someone has posted, I'll give this a few comments. Your comments make absolutely NO SENSE.

    Pension systems vary from country to country. There isn't a once size fits all. So in order for there to be any meaningful dialogue you need to specify the country of reference. In the US pensions have largely been replaced with individual savings accounts. For the most part, the only Americans with pensions are government workers, union workers, and those with grand fathered pensions. And not all pensions are funded equally and in the same manner, the pensions of federal workers are funded not from savings in a trust fund as are state and local government pension and private pension plans. Federal pensions are funded directly from the general fund where most federal expenditures are funded.

    Additionally, in the US all pensions are federally regulated and insured. So if a pension fund fails the federal government will, within certain constraints, fund the pension. That's called pension insurance.

    http://pbgc.gov/
     
  8. rpenner Fully Wired Valued Senior Member

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    4,833
    What the hell is wrong with having an employer-supplied pension? When you take a job, you do so in exchange for a known salary and other known benefits. Why should one of those benefits not be a pension -- a promise by the employer that if you work X years that you will be rewarded with a (possibly inflation-adjusted) fixed income of Y dollars after you are disabled or too old to work. It's not socialism, it's a capitalist incentive to make the economic choice to work for a particular employer.

    Not everybody is a risk-taker like an entrepreneur or venture capitalist or professional gambler. Those non-risk-takers have traditionally taken positions as employees. Why should they be forced into a role of gambling their savings for a chance to have an old age not governed by abject poverty?

    Now if an employer makes a promise to pay Y dollars a year in the future and does not take appropriate measures to secure that promise, that is criminal.
     
    Last edited: Sep 2, 2015
  9. georgi_zlatev Registered Member

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    Where is the problem.Each generation which is coming after is more educated,more productive and get more money than the previous generation and also make more pension insurance.In the case where the pension system is income and expenditure it is not fair to spend all the money for pension.If all the money are spent, the pensioner get more money than they worked. The pensioner must get smaller sum than that is collected in pension fund and the rest shall be invested.When in the pension fund gathered enough sum the pension fund must be destoyed and all the capital to be allocated between depositor.It is not fair the pensioner to get more money and the young generation to pay for that.
     
  10. joepistole Deacon Blues Valued Senior Member

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    There is nothing wrong with pensions if you are the employee. However, if you are the employer they are very expensive. That's why in private industry pensions have gone the way of the Dodo Bird. The employer bears the investment risk, with savings accounts, the employee bears the investment risk. Here is the bad thing, most employees are ill suited by education and by temperament to be investors. The thought was mutual funds would provide the professional money management employees needed, but that hasn't been realized. Additionally, many employers have offered some pretty shitty funds in their retirement plans. So if an employee works for a small company, their choices have in many cases been subpar.

    Employers cannot guarantee a rate of return on investment, that's why they want out. That inability doesn't make them criminal. Shifting the retirement burden to employees who are ill equipped by education or temperament to manage that liability is morally suspect but criminal, no.

    I have an ethical problem with nonqualified pension plans. There are basically two kinds of pension plans, qualified and nonqualified. A qualified pension plan receives tax benefits a nonqualified doesn't and is therefore more expensive. A qualified pension plan treats all employees equally. A nonqualified pension plan doesn't. Nonqualified plans are used to the exclusive benefit of senior executives. I don't think that sets the right tone. Many companies have scuttled their qualified pension plans while retaining and in some cases enhanced their nonqualified pension plans.

    I agree with you, there are a lot of problems with the current retirement set up. The end of pensions has been a boom for Wall Street, but for your average employee, not so much. Employees now have much more risk and much more liability. That isn't a good thing for employees and we are beginning to see that now as those most affected by this shift begin to retire.
     
    Last edited: Sep 2, 2015
  11. rpenner Fully Wired Valued Senior Member

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    4,833
    You seem to confuse "fair" with some word that means something different than "terms of employment transparently contracted between employer and employee".

    It's unfair for employers to lure migrant workers to travel long distances and the either pay them less than advertised or force them into situations where they can only live in company-owned housing buying goods from a company-run store at substantially higher costs than free agents.
    For the same reason, it's unfair for employers to lure employees with written promises of pensions and not execute those (as joepistole points out, expensive) promises.
    It's especially unfair for management to sell the company for their own enrichment and abandon the promises to former employees.

    Your use of the word socialism is equally strange.
    For example, it's crazy to say government pensions are socialism and not make the same indefensible claim about the salaries of government employees. Taxes, by their very nature, redistribute wealth. Also, it's much easier for governments to tax the rich than the poor, because the rich actually have money. What made Robin Hood unique was not that he robbed from the rich, but that he gave to the poor. What made the "widow's mite" (Mark 12:41-44, Luke 21:1-4) so exceptional is that she gave it to fulfill the needs of others when she herself had very little. Therefore, it is unnatural to tax the no-income pensioners for the enrichment of the young and able-bodied and more natural for the taxes on the young and able-bodied to pay both for the education of the very young and the older generation who bear the marks of having lived through history and are a mechanism of education and continuity of culture.

    If your complaint is "My Taxes Are Too Damn High" -- that is one thing. You should probably talk specifics since we need not have the same taxes or government.
    If your complaint is "My Government Should Feel Free to Abandon Its Earlier Promises to Its Poorer Citizens" -- that is another thing. You should probably talk specifics...
    If your complaint is "Old People Don't Deserve Anything" -- then I recommend you take immediate action to ensure that you are never classified as old. Otherwise, you risk being classified as a hypocrite in the future.
    If your complaint is "Strangers Don't Deserve Anything" -- then I recommend the life of a non-communicative hermit, neither depending on or interacting with strangers. Otherwise, you risk being classified as a hypocrite.

    But don't bring "socialism" into it until you can define the word in a way that makes sense.
     
    Last edited: Sep 2, 2015
  12. georgi_zlatev Registered Member

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    44
    Defending today's system you want the younger generation always to pay the pensioner.Today's pension system is reason for not having children.The younger generation has no future.The god shall punish you for that.
     
  13. joepistole Deacon Blues Valued Senior Member

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    Are you doing drugs? Your thoughts are disjointed, they don't make sense.
     
    Last edited: Sep 3, 2015
  14. joepistole Deacon Blues Valued Senior Member

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    As I wrote before, pension funding varies from place to place. So a point of reference is needed. Not all pensions are funded similarly. Therefore you cannot with any degree of credibility or honesty make these broad sweeping assertions about pensions. Perhaps you are referring to Mother Russia? If you are, you area referencing a small subsection of all pensions.

    As previously pointed out to you on multiple occasions, pensions are part of an employee compensation package. It is a cost of labor. Accordingly, employers make contributions into a trust fund which are then invested in a variety of securities in order to fund future pension expenses. The great unknown here is the pension fund performance. If the pension earns more than expected, the employer can contribute less. If the pension fund earns less than expected, then the employer will need to contribute more money. And the employer is responsible for managing the pension trust fund. That's how it works. There is no wealth transfer from the young to elders.

    Now I suspect you are referring to a Mother Russia style "pension" system. Well that is a mess. Mother Russia has many problems including but not limited to corruption. Russia has made a series of bad fiscal decisions. But that doesn't make pensions evil wealth transfers. If you are Russian, I know this might be difficult to swallow, but Mother Russia isn't the world. Mother Russia isn't representative of how things work in the rest of the world.

    http://www.economist.com/node/21564257

    "Mr Medvedev and his team were thus handed an unenviable task. No one disputes that today’s pension system, created in 2002, needs some kind of reform. Part of the problem is demography. Declining birth rates in the 1980s and 1990s have left Russia with too few workers to support those in retirement; birth rates have stabilised in recent years but too late to affect the looming pension crisis. Today there are 100 workers for every 87 pensioners, says Evsey Gurvich of the Economic Expert Group, who led the Strategy 2020 pension task-force; by 2020, that figure will be 100 workers for 100 pensioners." - The Economist

    The Russian pension system suffers from corruption. The problem isn't elders. It's corruption. Russians pay nearly twice what Americans pay for social insurance (i.e. the pay as you go programs). Is living in Mother Russia that much more expensive? No it isn't. It's less expensive in Mother Russia due in no small part to a lower standard of living in Mother Russia. In addition, American Social Security benefits are adjusted for inflation, that isn't the case with Russian pensions.

    http://imrussia.org/en/analysis/eco...n-pension-system-is-a-dangerous-zombie-part-1

    If you are living in Mother Russia as I suspect, the problems you see with pensions are not attributable to pensions, but rather to corruption and inept management. In the Western world pensions have worked and continue to work and evolve. The US retains a pay as you go insurance plan, it's called Old Age and Survivors Insurance commonly known as Social Security and it costs American workers about 6% and their employers contribute 6%. In Mother Russia Russian workers pay 26+% of their income and American workers get a larger benefit. The US population is growing whereas the population of Russia is shrinking. That is another problem for Mother Russia. Russians are leaving Mother Russia and for good reasons.

    The problem is the Russian government. It isn't with pensions.
     
    Last edited: Sep 3, 2015
  15. spidergoat pubic diorama Valued Senior Member

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    No you see, the pensioner earns their pension by working most of their life.

    And there is probably no God.
     
  16. georgi_zlatev Registered Member

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    Let’s talk a little about the money. When in one economy there is a lot of money and there is many businesses which compete each other these bisnesses work for very low profit or even at loss. The investment In such businesses is low even negative. Or those who invested may lose capital. The case with labour is not the same. The money earn with labour may be much than if you are investor. Or the labour is more effective earning money than investment. That is the situation when there is a lot of money in economy. In that situation if pensioner have investments they shall receive very little money-lower than they get from pension fund who gathered the pension insurance. In the nature the young are strong while the old are weak. In the economy is the same. The younger work and get money and they are strong. We must not take money from young people and give the pensioner. The young people must invest that money and when they grew older they will retire and they will become weak because they will rely on their investment. From their investment they will receive less money in most of the cases. But so is in the nature.
     
  17. joepistole Deacon Blues Valued Senior Member

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    22,910
    And you think that makes any kind of sense...seriously? Let's talk reason and facts, then we'll talk about the money.

    Nott all businesses have low margins, some have negative margins, some have huge margins and there are many in between. What you don't understand its labor is a cost of doing business and the labor market determines what that price is. If businesses cannot buy the labor it needs, it goes out of business and is replaced by one that can. Labor is just another cost of production. It really is that simple. It has nothing to do with pensions.
     
  18. rpenner Fully Wired Valued Senior Member

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    4,833
    That won't work because most younger people are related to at least one older person, so you are talking about having young people endorse the deaths of their relatives.
    Also, old people vote.

    A much more sensible plan is that you implement pension reform -- 1) old people with assets or income don't get any payouts, 2) the age at which benefits begins starts to increase 6 months every calendar year so that the rate of new pensioners goes down, 3) make the crimes of defrauding the pension system very stern -- 1000x repayment of any misused funds and lifetime ban from government benefits 4) spend money to catch pension fraud and other corruption.

    Then if you still want to eliminate pensions, you can think about private retirement accounts, but have to ensure that everyone is still being taken care of.

    Oliver Wendell Holmes wrote “Taxes are the price we pay for civilization.” Likewise, governments keeping even inconvenient promises is in the nature of civilization. The government promised young people that it would take care of them when they got old. They got old, therefore the government must take care of them.
     
    Last edited: Sep 3, 2015
  19. spidergoat pubic diorama Valued Senior Member

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    You can't bet your future on the stock market. Gambling is for the rich, not for the working person. I wouldn't work if I knew that when I got old, I would starve to death. That's why there are pensions, so people can work and then continue to live afterward. That money belongs to them, they made it, they earned it. The problem comes when corporations spend money from pension accounts, and then hide behind corporate law and never make good on their PROMISE.
     
  20. paddoboy Valued Senior Member

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    27,543
    How totally stupid is all of that.

    Not sure how the Pension system works in the USA, but in Australia, when a person reaches retirement age of 65 years they are eligible for the Pension.
    A person' assets do go to determine whether or not he/she receives the full pension rate or not. The car and home are not included in that assets test.
    Being at pension age myself and an old bastard, and still having my better half working full time, I only receive a very small fraction of the full pension.
    Not whinging at all, in fact I find means testing as we do in Australia to be entirely fair and equitable.
    I don't agree with point 2, but to compensate for that, the 65 years at which the pension age begins is going to be raised to 67 years, which I do not have much of an argument about anyway, as improved science is enabling people to work and live longer. Point 3 and 4 are certainly policed strictly here, just as it should be.

    When a person reaches retirement age, they deserve to be looked after by the rest of the community. Some have fought for their country, keeping it free and maintaining the good life for the community as a whole and even you georgi.
    They do not deserve to be thrown on the scrap heap.

    In saying all that, in Australia, our compulsory super schemes are such that the vast majority of people like my Son who is 34 now, will not be eligible or even in need of the pension when he is an old bastard like myself.
    It will though still be there for those that have been less fortunate or have experienced hard times.
    Of course also in our country a Pensioner/old bastard has no need to worry about hospital/medical charges as in the main they are paid by our universal medical scheme, and prescription charges are at $6 per 'script maximum. Also public transport charges are at a maximum of $2.50 a day, all day, bus, tram, ferry or train, or any and all combinations.
     
    Last edited: Sep 3, 2015
  21. spidergoat pubic diorama Valued Senior Member

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    In the USA, most corporations don't have pensions. They have a 401K account, which just puts some money into an investment account that invests in stocks. It's a crappy system which we shouldn't tolerate.
     
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  22. georgi_zlatev Registered Member

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    I must say something about the money.There is a paradox.From one hand today’s money have low value than money in past.This is called inflation.But today is much harder to win the money than in the past.In the future will be harder to win the money than today.Knowing that it is very important to appreciate the money won from labour today.The money for pension must come from investment not from pension insurance because of the hardship of winnig money from labour.
     
  23. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    10,353
    In the UK the term "pension" applies to any future income that is effectively tied up until you reach a certain age (earliest being 55).
    The vast majority of private companies offer some form of pension - mostly a "defined contribution" scheme - which means there is an investment pot with your name on it that you pay into out of your salary, and which your employer also pays into. The benefit to the employee is two-fold: you don't pay tax on the money that you pay in, and you also get the contribution from your employer (tax free to you at the time it is put in). Then, when you reach 55 or at any time afterward, you can do with the investment pot whatever you want - subject to the draw-downs being taxed at the prevailing rates of income tax.

    It's not a bad scheme - it offers the employee some financial security at the end, but you ideally need to invest early rather than late, and hopefully the people looking after the investment are reasonable and can make you a solid return. With inflation currently sub-2%, a reasonable annual return over the long-term that you might expect from a pension pot would be c.4-5%. Not brilliant, but also not too risky.

    The other private pension scheme that companies offer is the "Defined Benefit" - which is their promise that when you retire you will get a % of either your final salary (which might be called a "final salary scheme") or a % of your average salary. The company will put aside some money into a separate account that is invested and managed etc, such that by the time you retire the company can hopefully fund their promise to you. Typically the schemes pay a pension of 1/60th of the reference salary per year that you work.

    The government workers (teachers, nurses etc) are typically on this form of pension.


    In the UK company pensions must, I believe, all be "funded"... which means that at any given time the provider must have a pot of money ring-fenced from their day-to-day operations from which all their current and pending pension liabilities (i.e. the pensions people are owed) must be paid. Auditors check the level of this fund yearly and will advise whether it there is a deficit or not. Some large corporations went through a major funding exercise a number of years back when the markets crashed - as the pension pot is invested in those markets.

    For "Defined Contribution" schemes, they are "funded" as a matter of course - because they are basically just savings accounts in your name that you can't draw down on (tax effectively) until you "retire".

    However, the UK government mostly (there are exceptions) operates on an "unfunded" basis for their pensions (both for their workers, and for the provision of the state pension).
    This means that there is no ring-fenced pot to cover the liabilities for pensions, but rather they are paid for out of the general receipts it gets (and loans it takes out).

    This is somewhat of an issue for countries like the UK where the population is getting older - more old people, less workers (as a proportion) so less receipts by government and larger payments out. It is partly why the retirement age (before state pension) was increased to 67 (for men) and will likely go up a number of times in the next 20 years, and why some suspect that the state pension will be phased out in due course.


    The 401k in the US is, I believe, the equivalent of the UK's "Personal Pension Scheme" - which is another term for the defined contribution scheme - i.e. you put money in, it's invested, you live off the whatever the pot is when you retire.
     

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