The Pension Bomb
We are all encouraged to start a pension as early as possible when we start to earn income and rightly so.
When we do so, we are making a lifetime commitment in preparation for our retirement.
Unfortunately we need our politicians to do the same.
Politicians of all parties tend to plan for a period not exceeding five years.
Consequently priority tends to be attributed to policies which are likely to bear fruit in the short-term.
Like everything the pension deficiency has been highlighted during the recession as the spotlight tends to shine brighter on financial inadequacies during economic downturns.
In reality the pensions time bomb has been ticking for some time now and nobody appears to be willing or indeed capable of coming up with a clear and viable pensions strategy for the future.
Those of us working in the private sector will be very lucky if we get a pension which is linked to our final salary.
The cost of paying out on these pensions is simply too high now that retirees are surviving into their eighties.
Such pensions are also partly linked to inflation and employers have all but ceased offering such pensions to new employees now.
However, our public-sector counterparts in both America and Britain continue to benefit from pensions linked to their salaries.
Governments appear to be unable to bring public-sector pensions under control due to the likely political fallout which would unquestionably follow.
Nevertheless at some point this will have to be done.
Governments have increased the mandatory retirement age but this does not affect existing employees who can still elect to retire at the age of 60.
The reality is that the real cost of public sector pensions has never been publicised and this may go some way towards explaining why the issue has never been addressed.
There is little doubt that governments are intentionally understating their pension liabilities.
When a public sector employee transfers to the private sector they are entitled to retain their pension rights.
Private sector employers find that these pension costs tend to be double those estimated by the public sector.
This masquerade is unfortunately likely to continue for the foreseeable future.
The opaque pension system is incredibly unfair for private sector workers who effectively cover the entire cost of public sector pensions.
Most private sector pensions tend to be much riskier than their public sector equivalents where payouts tend to depend upon market performance.
Private sector companies tend to make much smaller pension contributions than Governments do to public sector workers.
In addition to this, private sector workers pay for public sector pensions via their taxes.
The result of this is that private sector workers effectively contribute between 20 percent and 30 percent of their pay towards public sector pensions.
When the extent of this finally becomes apparent, the pension bomb will explode.
Tax payers will ultimately light the fuse.
It is not a question of if this will happen.
It is simply a matter of when.
The same inequality is also apparent with employment too.
Both the American government and the British government have invested heavily into the public sector during the recession in order to in part stimulate growth but primarily to protect public sector jobs.
The respective national debts have swelled considerably in order to fund this.
Once again the tax payer will pick up the tab.
Once again the public sector worker will contribute the lion's share of the cost of these policies for many years to come.
In the meantime public sector workers have not received any protection, support or investment whatsoever during this time.
Both the American and British governments know that public sector cuts in both employment and pensions are inevitable.
The longer it takes to redress this balance the more it will inevitably cost the tax payer.
When we do so, we are making a lifetime commitment in preparation for our retirement.
Unfortunately we need our politicians to do the same.
Politicians of all parties tend to plan for a period not exceeding five years.
Consequently priority tends to be attributed to policies which are likely to bear fruit in the short-term.
Like everything the pension deficiency has been highlighted during the recession as the spotlight tends to shine brighter on financial inadequacies during economic downturns.
In reality the pensions time bomb has been ticking for some time now and nobody appears to be willing or indeed capable of coming up with a clear and viable pensions strategy for the future.
Those of us working in the private sector will be very lucky if we get a pension which is linked to our final salary.
The cost of paying out on these pensions is simply too high now that retirees are surviving into their eighties.
Such pensions are also partly linked to inflation and employers have all but ceased offering such pensions to new employees now.
However, our public-sector counterparts in both America and Britain continue to benefit from pensions linked to their salaries.
Governments appear to be unable to bring public-sector pensions under control due to the likely political fallout which would unquestionably follow.
Nevertheless at some point this will have to be done.
Governments have increased the mandatory retirement age but this does not affect existing employees who can still elect to retire at the age of 60.
The reality is that the real cost of public sector pensions has never been publicised and this may go some way towards explaining why the issue has never been addressed.
There is little doubt that governments are intentionally understating their pension liabilities.
When a public sector employee transfers to the private sector they are entitled to retain their pension rights.
Private sector employers find that these pension costs tend to be double those estimated by the public sector.
This masquerade is unfortunately likely to continue for the foreseeable future.
The opaque pension system is incredibly unfair for private sector workers who effectively cover the entire cost of public sector pensions.
Most private sector pensions tend to be much riskier than their public sector equivalents where payouts tend to depend upon market performance.
Private sector companies tend to make much smaller pension contributions than Governments do to public sector workers.
In addition to this, private sector workers pay for public sector pensions via their taxes.
The result of this is that private sector workers effectively contribute between 20 percent and 30 percent of their pay towards public sector pensions.
When the extent of this finally becomes apparent, the pension bomb will explode.
Tax payers will ultimately light the fuse.
It is not a question of if this will happen.
It is simply a matter of when.
The same inequality is also apparent with employment too.
Both the American government and the British government have invested heavily into the public sector during the recession in order to in part stimulate growth but primarily to protect public sector jobs.
The respective national debts have swelled considerably in order to fund this.
Once again the tax payer will pick up the tab.
Once again the public sector worker will contribute the lion's share of the cost of these policies for many years to come.
In the meantime public sector workers have not received any protection, support or investment whatsoever during this time.
Both the American and British governments know that public sector cuts in both employment and pensions are inevitable.
The longer it takes to redress this balance the more it will inevitably cost the tax payer.
Source...