The British retirement policy is finally going in the right direction

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What does one get if one combines the United Kingdom’s tendency to confuse with the ability to predict a system of providing security in old age? The answer is: Chaos. Over time, fragmented solutions create new chaos.

There are two distinguished groups of problems in the retirement system today.

The first is that the current and future retirees are now lacking in four categories: public sector workers, who have safe and inflationary pensions, who have been stored by taxpayers; The beneficiaries of the specific pensions of the specific benefit (DB), and many have now closed new contributions and new members; Younger people who provide specific contributing plans (DC), who bear all the risk of investment and longevity; The wages of the people who will end up depend on the state pension.

These divisions, except for the latest arbitrary products for history. Why should the pension arrangements for the public sector and the largest private sector be safer than the private sector workers ’messages today?

The second failure is that the retirement system has failed to make the economy more productive. This is because it is very fragmented and risk risk. According to Institute of pension policyOnly “18 percent of the assets of pension in the United Kingdom are invested in the productive assets in the UK – listed stocks, corporate bonds, private stocks and alternatives.” Such a specialization will not create the flourishing local companies on which the national prosperity must depend.

Looking at the legacy of previous pension promises, the jump from here to something coherent (and just) is, unfortunately, impossible. So, the question about this government’s plans for reform is whether it will move things better. The answer is: Yes. It is in line with the emerging consensus, which contains three main components: monotheism; Productive investment; Optimized savings.

I would like to add universality. It is wrong, in principle, that the risks are now unequal in the sectors and generations. This cannot be changed overnight. But over time it should be.

Two modern government papers – the final report Investment pensions review and Retirement pensions in the workplace: a road map – The outline of the intended direction.

Finally, Torsten Bell, Minister of Pension, explains that Retirement plans are an invoice You will put the results of the law. The main goal is to unify the charts, which creates “fewer pension providers, the largest, best and best governed pension, the best value they invest in a wide range of productive assets.” An important field of monotheism, which the recent government has started, is the plans of local authority. Others of DB and DC plans are smaller.

This broad theme of the merger is logical, because there are savings of size and scale in the management of pension funds. This monotheism, not least, will help ensure better management of risks and greater investment in innovative investments. Today, according to the map of pensions in the workplaceand 2,000 Despell charts carry only 10 billion pounds in the assets between them. Again, there are currently many DC plans with less than 100 members.

This is related to a controversial issue: the role of pension funds in promoting economic growth. There is an opinion that there should be no bias towards investing in local productive assets. There is also a parallel point of view that the best thing to do is invest in index tracking boxes.

I held such opinions, but I am no longer in the state of pension funds, for reasons on the road map. Thus, this states: “The quality of the pension system determines our living levels through what we all hope will be contracts in retirement. But it also supports our broader economy as one of the largest capital clusters. These goals, roles, are not more important for workers in the United Kingdom and our dreams.

This should be done, if carefully and cautiously. But it must be done. It can only be done through large plans and large funds capable of working in a very professional way. These reports are also right to emphasize that focusing on the higher returns will provide better pensions to savings.

It will be necessary to raise savings rates as well. The contribution rates are low, very low. National savings rates in the United Kingdom are very low. The first lifting is a necessary step towards lifting the latter. These big issues will be part of the next stage of retirement pensions, which is to focus on the adequacy of retirement income.

The conversion of the irrational and insufficient pension system in the United Kingdom to something less irrational and insufficient may be the most important economic heritage in the government. At least, it begins a reasonable start. You must continue.

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