Years ago, well before my time, there were no pensions or state superannuation. Indeed people didn’t live long enough to enjoy any period of retirement. There were exceptions of course. The financially wealthy could retire any time they wanted. It seems as if we are slowly returning to those days.
Cries of we have to work for longer and save more predominate from the spin doctors in government to those in the news media and finance industry. Even the Retirement Commission has trotted out this spin as if to justify to its paymasters that it is thinking along the correct or acceptable lines. It has said that future governments will need to reconsider raising the eligibility for a state pension, increasing taxes or have means testing if they are to fund the state pension.
The reason constantly given for this one sided propaganda is that there will be insufficient money raised from taxation to pay state superannuation. Therefore individuals will have to provide for their own private pensions in addition to what the state can provide through taxation.
To overcome this constantly announced "problem" the Cullen superannuation fund and the Kiwisaver schemes were devised.
Were they really a New Zealand response to the "problem”? Reference to an option endorsed by the International Monetary Fund in its December 1996 publication Ageing Populations and Public Pension Policy indicates these schemes were in accordance with what the world’s money men preferred.
In any scheme involving money, especially your own, the advice follow the money trail is the best one can have. Who benefits is a good question too to ask before investing.
The dependence on the stock market and bonds for income some time in the future to pay annuities is a hazardous, dangerous and risky venture. The transfer of savings and tax receipts to this gambling machine often enriches a lot of companies whose record on pensions and looking after other people’s money is questionable.
In 2002, in Britain a total of seven years' private pension contributions played on the stock market disappeared in a single year. This latest recession has exacerbated the risk taken with hard-worked-for cash from ordinary people. Enron is a name whose former employees do not like to hear. Years of savings disappeared as did their pensions. And who near retirement age in Britain could forget the Robert Maxwell theft of the Mirror Group Pension Fund. While the news media magnate was receiving the obsequious fawning of the British establishment as some of its members crawled to receive a hint of praise from the great man, he was stealing hundreds of millions of pounds from the pension fund.
There’s money to be made in private pensions, for the operators.
There is a well told story about a firm of stockbrokers who were managing £20,000 for a private client. The brokers -as like Kiwisaver and private pension providers - wheeled and dealt, bought and sold and managed to reduce the sum to £19,000. They then sent their client a cheque for £19,000 less fees and other charges telling him they didn’t manage portfolios of less than £20,000.
How is your Kiwisaver fund holding up? What guarantees do you have?
The British government a few years back established a fund - now stretched to its financial limits - to help those retirees whose pensions were lost by bankrupted companies and impoverished pension funds.
For many years, members of the DSC have been explaining that it is not the amount of money which one gambles on the stock market over the years which will provide a comfortable retirement. The first requirement will be what goods and services will be available at the time of retirement and the years that follow.
They have not been the only people who have seen through the finance industry’s pension propaganda to attract money to prop up their discredited debt based system.
The London Observer newspaper commented on 9 March 1997 - yes years back - that pensions do not come out of thin air, they are paid out of each year’s domestic product.
Susan St John, associate Professor at the University of Auckland Business School, told the Council of the NZ Government Superannuitants Association on 5 September last
Pensions are claims on current output. If claims are excessive, however financed, scarce resources will be rationed out, through mechanisms such as inflation, pension defaults, bankruptcies and collapses in share prices. In the light of an ageing population this suggests it is best to ensure we have a sound economy and a well educated and productive workforce.
In other words- my translation- if there are not enough doctors, dentists, opticians, nurses, surgeons, care workers, and food, water and the like, then it doesn't matter what funding you have in stocks and shares and loans, and the Kiwisaver, your lifestyle isn't going to be good.
Investment in the future shouldn't be about overseas currency and stock market speculation; it should be about education and social infrastructure.
And a safe sound credit based financial system!
- contributed by Mortimer Russell, UK-based economic analyst and commentator