Allowing retirees to purchase additional state pension

D

Dr Strangelove

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Here is an idea on the letters page of The Irish Times:

There is a simple and socially equitable alternative to requiring the purchase of annuities by future retirees within the auto-enrolment system. Within a prescribed monetary limit, allow an option to purchase supplementary social welfare pension from the State. The supplementary pension would be added to a retiree’s normal State pension, would be payable weekly and would qualify for periodic increases to the normal State pension on a proportionate basis. …..The annual amount of supplementary State pension (payable weekly) would be determined as 4 per cent of the amounted invested – a reasonable cost for a pension that would in practice be fully index linked, have a contingent surviving dependant’s pension, have the convenience of weekly payment in conjunction with the retiree’s normal State pension and be State guaranteed.
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What do ye think?
 
So this proposal is basically that you take your DC fund and get the government to pay an annuity on it instead of a financial service provider? I guess the problem kicks in if the government can't find a 4% annuity policy for whatever reason - so it's moving risk from the person with the fund to government. Is that it? It's about moving risk?
 
From what I have read.

The government has controll of all the funds going into the auto enrollment scheme.
This means that the pension industry doesn't get a chance to gain fees at the payments in stage.

To placate the pensions industry the government have seemingly agreed not to be involved in the system after the person retires.

So presumably the suggested scheme would not be run by a future government.

The pensions industry will probably invent a scheme similar to the suggestion.
 
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kickstart said:
o it's moving risk from the person with the fund to government. Is that it? It's about moving risk?
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Yes and no. Some risk would move onto the government but the pensioner would be at the mercy of the ability and willingness of the government to increase the state pension every year.

Recall pensions were frozen in nominal terms 2009 to 2015.
 
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