More here on Osbornes pension changes. Quote: There is little doubt that the key idea – the removal of the need for an annuities for defined benefit pensions – is politically attractive, as it can be sold as greater choice/the government not telling you what you have to do with your money. But the long term consequences of such a change are worth considering: 1) The reasons for annuities in the first place – a secure income for as long as you live, and the onus on insurance companies to work out how long that might be on average, how it might change as life expectancy increases, and price their annuities accordingly – is to be replaced by a free-for-all in which people have to guess how long they might live and plan accordingly. As life expectancy increases (at least amongst the previously somewhat better off), poverty in very old age may beckon for many. 2) While this may simply mean that many pensioners will stick with annuities as the safe option, it may also lead the the rapid development of a property-selling industry pitched at new pensioners, on the basis that fast property price increases will outdo annuities as an income source (and perhaps enable larger annuity purchase later on), even given the income tax hit if you don’t buy an annuity. I forsee lots and lots of mis-selling to vulnerable clients, given asymmetric information. 3) This could lead to a) a house price bubble even greater than the one we have now; b) greater retirement condo building c) a combination of both. 4) Most likely, though, it will lead to an even greater generational divide, with defined benefit pensioners buying up housing at ever-inflated prices and renting out to those increasingly unable to get on the property ladder. thoughcowardsflinch/2014/03/ ... evolution/ Michael Roberts take: Quote: ‘Hard-working people’ who do not earn enough so that they qualify for benefits and ‘universal credit’ to top up their incomes from work – the so-called working poor – get nothing from this budget at all. And remember the majority of people who are not pensioners and who get state benefits are working. Instead the government is imposing a ‘cap’ on welfare spending and extending this cap to end of the decade. As pensions are not being capped, that means the reductions in benefits for everybody else are huge. The austerity for the ‘hard-working’ poor will continue with a vengeance. On the government’s plans, spending on day-to-day services will be reduced to their lowest share of GDP since 1948 (the post-war austerity). And only a third of the cuts have been implemented so far. And there is no help at all for young people. They are without children, without pensions, without savings and in many cases, without jobs or paying huge student fees. The latest youth unemployment rate is still close to 20% of 16-24 year olds, or just under one million. Underemployment, as measured by those working part time because they cannot get a full-time job, is 1.4m. While overall employment rose to over 30 million in early 2014, the unemployment rate remains above 7%, well above the level before the Great Recession. thenextrecession.wordpress/2 ... ng-people/
Posted on: Thu, 20 Mar 2014 19:37:49 +0000
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