This article is about a group pension plan and a legally mandated way of calculating liabilities that isn't working in a particular case. It's a simple law change. It's not some crazy bureaucratic maze or malevolent government - it's actually a private pension administrator, and it is based on a strict way of calculating future liabilities for group plans being applied to individual members when they leave the group in a fairly dumb way.
The law in question came around for a good reason:
Section 75 came about as a result of a sweeping review of pension regulation in the wake of the Robert Maxwell scandal in the 1990s.
Following the media tycoon's death it emerged he had plundered millions from the Mirror Group pension scheme.
The Pensions Act 1995 introduced a series of reforms including a "minimum funding requirement" for pension funds. It also introduced something called "Section 75 pension debt", which meant if an employer "departed" a scheme, they could still be pursued for any shortfall.
It is just a poor match with this type of shared pension scheme (not British, so forgive problems matching this to other types of defined benefits plans I'm more familiar with). This seems to be a clear case to revise this Section 75 for these types of group plans/schemes.
There is no actual fiscal problem here, just a legal one. The biggest obstacle to amending the existing law, based on the article, is an inability to enact legislation because of distraction by Brexit.
> Section 75 came about as a result of a sweeping review of pension regulation in the wake of the Robert Maxwell scandal in the 1990s.
> It's not some crazy bureaucratic maze or malevolent government
hmm
Policy designed for big firms, and in reaction to a few bad billionaire's or hundred millionaire's actions, which then destroys or squeezing out the small companies is one of the most common complaints against regulations like this. It's how you end up with only mega-corps and no competition or upward mobility for the middle class, and everyone wondering why there's a wealth gap when your only option is to work at bigco.
This stuff always starts out with good intentions like "punishing the rich". And then some nobody middle-class plumber in Scotland is the one being forced to sell his house while Maxwell's family trust is still worth millions.
Meanwhile law changes are never a 'simple fix', these sorts of things stick around for decades.
Edit: note Robert Maxwell was the billionaire(?) father of Ghislaine Maxwell who was Epstein's second-in-command in the sex ring
Yes, financial regulation is hard. People are always trying to game it. Unfortunately there are really good reasons to avoid ex post facto laws. So you have the cat and mouse game where people find a loophole, exploit it, and it gets fixed. It gives the appearance of people "getting away with it". Overall the system works, and - almost by definition - you just hear about the exceptions. The solution isn't to give up.
I always feel like I'm missing something fundamental when I read these debates. unless the only alternative is "no retirement plan", why would you ever want a pension? wouldn't you be much better off having your employer dump the funds in your 401k?
Maybe. Pensions, like social security, are better understood as longevity insurance.
Pensions are complicated by lump sum payouts, survivor benefits for spouses, and a bunch of other things. But you collect them for life. If you live a short time, the 401k might be a better outcome and the beneficiaries of your will can inherit the wealth (or your spouse, if you outlive them, vs reduce survivor benefits). If you live a long time, it's overwhelmingly likely you have not saved up enough for it, and short of letting the elderly eat cat food and die on the street, the costs of that outcome are socialized to the rest of us.
A defined-benefit pension is a bet that your employer will remain both solvent and completely honest for the rest of your life. This is an enormous risk compared to just having your own personal retirement account.
If you as an individual still want proper longevity insurance and the predictability of a defined-benefit-plan without this risk, just use the personal retirement savings to buy an annuity.
In the UK at least, defined benefit pensions are almost always funded (unless you work for the government) meaning there is a pot of money big enough to meet actuarial estimates of the present value of the obligation.
No it isn't. PBGC, and it's various analogs. Yes, you get a haircut, but pensions are generally insured for that. 401 plans are administered by companies and are funds of funds, at any rate, and you're still just reliant on 1) a different set of companies 2) market values to line up with your liquidity needs.
Also, how are you just ignoring have to rely on the honesty/fiscal stability of the company backing your hypothetical annuity in the space of two paragraphs?
Pensions are disappearing anyway so I feel like we're arguing the nutritional value of eating yangtze river dolphins, but that is because 401 plans are cheaper for employers and there is a lucrative fee structure in administering them, not because of an intrinsic flaw of pensions.
There is no lucrative fee structure if the employer goes with a Vanguard and prob Schwann/Fidelity 401k. In fact, it’s far cheaper than the investment fees charged by pension fund managers and has greater performance. Absolutely no reason to pay all those actuaries and investors when an index funds with zero expenses do a better job over decades long timeframes.
And PBGC is woefully underfunded. It’s already needing a bailout with just a few failing multi employer funds. It’s mostly for show I presume, since this isn’t even the first time it’s getting bailed out.
Bittersweet, isn't it? Most of us don't want to see anybody else suffer, but it also sucks to see a previous generation get a better deal than the next one.
I guess the risk pooling is the part that I didn't fully appreciate. still AFAIK, most pensions are not inflation adjusted, so if you live for a long time, you risk "running out of money" anyway.
In the UK these pension schemes, known as 'defined benefit', legally have to be inflation adjusted.
There is still loads of risk to the employer as they are on the hook for any future shortfall. Shortfalls are common as there is huge correlation of risk, such as actuaries systematically under estimating gains in life expectancy. That's why most such schemes are in deficit.
One of the problems that caused the decline of DB pensions is the accounting industry decided on such a unlikely scenario that inflated the cost to the employer immensely.
One pension trustee commented that the scenario came true you'd be more concerned about your stockpile of tined goods and shotgun shells than a pension.
So who pays the accountants and who now has a nice excuse to shut down its scheme :-)
401k is specific to the US. It refers to a section of US tax code.
This article is about a British company. 401ks do not exist in the UK, and you get a lot of benefits and tax allowances from pensions that you get out of no other investment vehicle over here.
Theoretically there's a better expected value with the 401K, but that's not what almost anyone wants. People want a moderate upward trend in value with no chance of going under.
An interesting place to see this is in groups of US military members talking about the pension plan they just had the option to switch. The 401k version has a higher expected value than the pension version, yet many people who are themselves sticking things out to pension age prefer the pension age. Though it may be that people staying in the military trend risk averse.
> Though it may be that people staying in the military trend risk averse.
I'm sure this is more nuanced, and risk aversion may depend on the type of risk (ex. financial risk vs physical risk). But it still sounds really strange to me to characterize individuals who volunteered to join an organization that may (and probably will) put then in very dangerous situations as "risk averse".
Companies used to prefer having a pension for their retirement program because any excess returns on the pension fund would become profit. Many of the ill fated leveraged buyouts in the 1980s/1990s were PE firms raiding these "excessively" funded pensions. This, unfortunately, was around the time people generally stopped smoking and having heart attacks right after they stopped working. Also, people that have pensions live longer. This has led to underfunded legacy pensions.
As a general rule, the returns are better in 401k, yes. This assumes that it’s invested in something with good growth potential (U.S. stock index funds, etc) and not money market funds or something highly speculative, of course.
That's a great short term solution, but then what do you do with society's old people? We still haven't yet seen what's about to happen with the destruction of pensions in the US.
It will take two or three generations before they make (enough) money to pay for the "high pensions" of old Germans... And even we get a ton of new people. The old generations are still more.. M
Either? Dozen children is hyperbole, but 3 to 5 children, as well as an extended family for support. But it takes a lot of sacrifice to achieve, which no younger person I know of is interested in.
One can also plan to off themselves once they're unable to support themselves. I say plan, because I'm sure saying it is easy, but when it comes time to do it, it'll be much more difficult.
3 - 5 kids is not a solution to the problem, it's a pyramid scheme of ever expanding population that stops as soon as population growth stops, an I don't know if you noticed, but we've hit 8 billion, so it's no longer an option.
Also, what is this sacrifice you are talking about? Just another one "kids these days!"
I’m also in the younger generation, but we are choosing to live in more expensive cities and being further educated and prioritizing high incomes as opposed to starting to have kids at a younger age. There is no value judgment here about the choices, but I would consider it a sacrifice to give up partying in one’s 20s to raise a family capable and willing to support you. Of course, it may also not be a good choice since earning power of those who have children in younger 20s might be greatly reduced.
One of the big reasons cities are more expensive is that a lot of Americans use their house as a savings plan, causing society to prioritize things that keep property values stable or increasing.
We can't simultaneously have ever-rising property values and affordable housing. Without affordable housing, many people are choosing to defer having kids (including, as you say, by pursuing more education to get higher-paying jobs), which reduces the worker/retiree ratio. That in turn makes it more expensive to be old, requiring more yet more savings.
To me a lot of this problem like a pathological response to the US's lack of good long-term pension coverage. Our every-man-for-himself, devil-take-the-hindmost approach causes a lot of scarcity thinking, which makes it hard to adopt sensible systemic solutions.
Maybe one reason. But I think the biggest reason is that technology and globalization have caused more and more jobs to move to big cities, and in particular to cities on the east and west coast (in the US), which results in housing scarcity due to demand exceeding supply. This is the case in the city where I live. Due to a booming tech industry, the influx of people moving to the city exceeds the amount of housing that can be built (along with other infrastructure, like roads).
And it isn't a problem in all cities either. From what I hear costs are going down in many industrial cities as residents leave to seek more abundent jobs elsewhere.
Sure, but the question is: why hasn't housing supply kept up? I'd say it's because there are strong political incentives to avoid doing anything that might cause prices to go down. So we end up with very restrictive zoning and a ton of inertia. This is very obvious in all the Silicon Valley suburbs, where everybody loves job growth but housing growth barely happens.
As to the latter point, I'd be interested to see your data. The Case-Shiller metro indexes are all up over the last 5 years. [1] The metro area with the least inflation is New York, which doesn't match.
Cities in the US are more expensive due to housing policy, as you mention, but also because cities as the engine of American business and growth are subsidizing the rest of the nation. A significant chunk of every city dweller's money ends up in taxes that are transferred to far less efficient and less wealthy non city areas.
Take away the wealth transfer from cities to non urban areas and the only people living in rural areas will be the wealthiest and end of the world preppers.
People are prioritizing expensive cities because that's how you get higher income. You get higher income by being educated. And you need higher income to raise kids because raising kids is incredibly expensive especially if you don't have a higher income job's provided healthcare.
This has absolutely nothing to do with partying. And if you're choosing to have kids for the purpose of having a support network when you're older, that's kind of a fucked up rationalization for it. At that point, society has failed you somewhere along the way. Even ancient societies had other methods of supporting the elderly in the community or through some form of welfare.
Who would take care of someone else like they would their own parents? And you can do things for multiple purposes. Children and family provide a valuable support network to get you through life, but it can also be because you want to raise kids to be good stewards of society and all that Jazz.
Hypothetically.. if one were an unattractive misanthrope with low sperm count.. what procreation strategy would you recommend to maximise my comfort in old age? Off the top of my head, I'm thinking I should adopt at least 7 Vietnamese orphans.. I won't be able to provide them more than a community college education, and I will undoubtedly imbue them with emotional problems as well.. so 7 sounds like a safe number to perhaps end up with 1 or 2 more resilient ones that will be able to manage my care...
It’s impossible for 99% of people to save enough money to buy the kind of care your children would provide you. Not even considering how well someone would tend to wiping your butt, but the emotional benefits of being surrounded by family are probably not able to be replicated.
1. Had the government or community take care of the elderly.
2. Criminalize poverty and force them to work or be imprisoned.
3. Let them die.
Even the Roman Empire had pension for people that served in the military. You can take your pick as to which system you'd prefer, but pensions have quite literally existed for thousands of years in some form.
And what happens when the economy goes bust when you're running down your investment in your retirement years? Or if you can't invest or save due to the many rent-seeking behaviors we see nowadays? Do we just let them die because they had the misfortune of bad timing or being take advantage of?
For 5: Even in those non-American societies they have recognized that leaning 100% on your family is generally a bad thing for working professionals. Or at least those companies are not willing to pay for their employees to take care of their elderly or disabled family members.
A pension is a personal savings. Back when pensions were actually offered by companies, you'd often choose your company by not just your paycheck, but by the retirement plan they offer. You would literally turn down jobs that might pay better but offer no pension. If that's not saving your money, then what is?
Because pensions aren’t portable. They lock you into a particular organization. 401k, stocks, savings accounts, etc, do not. Pensions (in the private sector, public ones are another ball of wax entirely) do not protect you against inflation. You have no control over what they’re invested in (which in some cases, is the pension manager’s retirement). There are much better options available.
I think the USA going to soon learn the ugly truth about your item 4: that massive swaths of the population have not saved adequately. I mean, I make pretty ok money and save the max every year, but there is no way on earth my pathetic 401k is going to last even 10 years after I stop working. Now consider the average American who has fuck-all in their retirement account. Despite their disadvantages, pensions at least let people who didn’t save retire in (perhaps difficult) dignity. When my account says $1 and I have no other living breadwinners in my family, my only remaining retirement option is to spend that last dollar on a bullet.
I'm pretty sure that and our 2-3x inflation annual increases in our already-insanely-high healthcare spending are going to lead to civil unrest in the next 30-40 years. On the shorter side for the healthcare spending (no way we can keep up the current rate of increases even 20 more years without an actual, honest-to-god revolt) and somewhat later for the failing retirement system (such as it is). I'm a lot more worried about those than climate change, which we are for-sure not going to address anyway if those aren't dealt with.
If long term's just another 20 years, at the outside, that'll be enough. Short of lots more people getting sick and dying or living with chronic illness, untreated (so, not generating medical bills, and see also: civil unrest), I don't see what's going to slow it down in that time frame. I think effective legislation, which could theoretically do it, isn't likely for at least another 10 years or so if we're lucky. If it takes longer than that, well, I just hope the rioters blame the correct things/people for their problems. And hopefully the retirement crisis hasn't reached first-page-story status by that time yet, either, or it'll really be a mess. I suspect that one will hold off a bit longer, though. Pretty sure mid- to late-Gen-X folks will be the ones who make that one pick up the pace, especially if inheritance amounts have been trending significantly down for those same folks due to EOL healthcare bills for their parents.
So yeah, I agree it won't maintain a steady growth rate in the long term. I just don't think it'll stop before it causes some pretty big problems.
[EDIT] incidentally I'm not aware of high-profile projections of this stuff that have HC costs doing anything but continuing up way faster than inflation through at least 2030, provided the regulatory environment remains fairly similar. Even Warren's plan isn't projected to do much about that—need price controls in one form or another (like AFAIK every other OECD state uses) and a fix for our doctor supply problem, at least, probably, to do much about the rising costs.
Look at healthcare as a percentage of gdp over the last 50 years. Costs have been rising at a much slower rate over the last 10 years, and have dropped over the last 3. There's no reason to think the rate will stay constant over 20 years.
If anything naive extrapolating shows falling costs as a percentage of GDP, and sustainable rising real costs.
The only way we get crazy numbers is extrapolating using the average from 2000-2020, but there's no reason to do that.
I understand that, but if you are going to criticise him (?), you should suggest whatever it is you deem appropriate. Then it's going to be constructive.
If you are not going to make the effort, why should he take your criticism seriously?
There's nothing appropriate to suggest. Predicting the rate at which health insurance costs are going to rise over the next 20 years is impossible.
I can however tell you that naive extrapolation is definitely the wrong way to do it.
Look at the 2nd derivative it's all over the place, so assuming that it will magically stay constant is wrong. The 2nd derivative of healthcare as a percentage of GDP is actually negative over the last few years.
Not arguing about the US being about to learn this the hard way. But when we get to that point, neither a pension nor a 401k will be able to save anyone.
> This stuff always starts out with good intentions like "punishing the rich"
No. This stuff starts out with good intentions like - "not leaving people who have retired, suddenly with no pension and having to live in poverty or rely on the state, rather than on the employer pension that they had promised would be there for them". It''s not there to punish the rich.
In this case, however, the formula being used to determine whether a pension scheme is in trouble seems the problem and it needs to be reviewed urgently.
I'm a big fan of contextual laws with expiring timelines. One size fits all laws that are used like hammers for every industry and every company size are very destructive (the positive data supporting things like minimum wage laws are almost always limited to a few industries like mega-chain fast food restaurants, while there is plenty of evidence of harm for young and temporary workers). The conditions of marketplaces also constantly change where expiring/renewal should be a function of the policy.
I don't know, we don't have these sunset laws, they seem like an inefficient, because they lead to too much change without change in the environment. And become big rallying points to either keep them afloat or finally get rid of them. This of course could drive compromise, or just lead to a lot more tit-for-tat destruction. (You let expire that, now we'll let this one expire!)
I'd argue that it is a crazy bureaucratic maze, but we agree on the specifics of the change.
Shared liability was a fairly simple way for small employers to keep their workers taken care of even if specific businesses failed. Its existence, along with the existence of unincorporated business owners, was missed or ignored when Section 75 was put into place. And the oversight wasn't corrected in 2005 when the rules were revised.
More damningly, the rules were revised seemingly without consideration for the difficulty of back-filling forty years of contributions to an entirely new threshold. Section 75 came about because of outright theft, and was revised in response to employers promising pensions out of line with what they were actually investing, but it wasn't targeted towards those cases. Instead, it created a liability for employers who'd been adequately funding pension schemes for decades, based on a calculation they'd never planned to support. And if the pension funds don't play along, they incur fines which could actually make healthy funds insolvent!
So a change aimed at addressing theft from pensions has created a situation where either employers are bankrupted for offering pensions to employees, or healthy, honest pension funds become unable to pay full benefits. I won't allege malice, but it's fairly spectacular incompetence to write a law supporting pensions which actually endangers people's pensions.
I agree! Closing loopholes to prevent theft was good. Implementation was lacking. They should fix this and stop good people like the subject of this article from suffering.
> . It's not some crazy bureaucratic maze or malevolent government
It is. Because as one 71-year old individual, former plumber, one day the regulators come knocking on your door telling you you're 1.2m short. In this kind of situation, an individual with no political or instiutional connections is (perceivedly) powerless and overwhelmed:
- I can't pay my responsibilities.
- I can't change the law.
You can't really use that term to describe a situation that is well understood and is widely recognized to be a problem (not exactly a Kafka staple). It's simply awful law, which is bad enough.
You'd expect lawmakers to just fix it, although they tend to be preoccupied with other things in the UK right now.
- Every 4 weeks, men in grey, face-concealing masks sedate me and graft what is possibly the upper half of a deformed baby onto my back. They cry constantly. I am not allowed to have mirrors. It has been 18 months, and I can barely lift the weight of them any more.
It seems like the governments officials overseeing the scheme don't see anything wrong with Section 75:
> The Department for Work and Pensions spokesman said the rules were in place to ensure schemes were adequately funded.
> He said: "We have a duty to protect members in their retirement, ensure schemes are properly funded and work with those employers who remain in a multi-employer scheme.
It seems like a giant clusterf*ck was introduced in 2005.
1. It wasn't properly communicated to anyone
2. There was a loophole that allowed a company to exit the pension for £1
3. The remaining businesses to cover the share of the deficit for everyone who had exited the scheme.
4. Most of these businesses didn't learn of the deficit until 2016, a decade after the the new math went into effect.
If the pension didn't do their duty to warn businesses of the deficit in 2005, it should be on their heads to fund the deficit, and they should not be allowed to pull from the pension fund, they have to pull from their own money.
Had these businesses known 10 years ago, they could have been paying all along an increased pension rate for their employees.
>If the pension didn't do their duty to warn businesses of the deficit in 2005, it should be on their heads to fund the deficit
The irony is the Pension claimed they couldn't notice the employers at the time (which would have given the opportunity to buy out for 1 Euro) because they would have had to research the contact info for thousands of employers...yet the Pension seems to have no problem doing the research now and noticing these employers of their Million+ Euro liabilities.
The real irony is that the UK government has just killed the pensions of an entire generation of older women by raising the retirement age without notice.
So going after small businesses to enforce an onerous rule change is entirely hypocritical.
> and they should not be allowed to pull from the pension fund, they have to pull from their own money.
What's the pension's own money here? Everything they manage should nominally be part of the fund owed to their retirees. Where do you propose they actually draw money from?
Their management fees. They aren't running a charity, they collect from the $1000 pension fund a 1-2% management fee (if similar to US 401k administrators).
And if they don't have enough cash to add back into the fund, they need to take on debt to fund THEIR shortfall.
The businesses were not told to increase their funding obligation from the start, so they should be off the hook.
You are right, in a way. If they can't service the debts themselves, and they can't take out a loan to cover it, they have to go bankrupt.
In reality, the pension provider probably should declare bankrupcy. In theory, FSCS / PPF should kick in and most people should still get some kind of pension out of it - albeit a lot less than they expected.
However... I don't know much about the bankrupcy procedure. Would administrators have to be called in? Would they then chase these customers anyway?
I don't see any way out of this cock-up of a law without the law itself being changed. It's bonkers.
[UPDATE]
Actually, it turns out that's almost exactly what they've done
... and they aren't willing to do anything about it, for fear that people might use any fallout mitigation to walk away from being responsible employers.
Look at the PBGC in the US and the rampant abuse (socialization of the cost of "mild" white collar crime - shortfalls that hit well after the fact due to purposefully but mildly underestimating future liability and overestimating future returns) for the other side to the outcome described in the article. Financial regulations are hard. It is like infosec, where you have well funded adversaries who are sometimes criminals.
The description makes it sound like they're not /actually/ underfunded just underfunded assuming they have to pay for someone else to take over fund and wrap up their fund right?
The pension are presumably insured to cover their negligence and liabilities...including failure to properly notice employers/members of the fund in breach of their duty to do so, which resulted in damages. Otherwise it comes directly from the pension (which isn't just a fund made up of employer contributions, it is a business entity that takes fees from the fund itself)
Sort of off-topic but for context, the “Department of Work and Pensions” (DWP, previously the “Department of Social Security” but renamed for ideological reasons) has been repeatedly caught making blatant lies in publicly released material in recent years, and are widely despised by anti-poverty and disability-rights activists. So do not take their statements at face value.
> The Plumbing and Mechanical Services (UK) Industry Pension Scheme was set up in 1975 with the aim of providing pension benefits for all employees of firms engaged in the Industry in the United Kingdom. The Scheme offered deferred benefits based on career average earnings.
I have luckily never been caught in one of these kakfa-esque bureaucratic traps before, but I don't know how people hold it together when they do get caught in it. It seems like there isn't any thought being put into possible edge cases for policy and here seems to be little recourse for people to get out of it. Everything about governments just feels like this wall of indifference, from interactions at the DMV to policy being created. Just thinking about it makes me a little crazy. It is so inhuman.
It's not specific to governments, any sufficiently large organisation behaves like this. Think of the people who've had Google accounts vanished without explanation. Or the RBS small business scandal: https://www.theguardian.com/business/2018/feb/12/confidentia...
At least with governments you get a representative.
With government orgs we get representatives who don't have any stake in improving these things.
I once had an incident where the receptionist at a DMV office messed up and didn't register me. I had patiently waited for 3 hours before noticing that people who lined up after me started getting called. So when I went up and asked if anything is wrong, the office manager looked something up on her screen and, upon seeing that I'm not registered, smiled and cracked a joke about it with another employee. She then told me I have to go back and take a seat and wait for my number to get called. At this point, I realized something went terribly wrong, and started literally begging to get expedited since I had already waited for more than three hours by then. The office manager's response was to scream at me, telling me that I'm causing disruption, and threatening to remove me with force.
I wonder if there's a way to actually improve the quality of these services?
I always hear horror stories about the DMV from Americans, and I too am baffled as to why a service used by almost everyone is bad. The UK equivalent (DVLA) has no branches and does everything by post. So you don't have to queue for anything.
In the UK the extremely user hostile government services are those for the marginalized; benefits and immigration. But the universal ones have pressure to work effectively.
I think the DMV job are high volume customer service and the pay is not particularly great. So it is probably a stressful job dealing with all the people. On the other hand if I go to a low volume office like county records, the people are more pleasant.
They don't take a picture of you in person for your driver's license? Even the first one? What about the driving tests? Eyesight tests?
What if you want to buy a used car from a stranger, do you hand over the cash and then wait weeks for the registration to change hands by post? How do they prevent title theft if they can't check ID in person?
Photo authentication is either from other photo ID, or by a gloriously decentralised system of getting someone sufficiently middle class to sign it: https://www.gov.uk/id-for-driving-licence
Driving tests are done in person with an appointment, so no queueing. There's no eyesight or medical tests, but at the start of the driving test the examiner will ask you to read a numberplate from a specific distance (20 meters?)
> How do they prevent title theft if they can't check ID in person?
I'm not really sure what this means or how to translate it to the UK system? You might be at risk if someone managed to forge a V5 for a car they had stolen?
Where I live, you bring your own photo – there's some basic requirements to the photo, though – to the police station. Then you'll get a temporary license while the real one is in the mail.
You go to your doctor and get a proof of health. Costs around $100.
Typically the tests are arranged with your driving instructor as part of the course. Each attempt is also around $100.
When selling a used car, you just give the person the registration certificate when you've received payment. Then you reregister the car on the tax authority Web site.
If I recall correctly you either have to mail in your passport with application form and photos or you can go to post office where they can verify ID for your fist provisional license.
One of the step to get full license is to take theory test in person at test centre. They check your address and verify ID again at this stage.
We have small driving test centres in most areas. You prebook the slot and turn up. They’re fairly punctual.
> At least with governments you get a representative
...if you live in a republic. Bonus points if it's a democratic republic; then your representative will actually listen to you... if you can outbid the competition and get said representative elected via advertising money.
At least with a corporation, they can't impose arbitrary fines on you and lock you in a concrete box if you don't pay said fines... unless the government says they can.
The House of Lords kinda throws a wrench in calling the UK a republic, IMO. I know they're technically representatives (of... someone), but the Life Peers within the Lords Temporal are Crown-appointed ("on the advice of" the PM, which sounds like Her Majesty can tell the PM to bugger off and ignore that advice, but maybe there are specific restrictions there that I ain't aware of on account of not being British), which to me sounds like monarchy with extra steps.
The UK has a monarch. That means it's a monarchy without any extra steps and thus not a republic. I didn't call the UK republic, I pointed out that having representatives does not require a republic.
The House of Lords can only delay laws AFAIK and the monarch just can't decide anything. Even if they did, the House of Commons would still exist.
Yes, the Lords may only delay bills for up to a year and the Commons has the right to reintroduce the bill in the next session and pass it without the consent of the Lords under the Parliament Acts (1911 and 1949 respectively).
In theory the Queen has the right to tell her advisors to bugger off, but in practice she hasn't done so in a long time, and I think it's widely believed that if she tried to exercise any power the monarchy would be abolished very shortly.
I'm not sure that in theory she does. The law has this idea of "the Crown", which is a sort of mechanical legal function, which happens to be exercised by Queen Elizabeth II at the moment, but which is tied up in a lot of law governing what it does in various situations.
Consider the recent Miller II case [1]. The prime minster advised the Crown to prorogue parliament, which it did. The supreme court decided that the advice was dodgy, and so the prorogation was void.
This is not how it works for normal decisions taken under advice! If you advise me to buy an avocado ice-cream, and i do, but it turns out that you've never tried avocado ice-cream, and it's actually horrible, i don't get to go back to the shop and tell them that the purchase was void. I made my decision, and i have to stand by it. I might get to sue you for giving me duff advice, but there's no suggestion that my decision itself is altered.
So it really seems here that the Queen isn't deciding to do things, even in theory.
If she refused to do something she's required to - issue the prorogation, assent to laws, etc - then she would be in trouble, not because she's upsetting the balance of power, but because she's simply not doing her job, which is to exercise the powers of the Crown as required by law.
It's one of her reserve powers and exercise of her powers is non-judiciable (cannot be reviewed by a court); only the advice given to her can.
If she so wished, given she is the font of all law in the country, she could close down Parliament and sack her advisors - there is no legal mechanism to stop her, except the practical consequences of doing so.
With the way things have gone lately in the UK, it seems like they'd be a lot better off if she stepped up and took over for a while. She sure seems a lot more intelligent and sensible than the current PM and other figures in power.
> At least with governments you get a representative.
At least with corporations you get a choice, short of emigrating. Google is one of the most dominant corporations in the world, yet there are multiple alternatives to most of their services.
And how many people can pay for schooling their children twice, once for the the public school they aren't using, and then again for a private school? Or, afford to not work and homeschool their children?
> And how many people can pay for schooling their children twice, once for the the public school they aren't using, and then again for a private school?
That wouldn't be paying for it twice... it would be paying for it like 1.1 times because of the large number of house holds that have no children in public school and still pay taxes.
Who cares? That's irrelevant. You stated, quite clearly, that there is only "one choice". You're wrong about that, as I pointed out: there's multiple choices. I never said any of them were free.
Complete non-sequitor. A corporation can make a choice that causes misery. By the time the consequences of this corporate decision precipitate, it becomes too late to make a choice.
Case in point: 300 people killed by Boeing and 100 people dead in the fire in Grenfell tower in UK.
On the contrary, a representative might amend/revere the situation, for example by changing the law.
It’s ironic to talk about how corporations cause destruction in people’s lives in a way governments don’t, and then bring up hundreds of deaths as an example. Those deaths are tragic to be sure, but how many tens of millions of people have died at the hands of their governments in the last century?
I dont think counting deaths caused by dictators addresses my point.
How do we make it an apples to apples comparison? For example,today, 2 million people a year die from air pollution, who is to blame for those deaths?
What about drug cartels, do we count the deaths that occurred in fighting them 'against' government? But if the government did not exist, those deaths would be higher, so do we count 'prevented deaths'?
What about tabacco, etc. I dont think a realistic tally can be made.
Indeed so; and not just government, any bureaucracy of sufficient size. To take a bit of a pop-sci angle, then as soon as you pass Dunbar's Number.
A video essayist I follow on youtube had a bit of a discussion about this, about being on the receiving end, after his car had been stolen, joy-ridden, and then set on fire. He was required to pay impound fees for the wreck, using proof of ownership that had been in the glove box. When he told this to the clerk at the impound lot, the response came, "Well, that's going to be a bit of a problem, isn't it?". And followed the red haze and the realization that these lots don't have bullet-proof glass in front of the counter to protect from robbery.
But I'd argue that it's borderline impossible to genuinely account for even the second tier of possible edge cases, even in the best of faith; law is too complex, and world changes at different rates in different places in too many ways to make that kind of considered extrapolation anything but speculative in the best case, and hopeful, well-intentioned gambling in the worst. Incidentally, this is a typical argument against regulation, though I'm not sure I agree with that, either...
I agree that it is probably impossible to account for a lot of edge cases, but then that means there should be more generalized methods for recourse when people feel that the law hasn't accounted for their situation. It sounds like the courts in this situation were just deferring to existing law rather than realizing there is an issue with it and addressing it.
Frank Herbert wrote a couple of novels about the Bureau of Sabotage.
The setting had a government so powerful that it could cause horrible problems with offhand decisions, and so large that it couldn't be reasoned with or set unified policy. (It rather reminds me computerized stock trading today, with problems like the "flash crash" where decisions outrun the actual intent of any human involved.) It couldn't shrink or slow down and still handle genuinely pressing decisions, so the solution was an agency meant to delay and interrupt whatever actions it thought would cause problems.
I certainly don't think modern governments are so efficient they need to be intentionally delayed, but the nature of the department is interesting: powerful and almost unrestricted in oversight, but strictly reactive and unable to make policy. It's not a perfect fix, but regulatory capture and incompetence are less worrying when the people deciding on government procedures aren't the same ones enforcing them.
In the real world, that might look like a Department of Exceptions. It would be unable to make or even change policy, but would have broad power to reverse specific government decisions. The point isn't to fix bad governance, that's too hard a problem, but to fix issues like this where the edge cases of a rule produce absurd results. For safety from overreach, it would probably need to be one-sided; able to undo government actions on private entities, but not apply new ones or step into private disputes. (I.e. it can grant you a car registration without the normal papers, but it can't peanlize a non-crime or reverse a civil lawsuit.) And for safety from capture, it can't be unaccountable, but holding it to strict policies would be self-defeating - perhaps the best fix would simply be to record common-sense rationales for each decision, and set a low bar to fire or vote out employees for bad decisions.
It's a wild idea, and I can see a host of possible issues. But your point about courts is interesting: we already have a system which can't make law, but has enormous power to review government decisions. This would be much the same idea, aimed at irrational actions instead of illegal ones.
And by "a couple", it is just that. There are exactly two novels set in the ConSentiency Universe: Whipping Star and The Dosadi Experiment. There are also two short stories, available in the collection Eye. The Dune Universe proved more popular, but I think ConSentiency would have been more movie-and-television friendly. There's plenty of space in there for rubber-mask aliens.
I think it could be better solved by a jury of random people with some leeway to bend the letter of the law. Similar to, but not exactly the same as jury nullification.
Just for the record, I didn't mean to sound like I was happy about that point :). A more generalized system of recourse is an interesting idea, but I'm having a hard time imagining (and likely the fault of my own imagination) something more general than a court system. Either way, I feel like it'll be an immensely difficult uphill battle no matter what, because it's always easier to take the conservative route and defer to precedence, even if there's an acknowledged issue.
How does one rattle an institution out of its comfort zone? It's a pretty old question.
IIUC Common law courts were supposed to be exactly that - that's where the concept of judicial precedent comes from. When a court hears a case and decides it's different enough from previous cases it makes a new ruling for that scenario which is now a precedent for other cases in that scenario. The collection of rulings built up over time is the law.
Indeed, although the system of precedent has its own challenges — bad law can be created by a court unilaterally and exist for years or decades before being overturned by a superior court.
I don't, except by the weak negative; I feel that lack of strict regulation creates a predatory, cruel, socially violent mess, which feels less desirable to me. Not to imply that the banal evil of a bureaucratic mess is not a bad thing.
This reminds me a lot of my most recent divorce negotiations, and indeed, I don't understand how so many people deal so well with these catastrophes.
Take it from me: Don't get overly attached to money, things, or really even people. Think of it all more as a ride that you get to enjoy for a while, and then you get off.
If you're killing yourself at your job with the thought that you'll someday retire happily or otherwise get to start a happier phase of life (or even just be thanked for your hard work), disabuse yourself of that notion. The money you're piling up can be taken from you in a flash, or become worthless to you due to more overwhelming developments.
I saw a homeless man the other day with two dogs. The dogs were obviously happy, and had no concern that they were poor and might have had a much richer life. They had their health, weren't starving, and there were interesting things to do that day. I strive to live like those dogs.
The Greek and Roman philosophers had these concerns solved ages ago with the Stoics and others. Happiness comes from within, whatever situation we might find ourselves in.
And more spot on the cynics, whose name just says it : get inspired from those dogs. (although admittedly their name comes from the "swift dog's gymnasium", their gathering place, they themselves started embracing the pun as it was very fitting with their reasoning)
Hollywood popularized Han Solo, Clint Eastwood, and the likes as the Stoic Male archetype which recently became the poster boy for toxic masculinity.
Shame though, because Stoic derives from Latin for porch. The Stoics sat and shared their ways of a happy life on porches.
Stoicism does not subscribe itself to the male gender - it is a pursuit, much like Taoism or Buddism, to reach peace within the Logos, or rather the grand chaos that is the universe itself.
Anyone of any descent or gender may become one with the Logos.
A lot of these problems seem to stem from people unwilling (not unable, unwilling) to exercise judgement, and apply the rules in an ever-so-slightly flexible fashion.
With the right attitude, a lot is possible, but as you said there is often this "wall of indifference". I think a big reason for this is that it can feel good to exercise power over other people by saying "no". This is doubly the case if you live in a society where everyone is always doing this to everyone else: you feel "small" and pushed around, so when you actually get the chance to push others around you'll instinctively grab it.
What I find the most amazing, is that you do not get more desperate vengeance cases. I mean ; you worked your whole life, you tried to do the right thing, you basically have nothing to lose and yet you do not go out and hurt the people that screwed up your life out of nowhere. That always gives me new confidence in humanity as it feels like that could so easily happen, every time when someone (or a loved one) is screwed over by something they or you cannot, legally, get justice for.
Not only governments; big companies that just 'do things' because, like you say, no-one seems to have given any consideration to the edge cases. When you put that to them (Google, MS etc), the answer is always (possibly with some rancid dress-up) 'we cannot account for every case; that would not be commercial'. Governments probably have the same reasons but they cannot say that out loud (usually) because re-election (of their political party).
A friend changed her last name two months ago; she got a letter that it succeeded and it would take 3-6 months to take effect. So today, while she was traveling, she got a letter from the gov that it was finished and that all her papers are per direct expired. Passport, ID, driver's license etc. This was an edge case in that: 0) it rarely happens (first name happens more often, last name is rare here) 1) it usually takes much longer 2) they usually send a letter with enough room to request new papers 3) most people don't travel much.
But the end result was; those docs expired and 'we are sorry not warning you on time, but sorry we cannot do anything, you have to come to NL to request new ones'. No valid documents to travel, so how does that work? Anyway; not quite the same thing as the article, but it happens weekly at least. No-one thinks things through, ever.
>It seems like there isn't any thought being put into possible edge cases for policy and here seems to be little recourse for people to get out of it
There's often someone who wants to fix the bug when it comes up but unless it's mission critical over time it drops in priority and fades into the nothingness of the backlog and in the rare instances when the bug comes up it still keeps getting dealt with manually.
This isn't unique to government but the fact that government has a monopoly on many of the services it provides and the onus is often on the citizen to take action to avoid some sort of default action against them certainly does not help them find motivation to fix the edge cases quickly.
Per the article, he's being "pursued for a shortfall" under Section 75. Obviously I don't know any more details of the case than that, and it's certainly possible that this is all shenanigans driven by a corrupt pension administration.
But I don't see that that changes the point much: this is entirely private people arguing in court over 100% private money. There's literally no bureaucracy to be offended by. In theory this kind of dispute could happen with any 401k plan in the US too.
The pension administrator is not corrupt. Their current assets are 101% of what they need to be to cover their liabilities, assuming they can use returns on the assets to pay for the liabilities, given some standard set of assumptions about investment returns [1].
The "shortfall" is about a "wind-up basis", or "buy-out basis", which means assuming that the scheme sells its assets and uses the proceeds to buy annuities. Buying annuities is a really expensive way to provide a pension, so their current assets aren't enough to cover their liabilities this way. But they're not going to do this! Neither the administrator nor the members want to do this! The private people are not arguing over the private money, they're all perfectly happy with each other. But the law requires that a pension fund has enough assets to do this!
Why does the law require this? I have no idea. I'd have to dig out Hansard or white papers from the mid-'90s to find out, and that is a bridge too far. But it seems clear that the problem here is entirely derived from government regulations which don't align with what the private people involved want.
OK, so there's a regulation that limits risk in pensions, this pension is incompliant (which is the same thing as "out of money" I'd argue), and you think it's too conservative a metric. And the pension fund members are, unsurprisingly, on the hook for the difference.
And I'd probably agree as a numeric argument. But I still don't see that as an argument against "government". And I surely don't see that as an argument against the idea of regulating risk in pensions, given the propensity of these things to go belly up over history.
In this case, the problem really is caused by some bad regulations. But that doesn't mean that all regulations are bad, or even that these regulations are all bad - they probably work fine for big companies like the ones Maxwell raided.
Perhaps other people were arguing that in this thread; they're wrong. But it's also wrong to say that this problem is nothing to do with regulations!
The whole pension situation is going to blow up completely. As a GenX, I fully expect to have to work well into my 70's and then finally get a state pension (if I get one at all) completely inadequate to support me.
Boomers are the major political force, and so pensions are good now. But as soon as enough of them die off, GenY/Millenials will be the dominant demographic and all the remaining pension funds will get ransacked for benefits to the young.
A bit like Student Loans all over again (Boomers got their education for free, GenX had to pay, Millenials got shafted), except it'll just be GenX getting the finger this time.
I upvoted you because I tend to agree. However, I came to a different conclusion as to why benefits like pensions and social security will be underfunded for Gen X.
It basically all comes down to tax policy. Boomers voted to cut taxes (especially on the wealthy) to roughly half what they should be, and ran up the national debt to match the GDP when there was no war or other crisis to justify it.
The founding fathers warned against that, because if one generation offloads its debt to the next, then it effectively enslaves the next against its will (deprives it of property, and taxes it without representation, among other things). This is self-evidently unsustainable, because any generation could do it at any time.
This concept can be trivially extended to all underfunded benefits. Maybe a shark raided retirement funds through legal smoke and mirrors but never got arrested. Maybe bankruptcy was abused multiple times to avoid paying workers, and that person not only didn't go to jail, but ended up a billionaire and president of the United States. You can see that this philosophy runs deep throughout our culture.
So I don't buy that pensions are underfunded because a company collapsed due to loss of market or whatever. It's more likely that the funds were raided the same way that congress has been writing IOUs for social security since the 80s. Somebody stole that money.
So I'd vote to pay down the national debt by raiding wealth created between 1980 and today. A high inheritance tax would do that. So would raising unearned income taxes (like capital gains) far above earned income tax.
Yes, these would slow the economy. But we're all cheating right now, living off the backs of future generations. Growth won't matter if gen X and millennials wake up and decide to throw a jubilee and cancel the national debt (my pie in the sky preference).
Don't have to cancel it... All that debt is in US dollars. Just print so much money that you have 20% inflation per year for four or five years. Problem will be fixed. It's a scam you can only pull off once (after that the dollar isn't going to be the world reserve currency anymore), but it's a scam you can pull off once.
Most of that debt is owned by Americans, who incidentally also own 393.3 million firearms - twice as much as every police force and military in the world combined[0]. I shudder to imagine what 100 million pissed off gun owners would do when they find out that there's going to be a 50% haircut to their life savings.
> The founding fathers warned against that, because if one generation offloads its debt to the next, then it effectively enslaves the next against its will (deprives it of property, and taxes it without representation, among other things).
Enslaved to whom? You can’t send your labour into the past. A huge national debt ‘run up’ by a previous generation just means that the next generation becomes more unequal, as the majority are taxed to fund interest payments to the heirs of the original bondholders. I don’t really see how this is more unjust than the existence of any other law or policy established before I was born, which I had no say in. If the solution is to appropriate the wealth of bondholders, the next generation will be equally able to implement that policy.
I believe it was Thomas Jefferson who was most opposed to intergenerational debt, because one generation could hoard wealth (mostly land at that time) and then future generations would be indebted to the dead, which goes against the spirit of liberty and justice in the United States:
I agree with your sentiment though, that soon we'll have to make a choice as to whether to assume the debt of our parents or raid their assets to pay it down.
I also feel rather strongly that if children shouldn't inherit their parents' debt, then they also shouldn't inherit their wealth. The best way to accomplish that is a high inheritance tax. I know that people object to this as an impingement on liberty, but we have to also consider justice for the broader population (as I've written about in my previous comments).
And I also see your point that if we inherit infrastructure, we should also be ready to inherit debt (so that's perhaps not inherently unjust).
But I'd just like to also point out that I've never seen the federal government vote to raise taxes to pay for the national debt. The debt went down briefly under Bill Clinton, but that was mostly through reducing welfare expenditures (which arguably later backfired, as experienced by people whose benefits ran out during the Great Recession, among other things).
So I am also very skeptical that it will ever raid bondholders to pay for the debt, although that could explain the (cruel?) sentiment to destroy social security, medicare and medicaid to pay down the debt by republicans. Again, I am very skeptical that that would work, because prior experience indicates that they'll just give that money to the very wealthy and we'll still be left with a large national debt.
>I also feel rather strongly that if children shouldn't inherit their parents' debt, then they also shouldn't inherit their wealth. The best way to accomplish that is a high inheritance tax.
There's a slight problem with this idea: how do you deal with people giving each other money? People frequently "inherit" money from their parents before they're dead, sometimes long before. If parents pay for their kids' college tuition, do you want to tax that as "inheritance"? What if they set up a trust fund? What about the money parents pay while their kids are under 18 just for their living expenses? What if parents buy their adult children a house? With today's housing market, a lot of Millennials and GenZers can't afford decent housing right out of college, so sometimes their rich parents will buy a house for them.
So assuming you don't want to tax some 40-60 year old parents when they buy their 18-30yo kids a car or house or college, where do you draw the line? What if they're 70+ and they give their 40+ kids a big cash gift?
Finally, you're also assuming the parents die at an old age. What if the parents die young? What if the kids are still in college and don't really have any money of their own, and suddenly their middle-class parents die in a car crash? Do the kids now need to drop out of school and get on welfare or try to find a cashier job because all the parents' resources go to the state?
The only way I see a high inheritance tax not being really cruel, and also not being rejected by the voters, is if it only targets truly wealthy people. Jeff Bezos's kids don't really need to inherit all his billions if he gets hit by a bus. If an inheritance tax takes 95% of his wealth, leaving his kids with "only" tens or hundreds of millions each, that's far more than enough for them to live on for the rest of their lives. But taking that much from even upper-middle-class people won't really leave much for their kids. But with so much of the nation's wealth concentrated in the hands of a relative handful of people, I don't think it's really necessary to target anyone besides them.
>There's a slight problem with this idea: how do you deal with people giving each other money? People frequently "inherit" money from their parents before they're dead, sometimes long before. If parents pay for their kids' college tuition, do you want to tax that as "inheritance"? What if they set up a trust fund? What about the money parents pay while their kids are under 18 just for their living expenses? What if parents buy their adult children a house? With today's housing market, a lot of Millennials and GenZers can't afford decent housing right out of college, so sometimes their rich parents will buy a house for them.
That's not a real problem with the idea of an inheritance tax. That an inheritance tax alone doesn't result in perfectly equitable wealth distribution doesn't mean there's any problem with it - it would certainly be more equitable than not having inheritance tax.
>The only way I see a high inheritance tax not being really cruel, and also not being rejected by the voters, is if it only targets truly wealthy people. Jeff Bezos's kids don't really need to inherit all his billions if he gets hit by a bus. If an inheritance tax takes 95% of his wealth
I actually think that's a class where a high inheritance tax would be most problematic. Do we want the government to suddenly gain controlling interests in Amazon or Google or any other massive private enterprise?
>I actually think that's a class where a high inheritance tax would be most problematic. Do we want the government to suddenly gain controlling interests in Amazon or Google or any other massive private enterprise?
Absolutely, yes! The whole point of a publicly-traded corporation is that the company is owned by lots of different people, not just one person. If one person owns most of the stock in a company that large, then they're doing something wrong. Having a high inheritance tax for billionaires would be good this way, by making them think twice about hoarding all that stock.
With a normal huge corporation in this scenario, it would take a bunch of people all dying at once for the government to suddenly gain a controlling interest. I'm not sure about Amazon, but I'm pretty sure Google is not more than 50% owned by one person.
>That an inheritance tax alone doesn't result in perfectly equitable wealth distribution doesn't mean there's any problem with it - it would certainly be more equitable than not having inheritance tax.
I don't see how it's really equitable at all, unless you restrict it to truly wealthy people, so that you avoid family dynasties from happening and continuing for generations. For middle-class people (who these days really do not have that much wealth), I don't see how this benefits society at all.
Also, you never addressed my question about how you handle gifts. This is typically how extremely wealthy people get around a lot of inheritance tax today. (Remember, we do have an inheritance tax now, and it only applies to multimillionaires IIRC. And they typically get around it with trusts, giving it to their kids before they die, etc.)
Honestly.. my first instinct would be to reform our tax system so that all income is treated equally by way of tax brackets. So small gifts under about $10,000 wouldn't be taxed much, but the rate would scale pretty quickly so that $100,000 might be taxed at 30% or something. I'd also vote to restore the pre-Reagan top marginal tax rates so that $1 million would be taxed at 50-90%.
And actually now that I write this out, that might all be sort of how it works now. Except that tax brackets have only been adjusted for inflation, not things like the wage stagnation since 2000 or the exponential rise in housing costs:
Also, capital gains is a flat (regressive) tax, and social security taxes (also flat) top out at an income of $132,900. If those were placed under progressive income tax brackets with no cap, I think many of these problems would go away.
At that point I'd be concerned about increased government spending. So we'd probably also need a hiatus on new expenditures for some number of years, or until certain metrics are met, like the national debt being paid down by some amount. Realistically though, the world is too complex for that kind of absolutism to actually work unfortunately.
I realize that this would be an inconvenience for middle class families trying to send their kids to college, etc. But if you look at the big picture, an increase in upper class taxes (especially inheritance tax) could pretty drastically lower everyone's tax bill. People would have way more money for gifts, and that money would recirculate more in the economy (the opposite of trickle-down economics).
>Also, capital gains is a flat (regressive) tax, and social security taxes (also flat) top out at an income of $132,900. If those were placed under progressive income tax brackets with no cap, I think many of these problems would go away.
This I think is an excellent point. So many wealthy people make far, far more than the SS cap; forcing them to pay more into the system would certainly shore it up a lot. And capital gains should be taxed no less than regular income, if not more since it's passive.
This kind of over-generalization based on "generations" is nonsense. I'm technically "a Gen X" (although I haven't developed a bitter "just so" worldview based on having been shafted by the different age group with all the baddies in it) and have got a personal pension that I've paid into.
my parents got a free education (with a living allowance), mortgage tax relief on their mortgage payments, a pension based on their final salary, and a state pension that is growing about twice as fast as unemployment benefits.
The free education stopped as the last boomer quit university. The mortgage relief stopped as the last boomer paid off their mortgage. The pension was roughly equal to unemployment benefits until the first boomers retired. It's not coincidence.
It could also be correlation without causation. Moneyed interests love to depower the working poor - using a generational boundary coinciding with the grotesque expansion of corporate autonomy and authority over society minimizes the risk of a social upset while you ransack society and normalize poverty in the future generations.
Despite all the rhetoric to the contrary "boomers" are not a hive mind of universally conservative tech illiterate bitter resentful retirees who want to destroy the planet. In the same way Milennials are not some collective unified anti-capitalist anti-authoritation avocado toast pot huffing borg collective, people act in self interest and often irrationally so. Few are operating on substantial let alone complete information. Before you look at systemic societal change and pin it on a subconscious predisposition of millions you might want to look at those informed and empowered to cause such change without the cooperation of a disparate group representing almost a hundred million persons. Those with power and authority have long learned optimized techniques to divert culture and society towards their own ends and have been machinating such policy for centuries.
If you are paying more for education, housing, and getting paid less there is probably someone swimming in a Scrooge McDuck money pit on the weekends that with intent wanted that outcome to happen and aligned vast capital resources in participation with the capital resources of thousands of other plutocrats to see it done. The Fox News obsessed obese retiree blaming immigrants for all ills while being jealous of youth and a life unfulfilled is not organized or educated enough to affect national economic and political forces to inflict their will. But the millionaire boss at their last employer with close ties to all levels of government and the executives of all other corporations in their market certainly is.
We need class consciousness in opposition to power seeking to exploit and abuse. I don't expect those of older generations to embrace it - they have vested interests in defending the status quo and are thus erected as the vanguard of the moneyed interests that both make them miserable and make them feel safe and secure in their station. They are not an ally, but they are not the enemy - they are a symptom and victim of systematized propaganda meant to turn them against their own self interest.
In the UK, everyone got free tuition and a living costs grants. The grant ended in 1988, and the free tuition ended in the early 2000's.
In the UK, mortgage tax relief stopped around the mid-90's (can't remember the exact year off-hand, but I think it was '97). The average boomer was about 45 in this year, and had finished paying off the bulk of their mortgage because of the housing boom around that time.
In the UK, Final Salary pensions stopped being a thing for everyone except civil servants in the 80's, when it started dawning on everyone what a huge liability a guaranteed pension is (see TFA for details). Even the civil service has mostly stopped doing them, I believe (and of course they've outsourced vast numbers of previously civil service jobs to private contractors who don't even provide pensions).
Its a bit more complex but you can see how OP has a point if you look at countries with a state mandated pension system, Germany for example. While I dont think blame will get us anywhere, the idea that the last generation leaves us a pension system that might have some similarities to a snowball system is hard to argue with, especially if there is no political will to fix this. The last big debate ended with the government making no changes and declaring that pensions is safe till at least 2030. Which is not really that big of a trust boost for someone who is planing to retire a lot later. Not even mentioning for how many its clear that they will get a pension on or under the level of welfare. So despite the knowledge, that me getting a pension from the pension system is lets say unsure, i will keep paying the the pension of the last generation who will be entering their retirement in the knowledge that the system is broken and unsustainable.
We dont have a generation conflict yet, but if the government keeps ignoring the issue in the hope of it becoming the next generations problem there will be one. Looking at the debate on climate change, where the question what the current generation 50+ is leaving us behind, I hope we will be talking about pensions as well.
It often is and can be, but since when it comes to "pensions" we are specifically referring to periods of time and demographics, it can be relevant. Although when the bad stuff will happen may or may not align with any particular definition of the generations in question.
It's interesting that "Millenials got shafted". When I went to college in the 1980's, it was much cheaper than now - I admit that. I lived in a very small dorm room with 4 guys in it and one bathroom on a whole floor of dorm rooms. I worked part time during the school year and full time during the summer to pay for it. I had no car, no TV and only ate food the school provided via my meal plan.
I now work for a large public university. Let's compare. Most students don't have jobs at all. Most students live in high end apartments (lots of these apartments cost more than my mortgage payment for my 4 bedroom house - per person). These students visit the town restaurants quite often and we have bars that are overflowing on Thursday, Friday and Saturday nights with college students. When I've asked how this happens, I'm told that college loans let you pay for room and board so they happily get the most expensive housing possible because it's "free". Almost all students have cars and lots of them have a "parking ticket budget" so have no problems parking illegally and paying for it. It's also "free" because of their student loan.
Citation needed. 40% of undergrads work at least 30 hours/week[1] so I'm willing to wager that the majority of them have some sort of job.
> Most students live in high end apartments (lots of these apartments cost more than my mortgage payment for my 4 bedroom house - per person)
Where are you living that rents are so high but property is so cheap? Or did you buy a long time ago? And again do you have a citation for "most" (which is defined as > 50%)? The data says most undergrads still live in college-owned housing.[2]
> When I've asked how this happens, I'm told that college loans let you pay for room and board so they happily get the most expensive housing possible because it's "free". Almost all students have cars and lots of them have a "parking ticket budget" so have no problems parking illegally and paying for it. It's also "free" because of their student loan.
There's a term for these people: "financially illiterate". They have always existed and will continue to exist. Do you have any evidence that there are more of them now?
Anecdotes are not data. Your personal observations don't invalidate reality.
Here, here. Rich people and financially irresponsible people have existed forever. OP probably thinks people on welfare drive Cadillacs too. Also, I can't get over how OP talks about students not using school services (dorm/chow hall). They didn't at my school because it was a terrible value. You paid upwards of $10 for shit food, and more in rent than off campus. The only people that used the dorms more than they had to were forced by their parents, or were able to get it for free.
You can stop thinking about all the auxiliary stuff you mentioned, and just compare, for example, the ratio of tuition : minimum wage from your college education and a contemporary one.
That's what the students of the day are doing. Education is so expensive so I might as well live great while doing it. An extra $10K or $15K a year in living expenses on my loan is no big deal, right? That adds up when you need to start making payments on a loan that is ~$40K higher than it could have been.
Where are you getting this data? And FWIW it’s not unreasonable to pay 10-15k for shitty housing annually if you study in a city. What do you expect them to do? Go back in time and buy a nice home for 60k?
My father went to college in the 80's and he owned a tv, a car, and went to bars occasionally. He paid for that by working. A large portion of my friends paid for similar lifestyle by working in the mid 2000's.
You might be comparing your especially frugal college experience to a different one.
But tuition has been the college expense that has sky rocketed and made it difficult/impossible to pay your own way though college. My father paid around ~2,000 for tuition, my little sister would pay close to ~11,000 to go the same college which comes close to doubling the total cost of attending college.
I am a recent large public university grad. In my freshman year I lived in a very small dorm room with 4 folks in it and one bathroom on the whole floor. This was mandatory to attend the university. Everyone I knew worked part time during the school year and either worked full time to pursued REU (Research experience for undergrad) or others. Since my campus is only really manageable via driving, most people owned really, really cheap cars. I'm talking at least one person in my friend group getting in a car accident every winter because no one could afford winter tires type stuff. No one owned a TV and several couldn't afford the meal plan so they went without food and had to beg friends with meal plans to get them some food that day.
All of them are heavily in debt. Several dropped out because they couldn't afford it anymore, even with loans.
It's been a while since I was in college, but I got through mostly with loans, and also some part-time and intern work, but college costs were also lower back then. The loans only went so far; it wasn't an unlimited source of funds, so I still had to be judicious in how I spent it, so I had roommates most of the time, for instance, even though I would have preferred not to.
As for your public university, I really have to wonder why these poor students went there, as it sounds like a pretty terrible school. What kind of public university is only manageable via driving? I went to 2 different, very large, state universities, and both were quite manageable with walking or biking. I biked at both so I could get around faster. Even in America's car culture, both these schools were definitely not set up for driving to class; they had parking lots at the edges of campus, which were frequently overcrowded, and you still had to walk a long way to class, so it made more sense to avoid this unless you were a non-traditional student. Dorms were most certainly within walking distance of everything (though again, biking was faster, though not for everyone). The meal plans however were expensive and a rip-off, though at my freshman/sophomore school it was optional so I didn't bother, and got food from other places for less money. Anyway, maybe these kids should have chosen a better university, namely one that doesn't require a car. Cars are very expensive to own and maintain when you're poor, and college students don't usually have the tools or knowledge (or time!) to save money by doing their own work. That one thing alone probably would have made all the difference for your friends who dropped out due to finances.
"What kind of public university is only manageable via driving?"
If you wanted groceries there was a 1/week bus that did it, and if you wanted to be exposed to anywhere off campus you'd have to drive. There were often arts, research, etc. events that would require driving.
"I really have to wonder why these poor students went there"
Because they could afford it(the tuition was low comparatively) and it's relatively well known with a good reputation.
"That one thing alone probably would have made all the difference for your friends who dropped out due to finances."
It wouldn't have, sorry, we were a super afforable school at around ~15k/semester. At that point owning a car is chump change.
This is normally what I consider the cost of a university.
> mandatory dorms/meal plans, and if not dorms/meal plans then rent/food/car/etc
That's not fair to lump in, because all of that needs to be paid for just to exist. While I don't like the trend towards mandatory on-campus housing and meals, you still have to live somewhere and eat something, so I don't really think tacking the entire cost of those into the cost of a university is fair.
I don't think it's unfair at all. Not everyone needs a place to live: some college students just live at home for free. I had some friends like that when I went to a major state university; they just commuted from home. They certainly didn't need to pay for a dorm or a meal plan because they lived off-campus, and luckily that school had no requirement to do so. Personally, I think they missed out on some of the "college experience" doing so, but still, I can't deny it was a lot cheaper for them.
On top of that, if living in a dorm and eating crappy cafeteria food is much more expensive than living off-campus in an apartment and getting your own food from a grocery store, I think it's fair to include those mandatory costs into the "cost of a university".
> What kind of public university is only manageable via driving?
Tons of them. Cars are not that expensive to own either. You keep bringing up dorms, yet they were an absolutely terrible value at my school. The car is way more necessary when you have to live off campus.
Not necessarily. I lived off-campus in two different universities, and while I had a car, I definitely didn't need it, and only used it for fun on weekends. My apartments were always close enough to walk or bike to school. This isn't uncommon at universities, especially in college towns.
Cars certainly can be expensive to own. If they're newer, there's a significant car payment associated. College students are young, so insurance costs are very high (esp. if they're male). And if the car is older, it may be cheap, but it's a big gamble: what happens when it suddenly needs expensive repairs? Even a relatively crappy car is a major expense (as a portion of their entire cost-of-living) for a college student, at least it was when I was a student.
People buy winter tires? I couldn't agree more strongly with the rest of your comment. There were a few people that made horrible financial decisions, and others that didn't work. In fairness, it almost makes sense not to in some cases, because minimum wage barely covers rent, so it wouldn't make a dent; better to avoid derailing your education. Also, everyone owns a TV now (even then usually). I have no idea what OPs talking about.
>I lived in a very small dorm room with 4 guys in it and one bathroom on a whole floor of dorm rooms.
This pretty much still exists at many unis. Dorm housing was absurdly overpriced, which is why many schools required it. Unless you had a good reason, the dorms were a suckers bet.
> I worked part time during the school year and full time during the summer to pay for it.
This is very common
> I had no car, no TV and only ate food the school provided via my meal plan.
How are you supposed to hold down a job without a car in this day and age? People didn't use the meal plan because it was a terrible value. Going to a restaurant was cheaper.
> Most students don't have jobs at all.
According to you. Have you looked at data then vs. now? Also, you can barely even pull in enough to make rent, so what's the point? It doesn't make a dent.
> Most students live in high end apartments (lots of these apartments cost more than my mortgage payment for my 4 bedroom house - per person).
WTF are you talking about? Maybe at your university. I lived in a death trap @$180/month with a sketchy landlord I almost had to fight once. I'd hardly met anyone that lived somewhere nice. Maybe one or two, that would concede it was a nice thing, and a bit of a splurge, but they weren't paying that much anyway.
Your whole comment reads like someone that thinks people on welfare are living high on the hog and eating lobster.
EDIT: Added some stuff about how terrible a value college room and board is.
I'm sorry I don't believe you. My experience (as of 6 years ago) had been that I see students having part time jobs which aren't enough to cover much of anything other than food, partially rent, and occasional going out.
There were of course wealthy students who did all the things you talked about: going out, trips, expensive trips etc. but by no means were they the majority.
It's probably confirmation bias. Luxury college student housing definitely exists, but it's for rich Americans and rich foreigners.
The maximum you can get in Federal undergraduate student loans as a dependent freshman is $5.5k / year. If you go over that you have to get private student loans, and most people don't get private loans. 92% of student loans are Federal and the remainder are private. https://www.nerdwallet.com/blog/loans/student-loans/student-... Nobody is going to be able to afford a luxury apartment plus tuition on that a year.
It's worth noting that many students get supplemental loans, and some do use it to bolster their lifestyle. I have a friend that never worked, and got no help from his parents. He did splurge for slightly nicer housing, but it was reasonable (~$400/mo vs $250-350). However there were other people that bought TVs with it. Never heard anything about luxury college housing, unless your parents were loaded.
You see a couple of rich trust fund kids enjoying dad-given amenities and ignore all the poorer students not doing any of the things that you listed. I shared an attic with someone and slept on the floor because there was no room for a bed. And I went to a rich private school.
Also how many unis are there in the US? You work for all of them and know what "most" students live like?
Most importantly, even if what you said is true, what's an extra $5k a year to eat out and drink on top of your $150k tuition loans? The screwing has already been done.
I worked full time during summers (making over x4 minimum wage), TA'd during three semesters, went to a CC for the first two years, a state school for the second half. I lived with roommates for $500/mo for a year then with my parents for a the rest. At the end I still came out with $15k in dept.
That's getting shafted. For me it's fine because I had a career easily lined up. I don't see how the average person isn't getting hosed now though.
Except that student loan debt can't be discharged in bankruptcy. These ultra risky loans are being extended precisely because the government essentially removed all of the risk.
the vast debts incurred by the US education system are a new thing for this generation.
But I was mostly speaking of my experience in the UK, where the boomers paid no tuition fees and got a grant to cover living expenses. GenX generally paid no or little fees. Millenials are being saddled with more and more cost.
I have a cousin that used took the max for his college loans and then whatever he had left after tuition he used for trips to Japan, Europe, etc every summer and lots of fancy restaurants and clothes. College loans are insane right now.
I've never heard this before. Got a link that explains it? All I've heard from the few boomers I've talked to is that they generally worked during school and had some loans as well.
“Free” is only slightly hyperbolic. My mother went to the University of Washington for her undergraduate studies in the 50s/60s and paid $25/credit for classes. She covered that, easily, by working part-time. No loans.
Yes, my dad was able to pay his entire way through university (tuition, housing, food, etc.) just with the money he made working part time at the university cafeteria
This is what happened in the UK, tuition was free until fees were introduced at the tail end of GenX (quickly abolished in Scotland, more or less). I don’t think it was ever “free” in the US but until recently (GenX again?) it could be covered by a summer job in many cases. Obviously now it is absolutely bonkers in the US, and as it stands the more elite universities in England, Wales and NI are rapidly headed in that direction.
not only tuition. In the UK, students got a grant to cover living expenses as well as free tuition. This ended in 1988 (incidentally the year I went to university), to be replaced with student loans. Boomers are the generation born from 1940-1965, so the youngest boomers turned 23 when the student grant system finished in '88. Exactly the age when a person in a four-year course (and a gap year) finishes university. It's not a coincidence.
They didn’t get their education for free but compared to what people pay now it might as well be free. When boomers say they worked to pay for their education, they mean they took summer jobs washing dishes or waiting tables.
Try to do that today and you’d be washing dishes for the rest of your life and never pay off the student loans.
It's compounded by some people not adjusting for inflation. Education was still expensive back then, just not as expensive as it is now. It was also far less universal.
edit: "people" -> "some people"
edit 2:
Trying to reduce a complex situation quickly (so forgive oversimplification): for decades college education was a bargain, the lifetime value of a college degree (average increase in wages) was much higher than the cost of the degree. Ignoring the ethics and rationales for this, price rose to meet demand. At the same time, automation has reduced the number of jobs and the value of a college degree. It is an awful situation.
What I was trying to get across, using real numbers, is that Harvard tuition in 1960 was apparently $1500. Inflation figures would tell you that is 8x higher ($12k, affordable but still not cheap) in today's dollars. Actual tuition is $46k. But an average house was $12k in 1960 and so you'd expect $100k today on the same inflation rate. But it's $300k.
What you also have is an illustration of the stratification of society (lower/upper middle class gap) where "luxuries" like college, a house, or a car are tracking higher income growth and lower income growth is stagnating because of international and technological trade trends. This is well beyond the scope of this submission, so I'll cut myself off here except to say reducing this to "boomers" isn't helpful.
People are adjusting for inflation, but the rate of inflation on education has increased significantly without a stepwise increase in income or value from that education.
My dad payed his entire way through college with a part time cafeteria job and graduated with no debt. My tuition was over $50,000 a year and housing, fees, etc. was over $20,000. Even adjusting for inflation, he went to college for a tiny percentage of what it cost me
I'm at the tail end of the boomer generation (although I prefer to think of myself as men-x). When I left school only about 7% of my cohort went to university. Most of us didn't get a free university education, we didn't get any university education.
My parents, and their parents, and all their university peers, got grants to cover all living expenses, and paid absolutely no tuition fees. That's more than free - they were basically paid a wage to be there! None of them worked as far as I know - it was seen as full-time education.
An exercise for those who wonder: look at historical tuition + fees costs and the minimum wage at that time. As I recall, a summer of 40 hours per week at minimum would more than cover tuition at the University of Virginia in 1970.
So, no, the education wasn't free. But it was a lot more affordable.
It'd be the case for anyone in the UK where fees for education are relatively new. I'm making an assumption about the poster though. I paid a tiny amount in 1999 in the UK, but fees increased significantly since then. Your response is how I understand it to have been here in the US, but I suspect that the rate of inflation in the education market is much higher now than what "boomers" had to deal with. That doesn't change that they had to work during school or take on loans, but it did change their long-term outlook.
Another boomer here. I worked half-time throughout my undergrad and grad years, and full-time during the summer. Even then, I don't think I reached net worth zero until my late 30s or so. (This is with a solid tech degree.)
Well, I went to university in the UK in the 1980s and my education there for 4 years was completely free: fees were paid and I got a fairly decent grant.
I did work during the summer but focused on academic work (and other things...) outside of that.
If not free, a fraction of what we pay now. I think it used to cost a few thousand for a degree, not the hundreds of thousands that some people have for a philosophy degree.
> Plumbing Pensions scheme, one of the few schemes in the UK to be multi-employer, meaning it could be accessed by different, unconnected, employers and their employees... because it was a "last man standing scheme", those still in it had to pick up the liabilities of those who had already left - even though they had no connection with those businesses.
> The Pensions Act 1995 introduced a series of reforms including a "minimum funding requirement" for pension funds. It also introduced something called "Section 75 pension debt", which meant if an employer "departed" a scheme, they could still be pursued for any shortfall... Since 2005 far more stringent rules have been in force - and, by this new yardstick, Plumbing Pensions was deemed to be under-funded.
So pension systems were set up with an element of shared liability. That's a bit of a risk for employers, but also insurance for pensioners if their individual small employers failed. The worst case was that the scheme as a whole collapsed if many members dropped out.
Then the government applied a minimum funding requirement to payment structures which had been running for years without planning for that value. Then, it converted shared risk from an insurance model to a legal obligation, which could apply to individuals if their businesses were small enough. Then, it raised the minimum on plans which had been running for 40+ years, and couldn't possibly be backfilled.
It's hard to overstate just how badly Menzies was treated by these regulations. His pension enrollment was not only moral but financially responsible - it only became a problem when the terms he'd agreed to were repeatedly, retroactively altered. Nor should he be blamed for being slow to react to the changes - the last-man-standing scheme meant someone was getting stuck with that bill. Large, incorporated companies, by contrast, could be bankrupted but would at least face no personal debts.
Meanwhile, what about the Mirror Group, which motivated of these changes? Well, Robert Maxwell died before seeing any liability for his theft. His sons and other company directors were acquitted of all charges. And the government bailed out 50% of the uncovered pensions.
It's one small case of the usual dynamic, I suppose: some large businesses and multimillionaires behaved badly, so they faced no significant consequences , but a bunch of unrelated people who'd behaved just fine had their lives upended by a clumsy response.
The moral of the story is that governments and businesses should just abolish all pension, superannuation, 401K plans, etc... and let people manage their own retirement.
Big centralized retirement funds are scams and they always will be. Wherever there is a giant pile of other people's money managed by a bunch of bureaucrats, some suits will come along and find a way to profit from that pile of money in the most wasteful way possible.
Now all these retirement funds invest straight into low-yielding corporate stocks; so the money essentially ends up going into the pockets of corporate executives. And the worst part is that the government makes this compulsory.
I know superannuation is a scam but I'm forced to pay it anyway and I can't take the money out until I'm 65... I wouldn't be surprised if by that time, the retirement fund stock bubble will probably have popped and my retirement account will be worth $0... And all the fund managers and corporate executives will be rich.
It seems likely that US social security is linked with this: "Elderly poverty in the U.S. decreased dramatically during the twentieth century. Between 1960 and 1995, the official poverty rate of those aged 65 and above fell from 35 percent to 10 percent, and research has documented similarly steep declines dating back to at least 1939." [0]
At the same time as we have seen decreases in income, wealth and home ownership for younger cohorts when measured at the same age. Its just a transfer of wealth from young to old.
For reasons of both bias and curiosity, can you point to your sources for this?
Philosophically, even if there is no greater effect than transfer of wealth from young to old, pretty much everyone who is now young will one day be old.
"Among the savage nations of hunters and fishers, every individual who is able to work is more or less employed in useful labour, and endeavours to provide, as well as he can, the necessaries and conveniencies of life, for himself, and such of his family or tribe as are either too old, or too young, or too infirm, to go a-hunting and fishing. Such nations, however, are so miserably poor, that, from mere want, they are frequently reduced, or at least think themselves reduced, to the necessity sometimes of directly destroying, and sometimes of abandoning their infants, their old people, and those afflicted with lingering diseases, to perish with hunger, or to be devoured by wild beasts. Among civilized and thriving nations, on the contrary, though a great number of people do not labour at all, many of whom consume the produce of ten times, frequently of a hundred times, more labour than the greater part of those who work; yet the produce of the whole labour of the society is so great, that all are often abundantly supplied; and a workman, even of the lowest and poorest order, if he is frugal and industrious, may enjoy a greater share of the necessaries and conveniencies of life than it is possible for any savage to acquire." [0]
[0] Adam Smith, "An Inquiry into the Nature and Causes of the Wealth of Nations", intro.
No generation of social security workers has ever funded itself--each generation has taken out more than it put in. SS is solvent because each subsequent generation has been larger and wealthier than the past.
What we have done is voted in politicians who have promised us SS pensions, but not actually funded those pensions. Instead the debt is going to fall upon young adults who were kids/unborn when said promises were made.
Yes, everyone gets old. That doesn't entitle us to puts debts on people who had no say in the matter. It's really not much different from me borrowing money and promising my child's future earnings to pay it off.
Its mostly that elderly people can now afford to stay in their huge family homes until they die, instead of selling them and enabling the next generation of families to live in them.
Previously, elderly people would move into small houses in small towns, or into apartments, in order to free up capital and lower ongoing costs.
Elderly poverty was once a massive a tragic problem that both impacted the elderly as their ability to work waned, the families of the elderly who attempted to provide care, and the employment market as elderly employees tried to hang on as long as possible.
The conservative and libertarian trains of thought value individual agency above public welfare, which is a convenient point of view for people with the means to sustain themselves.
Another lesson is to only take any obligations on your business if you're running an LLC.
The plumber boss in question ran unincorporated, so his business's debts are his personal debt. Were he running an LLC, the debt would be on the company only.
LLC (and LP)’s are great, when there is any outside capital including debt:
all the profits go to you
Yours and other people’s money that you used to pay for things becomes a tax deductions for you
the worst thing that will happen is that the world’s most prestigious reporters will report that you “lost” a billion dollars and nobody will be the wiser that your personal balance sheet contains free and clear money and assets
The other cases discussed are plumbing firms which were limited companies. The fact they complain that its a problem because they can't sell on the business or pass it to their children tells you that the liability is with the business, not the individual.
That's actually a pretty good situation to be in. Plumbing strikes me as a very easy business to walk away from - just take your contact list with you and you'll be back in business in no time.
Yes - limited liability would shield the owners of those businesses. A personal guarantee would usually be required for something like a bank loan or a line of credit, but not normally for pensions given there are now state-mandated requirements to provide one.
>>> The moral of the story is that governments and businesses should just abolish all pension, superannuation, 401K plans, etc... and let people manage their own retirement.
That is definitely not the moral of the story.
Aside from that, what exactly do you think a 401k is, if not a vehicle for people to manage their own retirement? The only government involvement in a 401k is non-involvement in the form of allowing you to contribute pre-tax money. And the broker won't be involved either if you're smart and elect to invest in indexes, rather than mutual funds (which can have high fees).
I'm with you on 401k. I think the parent was more about pension plans where they are tied to an employer and the employee does not have much say in their retirement. A 401k can be rolled into an individual retirement account, allowing an individual to manage their own retirement money and allows portability between jobs. Pensions are often 'all or nothing'.
Workers do not have control over the fund choices they have in their 401k. Often, low cost index funds aren’t available. This can be fixed by working with HR and the 401k manager but it’s often an uphill battle and isn’t guaranteed to work.
Despite all that I agree that GP’s comment to abolish 401ks is throwing the baby out with the bath water.
From what I hear, lots of employers get royally screwed. Namely school districts and other small-gov employers. There is something about public schools that just love buying into high-fee 403b.
401k is stupid (as stupid as employer based health insurance). It should just be an IRA contribution. It’s insane that your employer can choose things like health insurance and retirement saving for you. They should have no business in this.
> Workers do not have control over the fund choices they have in their 401k.
The easiest way to fix this particular problem would be to make the contribution limit for retirement accounts a combined limit for both IRAs and 401k accounts, and to mandate that in-service rollovers be available free of charge.
In every country there is intentionally a lot of friction if you want to manage your own retirement fund. Often you need to have a minimum amount and you are limited in the kinds of investments that you can make.
And how is the little guy who is not a financial wizard supposed to manage their retirement funds? A lot of people will be easy prey for banks and financial advisors.
I hate this response. It comes up for everything. Someone always says we need government to be there for people who can't make good decisions. Where do we draw the line? A certain percentage of people will be too incompetent to function in a free society.
I hate this response :). Should we also get rid of food safety, airplane safety or health regulations? Considering how long feedback loops are financial decisions a developed society should define a baseline for long term decisions where the individual can rely on some standards. If you make individuals solely responsible for their retirement you will see a lot of people who will be poor in age and a lot of scammers getting rich. I bet already many less people will be able to retire since the move from pensions to 401k.
> The former president told House Majority Leader John McCormack in 1957, "Had it not been for the fact that I was able to sell some property that my brother, sister, and I inherited from our mother, I would practically be on relief, but with the sale of that property I am not financially embarrassed."[264] The following year, Congress passed the Former Presidents Act, offering a $25,000 yearly pension to each former president, and it is likely that Truman's financial status played a role in the law's enactment.[265] The only other living former president at the time, Herbert Hoover, also took the pension, even though he did not need the money; reportedly, he did so to avoid embarrassing Truman.[266]
If a former US president is dumb enough to go bankrupt repeatedly post-presidency, what hope do you think the average Joe Sixpack has?
People are bad at managing retirement money. It is better to have a mandatory distributive model like in Germany. That way retirement grows with the economy, everyone has a retirement and nobody can just misappropiate the money.
This is exactly why everyone needs to know about jury nullification, at least in the US where it is allowed, so that if and when such cases come in a court the juries can help make common sense judgements rather than the ones mandated by narrow interpretation of the applicable laws.
That's just interpreted as "not guilty". I still don't understand why it is so hard for people to understand this.
The jury are just asked "are they guilty?" and if they don't give an answer it is, by simple virtue, not a guilty verdict. Voila, verdict of "not guilty."
UK law has precedence for defendants who did do the deed being given a not guilty verdict by the jury already. We even gave it the name "perverse verdict." The wiki page on jury nullification has details.
Juries are given specific instructions which includes something to the effect of "it is your duty to determine if the defendent violated the law, regardless of if you agree with the law". The possibility of jury nullification is not included in those instructions.
Before being selected for a jury, jururs are asked (under penalty of perjury) if they can apply the law regardless of there personal feelings about it. Anyone who seriously considers nullification would be lying if they said yes, and would likely be excluded for saying no.
At least in the US, all jury nullification is, is the fact that the jury's decision making is above review. It is not so much that jury nullification is legal, it is that any ban on nullification is unenforcable. The courts therefore do whatever they can to avoid nullification.
> Juries are given specific instructions which includes something to the effect of "it is your duty to determine if the defendent violated the law, regardless of if you agree with the law". The possibility of jury nullification is not included in those instructions.
No, they aren't[1].
And from my own experience of serving on a large fraud case, the Judge even went into detail about "You are to return a guilty verdict if you think they are guilty of the crime charged, paying special note that you must believe beyond reasonable doubt, that their actions constitute a crime." Later in the case this became apparent when the evidence from the defence suggested one of the defendants was under coercion. i.e. they did commit the act of fraud, but not criminally so.
> Before being selected for a jury, jururs are asked (under penalty of perjury) if they can apply the law regardless of there personal feelings about it. Anyone who seriously considers nullification would be lying if they said yes, and would likely be excluded for saying no.
No, they aren't[1]. In fact the opposite. We were asked to use our "worldly experience" to help us reach a verdict.
Courts may be different, but as part of jury selection you are told that you have to take an oath that even if you disagree you have to follow the law.
I'm fact hinting that you know about jury nullification seems to be a great way to get out of jury duty.
> No, they aren't[1]. In fact the opposite. We were asked to use our "worldly experience" to help us reach a verdict.
Well, in my case the judge was very clear to use ONLY the evidence provided in the court and to NOT use any external info or knowledge.
The National Institute of Economic and Social Research, a UK think-tank, produced an amusing (by pensions standards) video explaining the recent shifts in pension schemes, especially for government workers like teachers and nurses, and how some groups benefit while many lose.
Unfortunately pensions are an intrinsically boring topic. I recently met a professor of economics who lamented the £23bn deficit in the UK University pension scheme but admitted he was unable to get even his fellow affected economics academics to care.
For the guy who said his family business is worthless. Why not create a new business in sons name and sell all assets to the new company including the name. Put the first in bankrupcy?
If that helps out at all, it's a fraudulent transfer that would get reversed by the bankruptcy court. The business's creditors are entitled to up to 100% of the value of the assets that the business owns, you can't just sell them off before declaring bankruptcy.
That applies to hard assets, like a truck, inventory of hardware, power tools, etc. The real value in a business such as this is in the local brand recognition (usually applied to the name of the proprietor), a reputation for honesty and good service, and a list of customers with their contact information. So in that sense, a father probably could reasonably transfer or transition ownership to his son, it would just have to be done in a multi-step, gradual manner.
Probably the easiest way of going about it is just to operate "Plumber Bob's Plumbing" and "Plumber Bob Jr's Plumbing" as separate entities for a bit, and start referring business to the son's firm.
In addition to their many other practical problems, defined-benefit pension schemes are profoundly racist and sexist. This is because different demographic groups have wildly different life expectancies, and these differences aren't taken into account when calculating benefits.
Let's look at Social Security. Consider Alice, an Asian-American woman, and Bob, and African-American man. They are exactly identical in every way that is visible to the SSA: they begin working at the same time, they make the same payments on the same dates, and they retire at the same age. Suppose further they both retire at the standard age of 67, and they both have made enough in-payments that they will get the maximum amount of $2,900/month or $34,800/yr.
When she retires at age 67, Alice has a long life to look forward to. Asian-American life expectancy is 87 years, and women get a life bonus on top of that, bringing her expectancy to just under 90 years. So on average she'll receive about 23 years of payments, for a total of $786K.
Bob's situation is quite different. The African-American life expectancy is 75.4 years, and men get a life penalty, bringing Bob's expectancy to about 73 years. So in expectation he'll receive just about 6 years of payments before passing away, for a total payout of $205K.
So these two people make the exact same contributions over the same period of time, but one of them gets almost 4x more of a benefit, on account of her race and gender. The system is literally forcing one group of people to subsidize the retirements of another group that lives longer than them (and, as a separate point, makes much more money).
Being required to contribute the present discounted value of the benefit, as private corporations do, is not absurd; the absence of that preparation is what's absurd, and has led to numerous pensioners getting stiffed when it turns out that megacorps are not perpetual fonts of wealth.
In this case the evolution of the rules was not properly handled and the risk assigned post facto to a population (these tiny businesses) not set up to handle the new rules.
With regards to the megacorps: they have often treated the future obligation and the current obligation as uncoupled on their balance sheets which is great in the short term and disastrous in the long. A bit of "apres moi le deluge". Not just the megacorps; the US state of Illinois made the same terrible decision.
What then is left to believe in? Individual businesses that would extort and rob to their heart's content if not for the government getting in their way?
Seems like the lack of a livable government pension is the real issue here. Why should an employer have to worry about "paying" employees after they stop working for you? There should be social programs under democratic control that deal with stuff like that.
if you like government solutions to things, the govt should solve the problem of getting people to save for their own retirement. It's the fable of the ant and the grasshopper, it's the parable of the marshmallow test, learning to manage your future is an important life skill; fobbing off responsibilities on other people, out of sight out of mind, is the road to ruin.
I'm not saying that income redistribution and levelling are not necessary ingredients, but in addition the mechanisms should reflect aligning long term outcomes with short term thinking.
people are naturally lazy, but we shouldn't encourage that.
Just like health care there are many problems with having your employer provide your pension. The UK is gradually moving away from that now with workplace pensions that are provided by a 3rd party and can move with you from job to job.
I don't quite get why this article sides with the boss. He promised his workers a certain amount of money through a pension, and now he's having trouble living up to that promise. I wouldn't say it's "being a good guy boss" that is the problem here, it's making financial promises that he wasn't able to keep.
The article also acts like changing to a different accounting system in order to get a different result would be the perfect solution. Well, that's how you get underfunded pensions in the first place.
I think the error was in making these pension promises in the first place. It is far better to make promises that you understand how to keep, like the defined contribution of a 401k, than to make promises to your employees that are implicitly assuming a certain rate of investment return for decades.
It sounds like you haven't read the article at all.
He has been paying into a scheme for many decades, even though there was no requirement for him to do so. Then as a result of literal theft from a pension scheme, a law was introduced that established a minimum funding requirement on pension schemes, even ones which have been running like this one - for 40 years and completely solvent, meaning that the fund is able to pay out the promised money. No promises were ever broken here. But because the law made an unrealistic minimum funding requirement(probably based on the number of years * some amount) this scheme is now suddenly magically underfunded and he is personally liable to pull £1.2M out of his ass. This doesn't make any sense. He has never lied to anyone, never done something that he shouldn't have, all the promises that he made can and will be kept - but the law fucked him over for literally no reason. It's like walking along on a street, happy and healthy, and being hit by a stray bullet - it can mess up your entire life at no fault of your own.
> He has been paying into a scheme for many decades, even though there was no requirement for him to do so.
Yes, that's true, and to his credit. However, the people whom he hired during that time negotiated their salary and chose their place of employment knowing about the pension scheme, so the whole thing is not quite the act of pure, disinterested benevolence the article makes it out to be.
The hinge point of the story isn't the setting up, administering, payments regarding, or any of the normal expected activity involved.
It is entirely about the arbitrary boundary change in 2005 that created legal debt out of thin air.
And incidentally about the soggy rotten mess that British politics seems to be at the moment, blocking any reasonable effort to adjust the law to a more reasonable funding requirement.
Benevolence or 'selling feature' is irrelevant to the legal blundering.
I did read the article, I just don't agree with their emotional take on it.
Basically, I don't agree that this pension fund is solvent. The minimum funding requirements exist for a reason, because underfunded pension funds are probably going to blow up at some point.
What happened is, he promised a certain pension to his employees. Then, he put his money in a pension scheme that actually wasn't charging enough. Now, years later, once some sane accounting rules are put in place, it turns out that there isn't enough money to live up to the promises that were made. It sucks that a decision like this would make a business go bankrupt, but that's what happens when you make financial commitments that you can't afford to pay.
> What happened is, he promised a certain pension to his employees.
No, he promised to pay a certain amount into an established scheme. Then he did so. He's upheld his side of every agreement he's been party to.
> Then, he put his money in a pension scheme that actually wasn't charging enough.
Enough for what?
> Now, years later, once some sane accounting rules are put in place, it turns out that there isn't enough money to live up to the promises that were made.
What promises? Why do you think they can't be met?
> It sucks that a decision like this would make a business go bankrupt
There is no business involved here any more. It's just an individual person who once employed people.
> but that's what happens when you make financial commitments that you can't afford to pay
He didn't make any such commitments. They were conjured out of the air by a legal change that rewrote the terms of his pension contributions retroactively.
He promised to pay a certain amount into an established scheme.
That is typically not the case with pensions. That is the whole problem here! With a pension, you promise your employees they will get a certain amount of money in retirement. With an American 401k, you promise your employees that you will contribute a certain amount of money to an investment that they control.
So when a pension plan runs out of money, that means an employer is reneging on promises they made to their employees.
> With a pension, you promise your employees they will get a certain amount of money in retirement.
No, that's not how it works for most workplace pensions in the UK now that we have a statutory system for them. There are statutorily-specified percentages of the employee's paycheck that get paid into a workplace pension account by the employer - one percentage as a deduction from the employee's paycheck, the other out of employer's pocket on top of the employee's paycheck. Then the employer's duty is done; the money is now in an account controlled by the employee, they're free to move the money to a different provider if they want to, and if they don't and the provider they're using fails, that's not the employer's problem any more.
As I understand it, the agreement the employer and employee had in this case worked in essentially the same way. However, retroactive statutory changes to the rules governing the scheme type had the effect that:
1. The employer retroactively became a guarantor for the liabilities of the scheme
2. The scheme became obligated to have a greater amount of capital on hand to ensure solvency, which the employer was then liable for
This is a "multi-employer" pension scheme. Which means that he is on the hook for the collective shortfall across ALL the employers in the scheme, including much bigger companies that have subsequently gone bankrupt. This is not about him failing to live up to the obligations he made to his own employees. Which should be obvious given that the "shortfall" he is expected to pay seems to be many multiples of the annual turnover for a local plumbing business such as his.
The law in question came around for a good reason:
Section 75 came about as a result of a sweeping review of pension regulation in the wake of the Robert Maxwell scandal in the 1990s.
Following the media tycoon's death it emerged he had plundered millions from the Mirror Group pension scheme.
The Pensions Act 1995 introduced a series of reforms including a "minimum funding requirement" for pension funds. It also introduced something called "Section 75 pension debt", which meant if an employer "departed" a scheme, they could still be pursued for any shortfall.
It is just a poor match with this type of shared pension scheme (not British, so forgive problems matching this to other types of defined benefits plans I'm more familiar with). This seems to be a clear case to revise this Section 75 for these types of group plans/schemes.
There is no actual fiscal problem here, just a legal one. The biggest obstacle to amending the existing law, based on the article, is an inability to enact legislation because of distraction by Brexit.