THE PENSION CON

I have noticed recently that in many times in newspapers pensions are given a net worth. Surely a pension to a person has not net worth but has an income per year: there being a difference between income and wealth. Also when a government document was published in the newspapers that 1 in to households were worth 1 million pounds: a substantial amount of this was pensions: if memory serves me correct about 7-800,000 of it.

When you take into account that in the uk any money saved in a penions has to go to buy an annuity, and that if you stop paying into a private pension before you retire you lose all the money: as 1 in 3 people do in the first 3 years. Are pensions really the easiest way to transfer wealth from a alrge amount of people to financial institutions.

Pensions are sold on fear and not numbers.
1. The fear of having no money in retirement.
2. The fear of losing the money you have paid in(which increases as they years go by).
3. Also that on retirement what you get is not decided by you but the company you get the annuity from.

So are pensions a con?

Putting pensions down as net worth: is so obviously wrong. I would like to point out that this lie probably is there not just to transfer wealth but also to shore things up too. It has been there for so long that no body questions it. It is the ultimate con they have billions of people all conned to not question it's basic message.

reply to post by werewolf99


It's a con ...It's not the only con on the block either ..ie. Insurance is a big one ..Mortgages have to rank up there ..

OP, if I can offer nothing more, this is a great conspiracy topic. I think a lot of folks (myself included) have been played by this con. I'm vested in SS, a future pension, an active retirement, and a 'special' individual retirement plan. I was dwelling on this the other day and considering starting in on my second retirement. I feel I might as well start cashing in on at least another one of my investments.

One of the conclusions I came to, was that I had not invested very much in myself to this point. I retired once before ... and quickly came to realize how scarce the grass is (green or not) on that side of the fence. Shuffleboard ain't my thing you know. Problem is, there's no coin in self-investment, so in lies the rub. One has to eat.

I guess the bigger picture is that you eventually become a part of the economy (the ultimate Ponzi scheme) and wind up doing a lot of hand-wringing as the table begins to shake under the house of cards.

-Cheers!

Also investment companies such as coutts have also managed to make the richish think they need them too. Many UK start have been conned into giving large amounts of their net worth into pension funds. It is the perfect con as even the government lie about it. Saying in official documents that a pension has a net worth.
Also an army of financial advisers who have ben told to get peoples money into pensions. After all if the money is invested they get it back, but when they get a pension they no longer own their own money. If it hits a recession it is even better as when people cannot afford to pay in they lose all the money they have given the pension funds. Anyway most of the annuities give much less than if the money were invested in property etc.... and then you money is still yours and can be passed on.

Just think of the levels of wealth that would build up by people if the money could be passed on instead of being in a pension scheme?

werewolf99
I have noticed recently that in many times in newspapers pensions are given a net worth. Surely a pension to a person has not net worth but has an income per year: there being a difference between income and wealth. Also when a government document was published in the newspapers that 1 in to households were worth 1 million pounds: a substantial amount of this was pensions: if memory serves me correct about 7-800,000 of it.

When you take into account that in the uk any money saved in a penions has to go to buy an annuity, and that if you stop paying into a private pension before you retire you lose all the money: as 1 in 3 people do in the first 3 years. Are pensions really the easiest way to transfer wealth from a alrge amount of people to financial institutions.

Pensions are sold on fear and not numbers.
1. The fear of having no money in retirement.
2. The fear of losing the money you have paid in(which increases as they years go by).
3. Also that on retirement what you get is not decided by you but the company you get the annuity from.

So are pensions a con?

First off you are comparing apples and oranges here.

A pension fund (where individual contributions are collected and 'hopefully' increased) does have a net worth. Net worth (simply) Net Worth = Assets - Liabilities.

Income is an asset. Propety is an assest. Annuities are Assets.

I don't know how things work in the UK but I've always thought Annuities were a scam and have never been able to get an answer from a "Financial Professional" (read Masters of the Universe) that explained them as anything but. But I'm just a simple bookkeeper.

reply to post by FyreByrd

The pension has a networth to the pension company as they own the money you have given them. Whereas you own the income and income and net worth are very different concepts. For instance would you put your salary down as an asset? No.
The income of something would be something which would be placed on an income statement. Where as the net worth of an individual would be simply what things would be sold for. Although it would be interesting if the amount people had paid into pension schemes and invested in the same form and the possible income to derive, could be compared with the annuity rates I think it would be most enlightening.

werewolf99
reply to post by FyreByrd

 

The pension has a networth to the pension company as they own the money you have given them. Whereas you own the income and income and net worth are very different concepts. For instance would you put your salary down as an asset? No.
The income of something would be something which would be placed on an income statement. Where as the net worth of an individual would be simply what things would be sold for. Although it would be interesting if the amount people had paid into pension schemes and invested in the same form and the possible income to derive, could be compared with the annuity rates I think it would be most enlightening.

I will suggest looking up definitions for "Net Worth" and "Asset"

Definition of 'Net Worth'
The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure of how much an entity is worth. A consistent increase in net worth indicates good financial health; conversely, net worth may be depleted by annual operating losses or a substantial decrease in asset values relative to liabilities. In the business context, net worth is also known as book value or shareholders' equity.

Investopedia explains 'Asset'
1. Assets are bought to increase the value of a firm or benefit the firm's operations. You can think of an asset as something that can generate cash flow, regardless of whether it's a company's manufacturing equipment or an individual's rental apartment.

2. In the context of accounting, assets are either current or fixed (non-current). Current means that the asset will be consumed within one year. Generally, this includes things like cash, accounts receivable and inventory. Fixed assets are those that are expected to keep providing benefit for more than one year, such as equipment, buildings and real estate.

Both from :www.investopedia.com...

reply to post by FyreByrd


Annuities are the worst thing ever in the US. The guarantees are tricks. For example many annuity companies offer guaranteed life income benefits of say 5% annually. The average sheep thinks geez I can get 5% a year guaranteed. This is not the case. The income they give you (using a completely different rate) is guaranteed to go up 5%. The problem is once you begin that income, you give up any principal you may had. That income also includes any principal you may have given up so part of their guarantee is actually return of capital and not actually income.

The only time annuities would be a good investment is if we saw a huge decline in the markets over a very long period. Then the returns would make sense. However if we saw such a prolonged decline the insurance companies would all go broke, leaving the policies worthless as well.

I don't sell my clients because that's not my style - the downfall of that is that an insurance gets a hold of them and sells them what they think is security and stability with these annuities - and they end up bailing on me to their own detriment. Makes one think doing the right thing for people is actually the wrong thing for myself. I know- too much information. Annuities are the biggest con on the planet. Pensions as a whole are not, although they have their whole set of problems.

sligtlyskeptical
reply to post by FyreByrd

 

Annuities are the worst thing ever in the US. The guarantees are tricks. For example many annuity companies offer guaranteed life income benefits of say 5% annually. The average sheep thinks geez I can get 5% a year guaranteed. This is not the case. The income they give you (using a completely different rate) is guaranteed to go up 5%. The problem is once you begin that income, you give up any principal you may had. That income also includes any principal you may have given up so part of their guarantee is actually return of capital and not actually income.

The only time annuities would be a good investment is if we saw a huge decline in the markets over a very long period. Then the returns would make sense. However if we saw such a prolonged decline the insurance companies would all go broke, leaving the policies worthless as well.

I don't sell my clients because that's not my style - the downfall of that is that an insurance gets a hold of them and sells them what they think is security and stability with these annuities - and they end up bailing on me to their own detriment. Makes one think doing the right thing for people is actually the wrong thing for myself. I know- too much information. Annuities are the biggest con on the planet. Pensions as a whole are not, although they have their whole set of problems.

Thanks for the consise confirmation.

In the UK people have to buy an annuity with their pension and so seperating the two seems quite odd.
Also in response to the claim that the income from a pension is a net asset I will explain my position.
I=income E=expenditure S=savings

S=I-E

In a companies books Income would be that which has been earned in cash or income from investments.
Expenditure is that which has been spent in cash.

The important point is that in a balalce sheet what is shown is the income unspent which is the value of cash at the bank which has been saved. This helps a company show how cash earned is different from increase a of fixed assets: a company can show a profit by assets it owns increaseing in value but show eg decreased sales of goods. So a shop that also owns the property can see if it is actually making money, or if the property prices have risen.

I hope I have shown the use of Income and expenditure in the asset equation and how it is just a represetation of cash in bank. Also I will point out that a pensions aim is not to be saved but to provide an income.

Therefre the above can be simpliyied as

ASSETS ARE OF MORE THAN ONE TYPE
I will collect them into 2 categories
GENERAL = ALL THINGS YOU HAVE FROM LAST YEAR
SAVINGS=S

CAPITAL=ASSETS-LIABILITIES=
CAPITAL=( GENERAL-SAVINGS)-LIABILITIES

If a person assumes that the point of a pension is to provide an income then it can be simplified as

CAPITAL=GENERAL-LIABILITIES

Also if we were to look at the return on an annuity it would be obvious that they are a massive con