Pensions, risk and the social contract
11:08am Monday, 14th August 2006
It's hardly original to argue that we're entering an age of greater risk. From employment to healthcare, the trend is towards less certainty and greater individual responsibility. But if this is a renegotiation of the social contract, shouldn't individuals be demanding a little more in return? Shouldn't the payoff for greater risk be greater control over our lives and communities?
I started thinking about this because of pension reform. The Turner commission's idea is to create a new national saving scheme to make earnings related pensions more widely available. The money is going to be put by the government into private investment funds.
But hang on a second - the scheme is done on a defined contribution basis - the benefits are subject to market fluctuations. Once again, we're taking on more risk as individuals, but getting no more control over our lives.
Here's my half-baked proposal for a different approach: run the scheme at a city regional level, perhaps as part of a local public sector fund. Give the fund manager a mandate to use some of the money to invest in profitable local businesses.
If the fund makes a surplus, then an amount equivalent to a private fund's average profit margins should be invested in local social enterprises serving the elderly, ensuring that good care homes, support groups, clubs and other facilities are available for the future.
It's a better idea because the fund would not only provide a means to support people's earnings today through business investment, but would also ensure that there are institutions as well as money to support them when they retire. Of course, a fund run at a city level could also be held far more democratically accountable than the government's national schemes.
The risk is a lot closer to the people who have to manage it, and the benefits go beyond a regular cheque at retirement.
I started thinking about this because of pension reform. The Turner commission's idea is to create a new national saving scheme to make earnings related pensions more widely available. The money is going to be put by the government into private investment funds.
But hang on a second - the scheme is done on a defined contribution basis - the benefits are subject to market fluctuations. Once again, we're taking on more risk as individuals, but getting no more control over our lives.
Here's my half-baked proposal for a different approach: run the scheme at a city regional level, perhaps as part of a local public sector fund. Give the fund manager a mandate to use some of the money to invest in profitable local businesses.
If the fund makes a surplus, then an amount equivalent to a private fund's average profit margins should be invested in local social enterprises serving the elderly, ensuring that good care homes, support groups, clubs and other facilities are available for the future.
It's a better idea because the fund would not only provide a means to support people's earnings today through business investment, but would also ensure that there are institutions as well as money to support them when they retire. Of course, a fund run at a city level could also be held far more democratically accountable than the government's national schemes.
The risk is a lot closer to the people who have to manage it, and the benefits go beyond a regular cheque at retirement.
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