Why Bush is right to privatize social security
Adam Smith Blog
By Eamonn on Benefits
It is predictable that those who like big government have scorned President Bush's plan to privatize part of social security - or state pensions as we call it in Britain. But it's disappointing that they've lied about it too.
They say that pension privatization in Britain was a failure, pension funds have cheated their customers, plans have gone bust, and privatization has condemned the Brits to retire in poverty.
Ignorant drivel. Britain still has a state pension system. It was supposed to see you alright in old age. But politicians proved very good at raising the taxes, very bad at raising the pay-outs. So the state pension now leaves you in poverty. If you relied on it, you have to go on welfare.
So people didn't rely on it. Companies set up pension plans for their employees. Individuals saved for themselves in tax-assisted personal plans. That way, you keep what you save, and don't have to rely on the promises of future politicians. It was a huge success: in 1996 Brits had investments of nearly £1 trillion in their private pensions - more than the rest of Europe put together.
But now company plans are closing and fewer people are saving. Why? Because in 1997 the New Labour Chancellor, Gordon Brown, figured (correctly) that most people don't understand investments and he could sneak a new £5-billion a year tax on the pension funds without anyone noticing. So now those same funds are facing shortfalls - of almost exactly the £35 billion he has lifted from them so far. And bookloads of new regulation have raised their costs even more. Meanwhile, Brown's raising of welfare pay-outs has made more people figure there's no point in saving anyway. Any wonder that people aren't saving, and firms are closing their retirement plans to new workers?
Britain's pension system was a success. The state system was a swindle, but people had private or company pensions instead. Because they could be invested anywhere in the world, they gave savers much higher returns for their money than the state ever could.
Then the politicians interfered and... the rest you know. |
