4 ms·

From the article: Firstly there is the sheer scale of savings held by individuals, companies and governments. From http://www.bbc.co.uk/news/magazine-35801951

From the article: Firstly there is the sheer scale of savings held by individuals, companies and governments. From http://www.bbc.co.uk/news/magazine-35801951 http://www.bbc.co.uk/news/magazine-35801951: A survey by the Money Advice Service has found that four in 10 adults in the UK do not have £500 or more in savings. Another by ING bank suggests 28% of UK adults have nothing at all in the bank. Yeah, I'm sure all those hardcore savers in the UK are ruining it for the world's economy.

dx034 10y ago
In addition to that they name pension funds as #1 source of savings. So they really want people to stop saving for their pensions? I doubt the author of the article wants to live off £150/weekk state pension.. If you want to lower the savings rate you have to introduce a state pension system like Germany where (most of the) pension is paid by current workers. Doesn't work well with the ageing population but means that all money is directly distributed.
- srssays 10y ago
  State pension systems tie your financial security directly to government finances, and also to election results decades in the future. They are essentially a form of gambling. No rational person relies upon them, and rational people are precisely the kinds of people to have savings!
  - pjc50 10y ago
    Private pensions also tie you directly to private finances, and market results decades in the future. You're also gambling that the money won't be stolen by the institutions or suffer a collapse in value - banking on a TBTF bailout in the future. (Overstated slightly, but there is a role for both private and state pensions in a sensible system!)
    - deleted 10y ago
      [deleted]
    - srssays 10y ago
      With a state pension, a government can exclude people from reaping what they have put in, retroactively. I don't expect to be able to claim a UK state pension -- they can just keep putting up the minimum age from 65, to 66 to 70 to 75 to 80... until the scheme is removed entirely. Whereas with private pensions the values go up and down but are unlikely to hit 0 and stay there -- unless it's really mismanaged!
      - empthought 10y ago
        > I don't expect to be able to claim a UK state pension -- they can just keep putting up the minimum age from 65, to 66 to 70 to 75 to 80 What would be the point of doing this? Whose interest does it serve? It does not serve the banks' interest. It does not serve the politicians' interest. It does not serve your interest.
        pjc50 10y ago
        It brings the deficit down, and as long as it's only done to a narrow group of people at a time and has the support of the newspapers it looks good for the government's economic competence. Private pension collapses: "stakeholder" ones seem a bit safer, but company ones keep getting into trouble e.g. http://uk.businessinsider.com/sir-philip-green-bhs-pension-fund-2016-7 http://uk.businessinsider.com/sir-philip-green-bhs-pension-f...
- dalore 10y ago
  If you're saving for a pension it normally would be invested. So it's not really savings as well.
- Aaargh20318 10y ago
  > So they really want people to stop saving for their pensions? I would stop immediately if I could. I am, however, required by law to save for a pension I will never receive. The retirement age has already been raised to 67 where I live and is now linked to life expectancy. The second someone finds a cure for old age my retirement will be cancelled. Even if they don't, by the time I'm 67 the pension age will be >70.
  - madgar 10y ago
    As an American in their late 20s I don't know anybody who thinks they'll see a dime out of social security. We know we're paying into it to keep current retirees alive and we know that just won't happen for us.
    - Aaargh20318 10y ago
      This is not even social security. This is a private pension. Theoretically, the money is invested and you'll make a nice profit on it. In practice, the only one who's making money off it are the insurance companies. My pension fund is actually worth less than the amount I paid into it, because all the intermediaries want a cut for their 'services' (whatever those may be). It's like being legally required to flush money down the drain.
      - madgar 10y ago
        I know the difference between pensions and social security. I also know that some of the commenters in this thread are talking about pensions without distinguishing between public and private pensions. I also know that there is an enormous amount of capital in the form of public pensions and that public pensions are often invested with relatively few restrictions compared to private pensions. (At least in the US?)
  - empthought 10y ago
    Assuming you're talking about a social insurance plan like Social Security, that's not saving for a pension and never was. It is insurance against getting too old to work productively, which is perhaps a concept that is becoming more and more quaint as technology and medicine both improve. (Technology means that fewer and fewer people can "work productively" regardless of age, medicine means "too old to work" becomes older and older.)
- Roritharr 10y ago
  German here: the state pension system has become a joke. None of my friends below 35 actually believe they can rely on it for something that comes close to a livable retirement, and even people already on the state pension system feel cheated for various reasons. The only people with okay pensions are politicians and civil servants, who fall under a completely different system. The Tax-Burden on the other hand has been growing and growing, leading to a lot of braindrain and tax evasion.
merpnderp 10y ago
Same situation in the US. The personal savings rate is around 5.7% near the all time low and certainly well below the historic average. When the US experienced the highest levels of economic growth in the past, the savings rate was double or triple what it currently is.
johnwheeler 10y ago
You mistakenly assume wealth is distributed evenly with your comment.
akerro 10y ago
It nicely contrasts with picture of letting agencies that have hundreds of properties in each of TOP50 cities and take +70% of minimum wage for single bed.
objectivistbrit 10y ago
The unprecedented size of these savings might not matter if investors only wanted a modest return. Unfortunately investors are greedy and there are simply not enough things to invest in that can offer the high returns they demand. So how do investors react? For decades, they have bullied governments to release assets for sale that can then be leased back at high returns. In the UK, this is why we have privatised utilities and a swath of other safe, previously state-owned, assets in private hands. It is not morally wrong ("greedy") for investors to seek high returns. If an investment does offer high returns, investors will flock to it, the price will increase, and it will quickly offer average returns, relative to the amount invested. Nor do investors "demand" high returns - who would they demand them from? - they simply look for the best place to put their money. Investors are not a cartel that lobbies the government. Government services were privatised in the UK for political reasons. Then there is the way most people, businesses and governments have accumulated their savings. Just a quick look at the $100tn total and we can see that most of it is the result of tax avoidance. The Japanese are famous for their savings and investments. But middle-income families can only save because they don’t pay enough tax for officials in Tokyo to provide basic services. Every year the Japanese government runs a 10% budget deficit, such that its accumulated debt is worth almost 250% of GDP. The author has expanded the meaning of "tax avoidance" to cover cases where he thinks the government should be imposing higher taxes. I agree that governments should run a balanced budget (I would prefer they do so by cutting spending), but the author implies that you could pay all the taxes you owe, and you would still be cheating the system.
- SomeStupidPoint 10y ago
  > Investors are not a cartel that lobbies the government. They most definitely are, especially in the UK and US. I'm actually a little unsure how you could honestly believe that investment institutions don't lobby governments.
- pjc50 10y ago
  > Investors are not a cartel that lobbies the government. Investors as a class most certainly lobby the government. > Government services were privatised in the UK for political reasons. .. and this politics does not exist in a vacuum. There is a whole mythology about privatisation that is put forward by opaquely-funded think tanks. It has other functions simply than providing assets - it's also an anti-strike measure and a means of avoiding complaints.

dx034 10y ago

In addition to that they name pension funds as #1 source of savings. So they really want people to stop saving for their pensions? I doubt the author of the article wants to live off £150/weekk state pension.. If you want to lower the savings rate you have to introduce a state pension system like Germany where (most of the) pension is paid by current workers. Doesn't work well with the ageing population but means that all money is directly distributed.

srssays 10y ago
State pension systems tie your financial security directly to government finances, and also to election results decades in the future. They are essentially a form of gambling. No rational person relies upon them, and rational people are precisely the kinds of people to have savings!
- pjc50 10y ago
  Private pensions also tie you directly to private finances, and market results decades in the future. You're also gambling that the money won't be stolen by the institutions or suffer a collapse in value - banking on a TBTF bailout in the future. (Overstated slightly, but there is a role for both private and state pensions in a sensible system!)
  - deleted 10y ago
    [deleted]
  - srssays 10y ago
    With a state pension, a government can exclude people from reaping what they have put in, retroactively. I don't expect to be able to claim a UK state pension -- they can just keep putting up the minimum age from 65, to 66 to 70 to 75 to 80... until the scheme is removed entirely. Whereas with private pensions the values go up and down but are unlikely to hit 0 and stay there -- unless it's really mismanaged!
    - empthought 10y ago
      > I don't expect to be able to claim a UK state pension -- they can just keep putting up the minimum age from 65, to 66 to 70 to 75 to 80 What would be the point of doing this? Whose interest does it serve? It does not serve the banks' interest. It does not serve the politicians' interest. It does not serve your interest.
      - pjc50 10y ago
        It brings the deficit down, and as long as it's only done to a narrow group of people at a time and has the support of the newspapers it looks good for the government's economic competence. Private pension collapses: "stakeholder" ones seem a bit safer, but company ones keep getting into trouble e.g. http://uk.businessinsider.com/sir-philip-green-bhs-pension-fund-2016-7 http://uk.businessinsider.com/sir-philip-green-bhs-pension-f...
dalore 10y ago
If you're saving for a pension it normally would be invested. So it's not really savings as well.
Aaargh20318 10y ago
> So they really want people to stop saving for their pensions? I would stop immediately if I could. I am, however, required by law to save for a pension I will never receive. The retirement age has already been raised to 67 where I live and is now linked to life expectancy. The second someone finds a cure for old age my retirement will be cancelled. Even if they don't, by the time I'm 67 the pension age will be >70.
- madgar 10y ago
  As an American in their late 20s I don't know anybody who thinks they'll see a dime out of social security. We know we're paying into it to keep current retirees alive and we know that just won't happen for us.
  - Aaargh20318 10y ago
    This is not even social security. This is a private pension. Theoretically, the money is invested and you'll make a nice profit on it. In practice, the only one who's making money off it are the insurance companies. My pension fund is actually worth less than the amount I paid into it, because all the intermediaries want a cut for their 'services' (whatever those may be). It's like being legally required to flush money down the drain.
    - madgar 10y ago
      I know the difference between pensions and social security. I also know that some of the commenters in this thread are talking about pensions without distinguishing between public and private pensions. I also know that there is an enormous amount of capital in the form of public pensions and that public pensions are often invested with relatively few restrictions compared to private pensions. (At least in the US?)
- empthought 10y ago
  Assuming you're talking about a social insurance plan like Social Security, that's not saving for a pension and never was. It is insurance against getting too old to work productively, which is perhaps a concept that is becoming more and more quaint as technology and medicine both improve. (Technology means that fewer and fewer people can "work productively" regardless of age, medicine means "too old to work" becomes older and older.)
Roritharr 10y ago
German here: the state pension system has become a joke. None of my friends below 35 actually believe they can rely on it for something that comes close to a livable retirement, and even people already on the state pension system feel cheated for various reasons. The only people with okay pensions are politicians and civil servants, who fall under a completely different system. The Tax-Burden on the other hand has been growing and growing, leading to a lot of braindrain and tax evasion.

merpnderp 10y ago

Same situation in the US. The personal savings rate is around 5.7% near the all time low and certainly well below the historic average. When the US experienced the highest levels of economic growth in the past, the savings rate was double or triple what it currently is.

johnwheeler 10y ago

You mistakenly assume wealth is distributed evenly with your comment.

akerro 10y ago

It nicely contrasts with picture of letting agencies that have hundreds of properties in each of TOP50 cities and take +70% of minimum wage for single bed.

objectivistbrit 10y ago

The unprecedented size of these savings might not matter if investors only wanted a modest return. Unfortunately investors are greedy and there are simply not enough things to invest in that can offer the high returns they demand. So how do investors react? For decades, they have bullied governments to release assets for sale that can then be leased back at high returns. In the UK, this is why we have privatised utilities and a swath of other safe, previously state-owned, assets in private hands. It is not morally wrong ("greedy") for investors to seek high returns. If an investment does offer high returns, investors will flock to it, the price will increase, and it will quickly offer average returns, relative to the amount invested. Nor do investors "demand" high returns - who would they demand them from? - they simply look for the best place to put their money. Investors are not a cartel that lobbies the government. Government services were privatised in the UK for political reasons. Then there is the way most people, businesses and governments have accumulated their savings. Just a quick look at the $100tn total and we can see that most of it is the result of tax avoidance. The Japanese are famous for their savings and investments. But middle-income families can only save because they don’t pay enough tax for officials in Tokyo to provide basic services. Every year the Japanese government runs a 10% budget deficit, such that its accumulated debt is worth almost 250% of GDP. The author has expanded the meaning of "tax avoidance" to cover cases where he thinks the government should be imposing higher taxes. I agree that governments should run a balanced budget (I would prefer they do so by cutting spending), but the author implies that you could pay all the taxes you owe, and you would still be cheating the system.

SomeStupidPoint 10y ago
> Investors are not a cartel that lobbies the government. They most definitely are, especially in the UK and US. I'm actually a little unsure how you could honestly believe that investment institutions don't lobby governments.
pjc50 10y ago
> Investors are not a cartel that lobbies the government. Investors as a class most certainly lobby the government. > Government services were privatised in the UK for political reasons. .. and this politics does not exist in a vacuum. There is a whole mythology about privatisation that is put forward by opaquely-funded think tanks. It has other functions simply than providing assets - it's also an anti-strike measure and a means of avoiding complaints.