The 60 year age limit tells us a lot about the lack of thought in the design of auto-enrolment

Elsewhere, I have expressed my frustration that the designers of this did not realise that saving for a home is a person's first priority. It just a lack of clarity of thought.

These are well paid civil servants who have never had to think about pensions or worry about getting the deposit together to buy a house.

Bizarrely, in the straw man consultation, they actually proposed that on drawdown, the fund would not be taxable. There were gasps in the room when the guy in charge said this. They have fixed this in the Design Principles.

But here is another mad one:


From the Design Principles Page 20 (PDF page 22)


The upper age limit for being enrolled automatically is to be set at 60 years as it is unlikely that a participant joining over
this age will accumulate a meaningful pension fund prior to retirement. However, any employee over that age may opt in if they wish.

A 20 year old who opts in is putting their money out of reach for 45 years and may be preventing themselves from ever buying a house. So he has a decision to make.

A 61 year old who opts in and contributes €1,200 , gets €1,200 from his employer and €400 from the taxpayer. So they turn their €1,200 into €2,800 and can access it 5 years later.

Who wouldn't want free money?

Brendan

Brendan Burgess said:

These are well paid civil servants who have never had to think about pensions

Click to expand...

This is not true Brendan this forum is full of public servants looking for pension advice.

Brendan Burgess said:

or worry about getting the deposit together to buy a house.

Click to expand...

There is no exemption from the CBI rules for civil servants who have to save a deposit like everyone else.

The guys designing this are senior civil servants who are all on defined benefit pension systems. They have very little to worry about.

I would also think that they are all home owners who bought houses long ago and were welcomed by the banks with their guaranteed jobs and salary increases.

They simply do not understand the problems faced by people trying to get on the housing ladder today.

And they are very unlikely to ever face the practical choice: "Do I contribute to a pension scheme voluntarily?"

Brendan

Brendan Burgess said:

I would also think that they are all home owners who bought houses long ago and were welcomed by the banks with their guaranteed jobs and salary increases.

Click to expand...

Lots of mid-career entry to the civil service, including at senior level now. These people face pension options - dig through your own forum!

Brendan Burgess said:

And they are very unlikely to ever face the practical choice: "Do I contribute to a pension scheme voluntarily?"

Click to expand...

Senior civil servants make policy for Travellers without living on a halting site, set excise rates even if almost none of them smoke, etc, etc.

If a policy is bad it's bad, it's not necessarily anything to do with the personal characteristics of the people who design it.

Hi Coyote

Agree that a bad policy is a bad policy and this is a bad policy.

But I have spoken to these guys and they just have no understanding or appreciation of the issues. With defined benefit pension schemes, and well paid, they just haven't had to think these through and they have clearly not done so.

Brendan

I would have thought they got external advice from one of the consultancy companies. My experience is that these days, you can't go to a meeting with a Govt Dept or Quango on anything without some external consultants being on hand, partially because payrates in the Civil Service haven't kept up with the private sector and partially (in my view anyway) as a protection mechanism by the Public sector.

Brendan Burgess said:

These are well paid civil servants who have never had to think about pensions or worry about getting the deposit together to buy a house.

Click to expand...

Wow,

That’s a very narrow view.

I’d go with Peanuts20’s view as to the reality.

I was at the presentation. I spoke to the people who designed the system. I have read the Straw Man and the Design Principles.

Maybe they were a lot younger than they looked.
Maybe they were clerical officers and not Principal Officers and Assistant Secretaries.
Maybe they are renters unable to get the deposit together for a house.

But whatever they were, they have produced a design which is divorced from the real problem which is housing. They did not realise that giving tax incentives on the way in and not taxing it on the way out was crazy. And they don't seem to appreciate that a 61 year old might now want free money.

Pensions is a time bomb which may gradually explode over the coming years. Housing is actually exploding in front of us now.

I am struggling to explain all this.

The guys are not stupid. So I think that they are just out of touch with reality.

Brendan