You save for a state pension the same way you save for state health care - not at all. The current working people pay for the current retired people, and this only works so long as there are significantly more working than retired people. Advantage of this system: You dont need to be afraid of not having saved enough money if you end up living too long. Disadtvantage: Thid only works if there are substantially more working people than retired people, which is no longer the case, so pensions have to be reduced.
Then perhaps it should be said openly, that this is an elderly tax, not a pension and it should be just kept to the minimum, allowing people to save more of their own income for their own private pension.
Currently, it's the worst of both worlds: you get taxed quite a significant portion of your income, and then, in the middle of the game, someone changes the rules and tells you to play longer in order to get the prize.
> Then perhaps it should be said openly, that this is an elderly tax, not a pension and it should be just kept to the minimum, allowing people to save more of their own income for their own private pension.
This doesn't fundamentally change the equation. Whether you save pension points or cash or ETFs it's just a coupon for your share of the economy of the future. It's a promise that the future generation will share some of their income with you.
Exactly. Saving is not a thing for an economy. The future economy needs to actually create all those goods and services for which you saved up. If the future economy doesn’t have enough labor because of demographics then some major price adjustments need to happen in favor of the future workers.
It's fundamentally different in any society with strong private property rights. A private pension is a set of investments, i.e. something that ultimately is owned by you. How much those investments pay off, if at all, is unknown, but if they do pay off then it's yours.
A state pension would be illegal for anyone except the state to run, because it'd be classed as a Ponzi scheme. Those are recognized as being unstable, hence why you're not allowed to run one. There is no investment into owned assets that pay out, just the appearance of it.
> […] allowing people to save more of their own income for their own private pension.
As someone who frequents personal finance sub-reddits, this does not work. The number of people who would save for their long-term needs is generally small.
And for some folks it is a 'personality problem' in that they are short-sited, in numerous cases it's a matter of not having any available funds. Forced savings are an absolute necessity.
Further it is also necessary for the funds to be away from people's hands so they don't fiddle with the money.
Canada went through this debate in the 1990s when it reformed its government pension system, and between fees and behaviour issues, the general consensus was that have a pool of money separate from private retirement accounts (RRSPs in Canada) was absolutely essential. A history of the reforms:
If what you say is even remotely true, wealth would have never been passed from generation to generation and people would have never invested in stuff useful for the future.
What you actually mean is that there is a non-negligible portion of the population who act like children and won't ever be able to plan for the future, so we have to force them.
But not only them, everyone into the same basket, regardless of their qualities and wants/needs.
Sure, a non-collectivist system would break a few more eggs, but isn't it the point? Rewarding the best/most useful behaviors seems like a fundamental need of a lasting society.
The curent system is problematic because it has pushed the equality ideology at the expense of personal freedom.
The irony is that people who could benefit from better environment/luck/opportunities, will still get ahead at the end of the day. You are disproportionately impacting those who could have had better outcomes to "save" the ones who will have bad outcomes regardless.
It's all very cynical, and the peoples in power don't have to care, they are fundamentally not at risk...
That's how it works in Sweden though: part of your pension is your own private investments, they aren't taxed as normal investments since you can only withdraw after reaching retirement age, the other part of it is a state pension. Even with this scheme we still got our retirement age risen.
So it seems it doesn't matter if it's public or private, the benefits of improved productivity is not trickling down to workers, a lot more is produced, generating a lot more wealth, and even with private funds we still get shafted because the capital class wants more and more of the pie.
But how much do workers pay towards pensions? In Austria, 20% of personel costs go directly towards pensions, and almost 30% of the entire state budget also goes to pensions on top of that, which is insane.
