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Why are employers responsible for workplace pensions?

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The purpose of a company is to produce products and services.

Why does our society insist on saddling organisations with more responsibilities disjoint from its core function? Employing people is complicated and expensive enough already, with growth at near 0%, why are we making it even harder to start and run a company?

People need to save for retirement but why does your company have to do the paperwork?

Where is the incentive for a company to provide a minimum wage employee a pension?  Over 900 thousand people are on zero hour contracts (ONS) and are unlikely to have employer provided pensions.

Why is it that I have a pension account for every company I have worked for?

It is so critical to life, why is this not a public utility? I do not trust the government to be able to deliver such an important project on time, on budget and in a technically effective way. But it seems like it we need it.

The relationship of pay between an employee and an employer should boil down to a single financial transaction.

  1. Company payroll pays employee
  2. Employee pays taxes
  3. Employee pays pension

Unfortunately the government does not trust us to pay taxes or save for retirement, so they take it before you are paid with Pay As You Earn. How about something like this instead:

  1. Company pays employee representative
  2. Representative deducts tax
  3. Representative pays employee's assigned pension provider
  4. Representative pays employee

The representative could be a special kind of bank account with a normal bank, in your name. Or it could be an organisation that is your nominee for your holdings, like a stockbroker client account. Or it could be a publicly funded department, like HMRC.

I think we should outsource the effort and responsibility of retirement away from companies and onto standardised utility, like PAYE.

Would this save money in the economy? How should it be funded?

Edited by phantominvestor

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You cannot trust anyone to honour their obligations. Companies, the state, even the pensions industry that rips you off at every turn. Part of the problem is people's ignorance and that it is so far off and complicated that they don't check what is going on.

Agreed. I was recently reading about Poland raiding private pensions and the government taking over Royal Mail pensions. The RM pensions being taken ensured that pensions remained a public liability after privatisation but may have ensured they remained funded...

My goal is to move the responsibility of selecting a pension provider and its payment from employers to a central organisation.

I would like to think that accepting a single large payment from a company and then forwarding that money to the employees and their pension provider would be simple. This organisation is then responsible for putting them on a default pension (perhaps something like NEST)

Anyone want to join me in starting this company? It is essentially outsourced payroll.

Edited by phantominvestor

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Yep. I tolerate the system just enough to collect the employers contrib, and then sweep it annually into a SIPP where I can actually pick what I really want rather than from about 6 stupid mutual funds.

If I could control the salary sacrifice process myself and get that cash under my control from the off, it'd be a lot more efficient.

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It is just another anti competitive measure that will put off potential start ups or investments in this country.

The chickens will come home to roost in the end.

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2 hours ago, phantominvestor said:

The purpose of a company is to produce products and services.

Why does our society insist on saddling organisations with more responsibilities disjoint from its core function? Employing people is complicated and expensive enough already, with growth at near 0%, why are we making it even harder to start and run a company?

People need to save for retirement but why does your company have to do the paperwork?

Where is the incentive for a company to provide a minimum wage employee a pension?  Over 900 thousand people are on zero hour contracts (ONS) and are unlikely to have employer provided pensions.

Why is it that I have a pension account for every company I have worked for?

It is so critical to life, why is this not a public utility? I do not trust the government to be able to deliver such an important project on time, on budget and in a technically effective way. But it seems like it we need it.

The relationship of pay between an employee and an employer should boil down to a single financial transaction.

  1. Company payroll pays employee
  2. Employee pays taxes
  3. Employee pays pension

Unfortunately the government does not trust us to pay taxes or save for retirement, so they take it before you are paid with Pay As You Earn. How about something like this instead:

  1. Company pays employee representative
  2. Representative deducts tax
  3. Representative pays employee's assigned pension provider
  4. Representative pays employee

The representative could be a special kind of bank account with a normal bank, in your name. Or it could be an organisation that is your nominee for your holdings, like a stockbroker client account. Or it could be a publicly funded department, like HMRC.

I think we should outsource the effort and responsibility of retirement away from companies and onto standardised utility, like PAYE.

Would this save money in the economy? How should it be funded?

I think you speak a lot of sense...good stuff.....:rolleyes:

Edited by South Lorne

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Depends on the setup. Salary sacrifice into a pension means a reduction in employer NI. Employer contributions the same, better than actually paying you the salary. 

Wouldn't having an army of middlemen with layers of management be more costly (either taking yet another cut of your money or to the public purse)? 

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It's an interesting approach - and what you favour probably depends on what kind of state you want and which you believe is more efficient/effective - private or public enterprise. 

If you're a free-market libertarian, you'd probably run screaming from the OP's suggestion - and say no-one but the individual should be responsible.  

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8 hours ago, doomed said:

It is just another anti competitive measure that will put off potential start ups or investments in this country.

The chickens will come home to roost in the end.

Don't agree. I have been running a people intensive IT services business for over 25 years. I think the quality of start ups now is much poorer than the early 90's.  My observation is that then we really wanted to create a business and all it entailed from careers for people, appraisals, training, along with strategy, finance and the whole lot. That includes taking a holistic view of your employees and ensuring they have a good job in a rounded sense.

It seems start ups expect all the glory without the hard bit - managing people. It is noticeable that the majority of UK SMB's are small (9 or less employees) 5.3 million  out of a total of 5.6 million, they are usually the ones who complain about red tape etc.

Whats the alternative ? every one self employed ? zero hour contracts ? 

Don't agree it is over onerous to employee people. It is hard to find good people at all levels being a good employer can only help that. The problem is very few people take managing people seriously, outside the large corporates very few people self invest in being a better leader or manager but quite happy to spend tens of thousands on other areas. When in fact that investment would make the biggest difference.

Successful businesses usually have a vision beyond knock out as many products or services as we can - hardly motivating for a non share holder is it?

Elementary management training would teach most people that motivations of their employees are complex and money is hygiene factor but way down the list.

 

 

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think I'll benefit from this as an employee. Fairly low pay, late twenties and never had a pension. It's also an incentive to stay for now. The small contribution is better than nothing - but obviously I'll need to do my own thing to prepare for retirement.

Having worked for an American company and seeing how little holiday my American colleagues got, needing employment for healthcare and generally being treated poorly by management, I'm pleased there's more of a balance here.

 

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  1. Company pays employee representative
  2. Representative takes x% cut of employee salary to pay international executive talent and their own bloated workforce with gold plated final salary pensions.
  3. Representative deducts tax
  4. Representative pays employee's assigned pension provider
  5. Representative pays employee (hopefully).
  6. Representative company goes under taking x months employee salary with it.

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The simple answer is that historically it made excellent sense. Until Maxwell a company's pension fund was an easily-accessible source of free borrowing. 

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In a globalised world where anyone can sell into the country this just adds more pressure to the wage and condition arbitrage that already exists.  It is astounding that people will go crazy about minimum wage, pension benefits, etc. whilst walking around in clothes that were most likely made by a 10 year old Bangladeshi under sweatshop conditions.  

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