Saturday, June 09, 2007

"Privatization Bombed in Britain--Now they’re looking for a way out"

Check out this article from the AARP.

It’s "actually cheaper for the state to carry the risk," says Chief Executive[*] Christine Farnish, adding that in looking for a system that offers the best combination of modest guaranteed retirement benefits and low cost, the U.S. Social Security program seems the best model. "It doesn’t have to make a profit, and it delivers efficiencies of scale that most companies would die for," she says. . . .

In 1986 the Thatcher government offered to let people divert part of their social security taxes into a personal investment account similar to a 401(k). For help in designing the plan, the government turned to the insurance industry, the main source of long-term investment products in Britain. By assigning this role to the industry that would benefit most, the government had in effect asked the fox to design the chicken coop. . . .

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[*of Britain's National Association of Pension Funds, an employers’ group]

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