Pension pyramids

2014-10-13

Today Dutch news reported about a press release by the association of Dutch employers. They basically concluded that independent contractors should be forced to start saving for their pension. It also proposed more money for schooling should be made available to them (whatever that means). Now I don't really care about the schooling part. It doesn't affect me but if there are similar opportunities for regular employees then it may make sense to make these available for contractors. It's the pension thing that hit a nerve.

Since this put me in instant rage mode let's first do some sanity checks. First of April coming soon? No, not likely related (I always get hit by these ;)). Fake news? Don't think so. The NOS article links to some manifest that was tldr for me. Ok whatever.

Every now and then I get random letters from various pension funds reporting how much they'll owe me when I turn ... well when I turn whatever the pension age is when I get there. From the combined reports I'm probably going to get abouuuut... 11 euro's. I'm not even sure if that's per month or per year or in total. Pretty sure it won't make a difference either way. These pensions were built up in earlier short-term employments for shit-jobs paying shit-wages. Okay, they weren't all shit-jobs, but most were at or near minimum wage nonetheless, because why pay a teen the same wage for the same work as an adult eh. These letters are mandatory but I think the whole reporting thing is costing more money than they owe me.

Okay so I don't really have a pension and what's up with that. I'm in my thirties. I won't be up for a formal pension for at least thirty more years, maybe/probably even more. I'd be very very VERY surprised if there is anything left of the current pension funds by that time. I can't even predict the next five years, let alone 30. Just look at what changed in the past 15 years, holy shit.

Thing is; these pension funds are only drying up. The number of people eligible for a pension is still rising which is why they're pushing hard to extend the year of qualification. At the same time most funds have been hit hard by recent recessions. Not per se because they've done bad investments, though I'm sure some have, but simply because every investment had a reduced revenue. Even the stable ones. At this point, for me, it's just a big pyramid scheme. People paying for their pension now won't get a pension, or a very meager one. And even if they do they're probably still on welfare. I don't really think the socialistic part of, at least, Holland will disappear any time soon. But this whole pension fund thing will be replaced by something else. Something that we'll probably end up paying for anyways through taxes.

So I've never trusted pensions. I've always opted for roll-your-own when I could. And of course I have a live-now-ask-questions-later mentality. I might actually never even reach the retirement age. And while it'd be terribly stupid to not take any precautions for the case where you actually don't die, it'll still be a time where you're less able then you are now. Both mentally and physically. You won't need all that fancy money because really, what are you going to do with it. Party hard? You won't care. Buy a new car? Except you're no longer allowed to drive. Invest in a new house? You won't be able to maintain it, or enjoy it that much at all. Etc. Yeah, I have a pretty bleak look at that part of my future. Luckily it'll still be a few years and I'll gradually slide into that life style so I won't really notice it :)

I've always intended to go for a roll your own pension. For example, I deem my house as a long term investment in case there's nothing else. Meaning that when push comes to shove and we're out of money come our retirement, we can sell the house and have a decent living for at least a few years. I realize this isn't for everybody because either they simply can't afford to buy a house or they really don't want to move out of their own home. But there are plenty of other ways to invest your money in something relatively safe. I'm not saying it's value will remain the same. Heck, I know it won't (it's called inflation, look it up). But there are plenty of things to put your money into that will still be worth plenty of money in the future. This could be gold, art, or even just a personal long-term savings account/plan.

For me it's about estimating how much money I'll need past my retirement. I'm assuming I won't need as much money per month as I do right now, after inflation adjustment of course, Also, money means nothing once you're in a retirement home, if you even live to see it (90+?). In fact, at this point our government is pretty much stripping you of it. Or they were planning something like that anyways. Who cares when you're old and senile, eh? If you have kids you may be tempted to want them to inherit something, but think about it. By the time they ought to inherit it because you're at an age of natural death, they'll be old enough to have a family themselves and should not depend on any inheritance. It'd be nice but hardly worth the trouble of taking into account unless you already have enough anyways.

My suggestion (IANA financial advisor!); do make sure to have your own retirement plan but live your life now while the age thing hasn't taken its toll.

(Seems I'm not the only one opposed to this forced pension idea: news article (Dutch))