What we can learn from countries that have privatized: It’s
‘A bloody mess’
It was privatized 21 years ago. So how is Britain’s retirement insurance
system doing now?
It’s “a bloody mess,” according to a recent assessment in The
American Prospect magazine.
When you examine how some other nations have fared, it’s not pretty. But
we can learn a lot from other countries, such as Britain, whose right-wing government
dragged workers down that rocky road.
Great Britain privatized its social insurance system for the elderly in 1984 under conservative Prime Minister Margaret Thatcher, to replace a program she claimed would be unaffordable in 50 years. Now Britain’s Pensions Commission believes those who think Thatcher’s privatization solved the pension problem are living in a “fool’s paradise.”
Largely unregulated, administrative costs eat up a large portion of private accounts there. On average, fees and charges reduce pension lump sums from 20 to 30 percent on retirement. Britain’s Pension Commission warns that 75 percent of those with private accounts have inadequate savings.
The British system is a confusing array of different programs. It is so confusing that numerous Britons were sold bad investment plans creating the “mis-selling” scandal that led to insurance companies paying more than $20 billion in compensation to workers who were sold pension plans that made them worse off.
Now Great Britain faces a pension funding crisis that, according to the Daily Mail, “seems to get worse by the day.” According to a December report from Deloitte & Touche, “Blue-chip stocks (in England) would have to rise by about 30 percent from current levels to wipe out big pension fund shortfalls.”
The Bush privatization scheme looks suspiciously like Britain’s.
Ironically Britons are now looking to return to a state pension system. Their reform model is a much simpler benefits plan — one very much like America’s highly successful Social Security program.
