washingtonpost.com  > Politics > Special Reports > Social Security
Page 2 of 2  < Back  

For Many, It's Back to the State

One of them was Paul Weir, a public relations specialist who lives in the city of Cheltenham. He estimates he put about $160,000 in a pension fund operated by Equitable Life, one of Britain's biggest, and purportedly most reputable, fund managers. To his horror, Weir says, Equitable Life reneged on its commitments -- those who thought they were buying guaranteed annuities wound up with 40 percent less than was pledged. Others discovered that the money they thought was going into the stock and bond market instead wound up paying Equitable's debts.

Weir, who helps run the Late Contributors Action Group, one of several organizations of Equitable victims, calculates he lost more than $30,000 in Serps contributions, and another $50,000 in savings. Regulators are still examining Equitable's collapse for civil penalties.

A protester attends a September rally in London of British pensioners seeking an increase in benefits. (Richard Lewis--AP)

_____Related Story_____
A Safety Net With Some Holes (The Washington Post, Apr 11, 2005)
Social Security Around the World As U.S. Considers Private Accounts, Experiences in Chile and Britain Provide Some Inspiration and Offer Cautionary Tales
_____Special Report_____
Social Security

While the Equitable scandal has been the most notorious, Britain's financial watchdog, the Personal Investment Authority, has taken disciplinary action against more than 340 investment firms for failure to comply with government pension regulations, including a record $1.1 million fine for Prudential. Another regulatory agency has found widespread deceptive practices, hidden charges and dubious contract terms.

The state system was one of the least generous in the developed world, but it was complemented by a highly developed system of privately funded pension plans from employers. But while the state now seeks to cut back its role to control expenditures, the private system is in significant decline.

In its report in October, the Pensions Commission estimated that 75 percent of private plans have contribution rates that fall below the level needed to provide adequate pensions. Women pensioners, it reported, are even worse off than men.

On a chilly Tuesday morning in February, James Jacobs, 61, a former executive for Courts, a bankrupt furniture company, walked into his stable outside Nottingham and hanged himself. He was driven to suicide, according to family members, by his fear that the company's retirement fund had been drained of at least $25 million to pay its growing debt, leaving him and 500 other former employees without compensation.

The Labor government in recent years has sought to help out the poorest retirees by offering means-tested benefits to bring them above the poverty line. But critics complain such programs penalize those with personal savings and add another level of complexity to an already confusing system.

Experts say the British experience should serve as a cautionary tale for Americans. A carefully regulated privatization program can help, they contend, but don't expect it to solve the most fundamental problems. "I would say to President Bush, 'You're dead right to look for reform now, before things get out of hand, but you've got to do it the right way.' " Field said.

< Back  1 2

© 2005 The Washington Post Company