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The Insurracne Assignment

The cause of the pension crisis is as a result of the government proposing implementing the ‘Pan European Pension Scheme’ which is already being implemented in most member states of the European Union. Under the current pension scheme, the British Government was funding most of the pension fund related projects since over the years but proposing withdrawing from funding based on the new European directives. This report shows how the current pension scheme affected the life of her

citizens and how the new scheme could effect the change. The report also reveal the sacrifice they are to pass through before actualizing this goal and how it affected the insurance industry who are known as ‘Risk Investors’ The U. K pension scheme was considered one of the best in Europe being one of the advanced nations in the world. A nation who had colonized several nations of the world who are known as ‘members of the Commonwealth of Nations’ including the United States of America her former colony.

The British national policy in terms of governance and constitutions stand as a bench mark for other former nation to emulate although with some amendments. Those nations in Europe who were former British colony set up their individual pension scheme to the beneficiary of her citizens who have retired from public service both in the government and in the public sector. The structure and policy of individual pension scheme among the European nation was a welcome development which their citizens enjoy over the years.

Pension fund are wages paid to retired workers of certain percentage of their total wages they earn during their service. Each worker employed either in the government and private sector of the economy pays certain sum of money to the pension fund which is used to pay pensioners like in most countries. This accumulated amount is put into investment in order to generate revenue which is added up unto the Pension Fund. In recent times, it is revealed that U. K has one of the worst pension scheme in the whole of Europe.

A study by a consulting firm called ‘ Aon’ state that ‘the state (U. K) pays Pensioners an income equivalent to just 17% of the average earning. This is the worst in Europe …’ Workers get retired when they are of the retired age. The retired worker from any business or government establishment give way for another staff for a replacement; thereby creates job vacancy for those who are not employed to be employed from the bottom level. Those who had severed for a long time retired between the age of 40 to 45 like in most countries.

According to Aon, ‘U. K has the highest retirement age at average of 66. 2 years with 57 percent of the people aged 55 to 65 still working. THE PAN-EUROPEAN PENSION SCHEME Member nations of the European Union has formed the Pan – European Pension scheme to be regulated in all member nations of the Union of which U. K is a member. Each member of the Union has her individual pension scheme which is being enjoyed by her citizens. Now these member nations combined all their resources and ideas together to form the ‘Pan- European Scheme’

According to Hardwood ‘The Pan European Pension scheme was introduced as a result of the 2003 European Directive which was implemented in the U. K at the end of last year. The aim of the directive was to create single market for occupation pension… ‘ (Pan European Pension Provision – A developing Opportunity by Stephen Harwood; October 2007). The advantage of it is that it enable a company to rationionize it pension arrangement as to make it applicable in each member nation of the union..

In other words, a staff being a citizen of a member state working within any of the member nation will still enjoy the same pension benefit anywhere he works. ‘The rationalization into one pension scheme should enable a company to: Save money through reduced cost and lower investment fee; Control risk more efficient and impose corporate governance as it is easier to monitor the one pension scheme……’ Stephen Harwood added. THE NEW EUROPEAN DIRECTIVE U. K being a member nation of the European Union is proposing implementing the new pension scheme of the European Union.

According to expert, the new policy if implemented based on the European directive, ‘could stifle U. K pension scheme investment options; new restriction is being imposed on the Draft Occupational Pension scheme; to invest in derivatives could be restricted to alternative that either contribute to a reduction of investment risks or else facilitate efficient port folio management’ Aon added. Evidently, pension fund were invested in both in the government sector and as well as the private sector of the economy base on the former directives.

On the contrary, the new directive restrict the flow of pension fund to on-going businesses and investments both in the government and private sector. The former directive encourages the flow of pension fund to such investment to the beneficiary of the pensioners. Since the government will stop funding those pension fund related investment those investments and businesses will collapse and may result to lost of millions of British Pound of pension fund already invested since theses project can no longer exist due to lack of funding. THE PENSION INSURRANCE SCHEME

‘Under the propose changes included in the directives, the option for occupational directives could be restricted to alternative that either contribute to a reduction of investment risks or else facilitate efficient port folio management’ according to Aon consulting. The ‘investment risk’ here implies that pension fund was used to fund projects as a kind of venture capital. In that case, the fund were used in projects that are of very risky situation and there is the possibility of having both private and government Insurance scheme backing such projects.

Government provides insurance policy that protect such investment in the same way she provides both insurance and guarantee to projects overseas involving U. K citizen. In that case base on the new directive, if the government withdraws her insurance and funding to pension funded projects completely, those on-going project and investments before the implementation of the new directive will collapse which may result to lost of job by those already employed. The Labour Union will resist which may result to nation wide strike; and if not properly handed by the government.

The other option of the new directive is to ‘ facilitate efficient investment portfolio’; this implies that the U. K government has discovered that those pension funded project lack sound management port folio. As a result of poor management coupled with high taxation, they could not produce enough revenue to enable them become financially independent; so the government is seeing it as a waste of fund; therefore gives here options that either she restrict the low of fund or ‘to facilitate efficient port folio management’ base on the new directive.

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