How exactly do pensions work? I have never worked at a place where there was a pension offered. What I don't get is how do companies get away with going out of business and then people lose their pensions. Are they set up so companies can borrow from employees pensions? Don't you as an employee pay into a pension. Sorry for so many questions just have never had the oppurtunity to belong to a pension through my job so I have no clue how it all works.

I don't know. We're still new to the pension field ourselves and I honestly have a lot of the same questions you do.

The thing about pensions is that they originally - in the UK at least - attracted a lot of tax relief.

So individuals and companies were encouraged to put into a pension, on the grounds that the government would top it up.

Drawback being, you can't access the fund until you retire.

But relatively recently, the government killed tax relief on pensions.

Additionally, a lot of pension funds blew big money in the dotcom boom/bust, and there have also been plenty of documented cases of companies (or individuals of) dipping into the company pension as a cash reserve to lay out on other projects - often losing the lot in doing so.

The basic idea of a pension is sound - a lump sum of cash for when you retire - but in the UK at least it's all been such a cock-up that there's no real incentive to put cash into a pension scheme when you could investment in other savings schemes, with far less risk.

2c.

In the US, we've had a number of scandals with officers and companies depleting pensions. My dad's is working out for him, but I think ENRON every time I think about my husband's pension.

So are you saying pensions in the US aren't protected or ring fenced?

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Why not?
There are many pension scheme available. You can invest in any one of them. Again, you get tax benefits.

In the US, employers help workers save for retirement. About 50% privately employed people and most government employees are covered by some type of pension plan. alas 50% is not as much as it should.

Employers are not required to sponsor pension plans, which is pity but the government encourages them to do so by offering good tax breaks if they establish and contribute to employee pensions.

~Aviz