FOR those unfamiliar with the term, a Ponzi scheme is a fraudulent device by which innocent clients, having been promised a return on their investments, are paid “dividends” out of their own deposits and that of subsequent waves of investors duped to enter the scheme. At the same time those who manage the scheme don’t invest clients’ money but defraud them.

All my working life arbitrary significant amounts of income tax and National Insurance (NI) contributions have been removed from my wage packet before I even caught sight of it. My employers were also compelled to make payments to the Government simply for giving me a job. Both of us did so willingly on the tacit understanding that I would in time receive an old-age pension sufficient to cover the cost of living during my retirement irrespective of how long that would be. History shows that many adult males in Greater Glasgow were lucky to live long enough to get any return on this investment.

It is now clear that successive governments, rather than invest my and others’ contributions, spent it just as they did with oil revenues and now rely on current revenue to fund state pensions. It creates the ludicrous situation that my “old age” pension is part-funded by taxes from my “occupational pension”.

As mentioned in your Grey Matters section, Reform Scotland suggests that an independent body should take over from the Government the responsibility of managing state pensions with employees contributing a variable amount from their wages in return for a pension return dependent on their cumulative deposits in the scheme (“Radical idea to defuse the pension time bomb”, The Herald March 21). The current NI-based scheme is by any rational analysis a Ponzi scheme and unless any future organisation charged with conducting it is given sufficient start-up funding to allow it to save and invest all future contributions then it too would be operating on the same robbing Peter to pay Paul principle.

Currently the state pension scheme costs the country in the order of £100 billion annually and the Office for National Statistics' projections for the future costs suggest that figure will rise to £170bn by 2032/33 and to £438bn by 2062/63. This figure does not include other benefits paid to some pensioners, such as housing benefit and disability living allowance which when factored in brings the forecast for 2062/63 to £491bn (9.4 per cent of GDP).

Transferring the responsibility for pensions to an independent body would allow the Government to blame an independent body for a mess it itself created when it runs short of funds, as predictions suggest it eventually will. A capital investment of at least £100bn annually would be required for a period of several years before the return on investing of “new” deposits would yield sufficient to make the scheme self-funding. Where could this money come from? Well we printed hundreds of billions to rescue corrupt banks and the financial interests of a few, surely providing a comfortable retirement for every citizen who has contributed to the creation of the society we all live in and rely on is worthy of the same consideration and treatment.

David J Crawford,

Flat 3/3,

131 Shuna Street,