Starmer's vision quest

[C R]

The rest of Europe has unsustainable state pension and retirement ages. It's like looking at national debt and concluding ours is fine because of Greece.

Define unsustainable. Most of Europe has contributive pension models, i.e. you pay into your pension through your working life, the pension contributions are separate from general taxation. Effectively you are paying for a private pension, only the provider is the state.

 

[BoldonLad]

They could create a pensioner based index. I'm torn on means testing, it makes sense but at the same time will it simply take away an incentive to build your personal pension pot if it results in you getting a reduced State pension?

Possibly. This is already a regular "bone of contention" with Pension Credit, which is not only means tested, but, is a "gateway" benefit to more "goodies".

I doubt there will be significant changes in my lifetime, but, my preference would be for a "decent" level of State Pension, taxable if total income exceeds Personal allowance, and, scrap all "subsidies' (eg free public transport, free prescriptions etc).

 

[Psamathe]

I do not understand why a pension needs to be pegged to average earnings.

Throughout your working life your contributions through National Insurance are linked to your earnings. As raised earlier, inflation is a poor measurement of cost of living for pensioners so maintaining in relation to earnings (ie lifestyle) seems appropriate.

 

[BoldonLad]

I'd be uncertain as to the impact of changes eg make it a double lock of wages & inflation (ie drop the 2.5% "lock") and how much difference would that actually make to the cost.

The crucial aspect is not how wealthy pensioners in general are but how much those entirely dependent on State/New-State pension alone are getting eg when also paying rent. It's those struggling that need the focus. Hence maybe the need to consider some Universal Basic Income or Means testing (I believe some other countries means test state pensions eg Australia?).

Dropping the 2.5% would be reasonable IMHO. I am not sure that "cost" as such is the problem, it is the inability to forecast. with any accuracy what the cost will be, because, despite what they may try to tell us, Government are not in control of Inflation or Wages.

 

[Psamathe]

The rest of Europe has unsustainable state pension and retirement ages.

As others have commented "unsustainable" and "too expensive" is a question of choice not an absolute. In the UK we seem to be choosing to go with zero growth, choosing to have vast numbers on benefits not working through sickness, our Government choosing to flush large amounts on money down the toiles whilst choosing that a few already very wealthy get even wealthier.

Change those choices and "unsustainable" and "too expensive" can change.

 

[First Aspect]

Define unsustainable. Most of Europe has contributive pension models, i.e. you pay into your pension through your working life, the pension contributions are separate from general taxation. Effectively you are paying for a private pension, only the provider is the state.

Educate me. The current UK state pension would correspond to a private pension pot of roughly £250k. The French one seems to be on average about 25% more, for 3 years longer. Very roughly, you'd need about £320k to get your 5% annuity. Which more or less comes out at 8% of your earnings if you average the average over your entire 40 year career,.
according to Google.

My maths isn't great, admittedly. How much do you have to put in, in France?

 

[BoldonLad]

Throughout your working life your contributions through National Insurance are linked to your earnings. As raised earlier, inflation is a poor measurement of cost of living for pensioners so maintaining in relation to earnings (ie lifestyle) seems appropriate.

That sounds plausible, but, in reality it is simply not true. NI contributions are not "ring fenced" and, do not pay for "your" pension, the NI payment I paid during my working life were used to fund the then Pensioners, and, other Government expenditure, as part of general taxation.

NI is simply part of general taxation. Either the Government should come clean and just combine NI and Income Tax, or, they should fund Pensions, Contributory Benefits (and the NHS?) via a ring fenced NI.

Two problems I see with that are:

- which Government is going to "come clean" and effectively announce a basic rate of income tax as 30%+

- who would be foolish enough to trust Government to invest their Pension Savings wisely?

 

[First Aspect]

Throughout your working life your contributions through National Insurance are linked to your earnings. As raised earlier, inflation is a poor measurement of cost of living for pensioners so maintaining in relation to earnings (ie lifestyle) seems appropriate.

Throughout your working life, you are paying for someone else's state pension, and you are just paying more tax per se with increasing income, not specifically more tax into a national pension fund.

And if you follow your argument, why do you need the inflation lock?

 

[BoldonLad]

Why should it be locked to anything?

Chancellor can decide at each budget what they want to do. Same as other benefits, allowances and the minimum wage.

Because that was the scheme we had previously (pre-2011) and successive Chancellors allowed (State) Pension to fall behind the cost of living.

As the babies born in the baby boom after WW2 became near or at Pension age, (and because of the demographics a voting force), it was "politic" to do something about it. Alternatively, you can believe that Government had a Social Conscience, in which case, I have a bridge for sale, which may be of interest to you. 😊

 

[Psamathe]

NI contributions are not "ring fenced" and, do not pay for "your" pension, the NI payment I paid during my working life were used to fund the then Pensioners, and, other Government expenditure, as part of general taxation.

I'm no expert but I understood (maybe incorrectly) that NI was ring-fenced to a degree (paid into the "National Insurance Fund") in that legally it can only be used to fund contributory benefits (ie pensions, contributions-based jobseeker’s allowance, contributory employment and support allowance, maternity allowance, and bereavement benefits). When the fund is in surplus it can lend money to other areas of Government.

State Pension benefits are contribution based - don't make enough contributions and you'll get a reduced pension.

From a Government Briefing Paper https://researchbriefings.files.parliament.uk/documents/CBP-8554/CBP-04517.pdf

The Fund is used exclusively to pay for contributory benefits, and operates on a 'pay as you go' basis: broadly speaking, this year’s contributions pay for this year’s benefits. Indeed, retirement pensions account for over 90% of benefit expenditure from the Fund. The Government has no powers to use NICs to fund anything else.
...
... and in years when contributions substantially exceed outlays (as they have every year since the mid-1990s), the Fund builds up a surplus, largely invested in gilts: the government is simply lending itself money.

ie the NI/pensions/contributory benefit scheme is often in surpless and lending money to other areas of Government. So maybe I misunderstood "can't afford".

 

[Psamathe]

Throughout your working life, you are paying for someone else's state pension, and you are just paying more tax per se with increasing income, not specifically more tax into a national pension fund.

And if you follow your argument, why do you need the inflation lock?

National Insurance and taxation are not the same (as per my post above). If I spend my working like contributing to pensions of retirees then it is reasonable that others do the same for me when I retire. That is the way the Government have chosen the system to operate so retrospective changes such that I pay through my working life for those already retired but when I retire I don't get the same would be unreasonable.

State pensions are set at a really low level where those dependent on it as a sole income struggle. Their costs (energy, food, Council Tax, etc.) increase with inflation (though not properly reflected in CPI/CPIH for different groups). Were we to not index the pension then it would not take long for pensioners to be freezing to death during winter if malnutrition didn't kill them first.

Note that since 2014 National Living Wage has increased by 58% whilst New State Pension increased by 42%.
Note that UK National Living Wage (for full time 35 hr week) £444 vs full New State Pension £241 per week.

 

[BoldonLad]

I'm no expert but I understood (maybe incorrectly) that NI was ring-fenced to a degree (paid into the "National Insurance Fund") in that legally it can only be used to fund contributory benefits (ie pensions, contributions-based jobseeker’s allowance, contributory employment and support allowance, maternity allowance, and bereavement benefits). When the fund is in surplus it can lend money to other areas of Government.

State Pension benefits are contribution based - don't make enough contributions and you'll get a reduced pension.

From a Government Briefing Paper https://researchbriefings.files.parliament.uk/documents/CBP-8554/CBP-04517.pdf

ie the NI/pensions/contributory benefit scheme is often in surpless and lending money to other areas of Government. So maybe I misunderstood "can't afford".

Yeah, I think there is a degree of “ring fencing”, but, it is not like a “typical” pension scheme, ie, each individual does not have “a pot”

 

[CXRAndy]

Cannot blame them at all, who'd want to fight for starmer


View: https://x.com/i/status/2023503253426823190

 

[CXRAndy]

View: https://x.com/i/status/2023515641185988743

 

[CXRAndy]

View: https://x.com/i/status/2023702642514366645