MSE News: Pension age rise bought forward

Gracchus_Babeuf

jamesd wrote: »

With a £250 a week pension that would cost around £18,500 a year in national insurance, assuming 3.5% return on capital and ignoring changes in the ratio between working and retired people. That seems a little high for someone on minimum wage of £12,334 a year for 52 weeks each of 40 hours, or even for someone on the median wage of around £25,000 a year (median is what half or more of all workers get). The pension is also a raise for those on minimum wage, to £13,000 a year income.

Those earning more would pay more because I would lift the ceiling on NI contributions. And my figures are not costed, merely ideal targets. £250 a week could be reduced to £230 a week, but it would be roughly in that ballpark.

gadgetmind

Gracchus_Babeuf wrote: »

my figures are not costed

We're not wearing our surprised faces.

Gracchus_Babeuf

gadgetmind wrote: »

Again, it seems that you have decided to launch into a tirade on pensions without understanding either the current system nor the various proposals in the green paper on the subject. That minimum guarantee will most likely be removed as it's a disincentive to save.

Perhaps you need to take a break for a few days/weeks while you do some fundamental research? As it stands, your killer combination of fervor and frequent factual howlers does little to advance your argument.

Removing the minimum guarantee would be highly controversial, as this is a safety net. I don't think any government would do that, not even this awful current one.

gadgetmind

Gracchus_Babeuf wrote: »

Removing the minimum guarantee would be highly controversial, as this is a safety net. I don't think any government would do that, not even this awful current one.

That's because you still haven't bothered looking at what's being proposed.

dunstonh

Removing the minimum guarantee would be highly controversial, as this is a safety net. I don't think any government would do that, not even this awful current one.

Pension credit is already proposed to be removed as part of state pension reform (which actually looks very good on paper and quite a radical reform). The previous Government got rid of the minimum income guarantee.

Gracchus_Babeuf

dunstonh wrote: »

Pension credit is already proposed to be removed as part of state pension reform (which actually looks very good on paper and quite a radical reform). The previous Government got rid of the minimum income guarantee.

So what would replace the pension credit?

gadgetmind

Gracchus_Babeuf wrote: »

So what would replace the pension credit?

Various options are being proposed in the green paper, and we could give you a summary, but it's not a particularly long or complex document.

http://www.dwp.gov.uk/docs/state-pension-21st-century.pdf

I don't understand your reluctance to read it.

Gracchus_Babeuf

gadgetmind wrote: »

Various options are being proposed in the green paper, and we could give you a summary, but it's not a particularly long or complex document.

http://www.dwp.gov.uk/docs/state-pension-21st-century.pdf

I don't understand your reluctance to read it.

The pension credit would replaced by a higher basic state pension, according to this. OK, but effectively no major changes, other than abolishing the S2P and replacing it with a higher basic state pension (though still lower than the overall state pension if S2P had been retained). I assume that those who have built up existing S2P rights will be able to keep them.

What the government could do to encourage saving is not only offer tax relief on pension contributions but also make the payouts from private pensions non-taxable unless above the higher rate threshold. This would encourage a lot more saving. And they could also get rid of Brown's idiotic 10% tax on dividends to pension funds. One more thing they could do would be to underwrite some of the risk of these private schemes by guaranteeing a certain return (e.g. at least RPI) as a minimum.

At the end of the day the government is shooting itself in the feet by its ideological commitment not to increase state pension spending as a percentage of GDP. Therein lies the problem. By shifting the burden from the taxpayer as a whole to the individual they are forcing everyone, including people of widely different personal circumstances, into the same boat. And this is wrong. of course higher taxation falls mainly on businesses and the better off, and these are the more likely Tory voters - it all figures!

It's a zero sum game. Extra money needs to be raised, but the difference is that the government wants to move the system away from collective responsibility to individual one, in true free market mentality. My approach would be collective.

gadgetmind

Gracchus_Babeuf wrote: »

This would encourage a lot more saving.

A few messages ago, you seemed to be against people being encouraged to take responsibility for their own pensions by saving. What's changed?

I assume that those who have built up existing S2P rights will be able to keep them.

They claim so, but they are politicians. Let's just say that I'm glad I opted out early.

My approach would be collective.

Fortunately, you're not in government; look around the world and you'll see what happens to countries that have early retirement on huge state pensions: it's not pretty, and it's going to get much worse.

dunstonh

What the government could do to encourage saving is not only offer tax relief on pension contributions but also make the payouts from private pensions non-taxable unless above the higher rate threshold.

So, someone earning £200k on pension income would not be taxed?

And they could also get rid of Brown's idiotic 10% tax on dividends to pension funds.

Whilst it was a popular media reference, it actually applied to all investments.

One more thing they could do would be to underwrite some of the risk of these private schemes by guaranteeing a certain return (e.g. at least RPI) as a minimum.

Products have been available that do this in the past but there are generally not affordable in the private sector. Those that offered and pulled them tend to be only able to offer limited tranches and only at certain points of the economic cycle. If the private sector cannot underwrite them then the taxpayer would have to and that just means more tax and more civil servants.

Also, many people look to more than just RPI. So, you would be holding some people back.