Cutting the Welfare Bill

BigAunty

Generali wrote: »

As oodles of posters have worked out (or Googled - naughty!) the biggest single line item is pensions and associated costs. Add to that things like care costs and you have over half the welfare spend going on aged care of one sort or another.

Yes, and those who embrace immigration for its economic benefits, never seem to realise that they get old and qualify for pensions, too...

Jennifer_Jane

Is there any way to give the net pensions figure? ie we have to qualify for the Basic State Pension, and I understand that NI just goes into a general pot, nevertheless, in theory the pension is based on a separate qualifying criteria. I, myself, sent money over to the UK to buy contributions over some years and now get a reduced BSP based on 24 years or so, rather than the 39 that were required.

Pennywise

Another crazy thing about low paid public sector pensions is that there are many who get the same or MORE money in retirement than they did working.

EG a part time low level worker in a school or hospital, may earn about £7-8k per year. When they retire they may get £3-4k of occupational pension, but they also get about £5k of state pension (if worked enough years), so their combined pensions amount to £7-8k per year.

As they've been low paid, they won't have paid much NIC and they'll have only paid a few percent of their earnings into the public sector pension scheme.

How can this be right? It's going to get worse with the introduction of the £130 pw basic state pension for everyone.

Surely there should be some kind of sanity check that limits pensions to say 2/3 of last 5 years of earnings or something similar?

What's worse of course is that such a person pays no income tax as total income is under the £9k age related allowance! And even if income was over that, it's only the 20% basic rate tax, not the extra earnings tax known as national insurance! Another reason why they should be combined and charged at a higher rate for everyone. And why is there an age related additional personal tax allowance anyway? It seems that some pensioners are doing a lot better than today's workers.

drwho2011

Jennifer_Jane wrote: »

Is there any way to give the net pensions figure? ie we have to qualify for the Basic State Pension, and I understand that NI just goes into a general pot, nevertheless, in theory the pension is based on a separate qualifying criteria. I, myself, sent money over to the UK to buy contributions over some years and now get a reduced BSP based on 24 years or so, rather than the 39 that were required.

If you earn't NMW @ £6.06 for 24hrs (new working tax credit threshold) then you would pay £13 Income Tax and £38 in National Insurance in that year (Gross wage was £7,540).

So in theory, working 30 years to qualify for the basic state pension then you would pay £1140 in National Insurance.

30 years of state pension payments @ £140 a week would cost approx £220,000

drwho2011

Pennywise wrote: »

Another crazy thing about low paid public sector pensions is that there are many who get the same or MORE money in retirement than they did working.

EG a part time low level worker in a school or hospital, may earn about £7-8k per year. When they retire they may get £3-4k of occupational pension, but they also get about £5k of state pension (if worked enough years), so their combined pensions amount to £7-8k per year.

As they've been low paid, they won't have paid much NIC and they'll have only paid a few percent of their earnings into the public sector pension scheme.

They would have had to work for the majority of their career in the public sector, what your missing though is working for national minimum wage @ 24 hours a week means the state has lower employer national insurance contributions to make and saves on the cost of employing people at a living wage.

So in effect the state has the benefit of a low paid worker at the cost of higher pension payments in the future, which will be largely funded by existing public sector worker contributions.

Meanwhile it is spending public sector worker pension contributions to pay for Government services.

Jennifer_Jane

drwho2011 wrote: »

If you earn't NMW @ £6.06 for 24hrs (new working tax credit threshold) then you would pay £13 Income Tax and £38 in National Insurance in that year (Gross wage was £7,540).

So in theory, working 30 years to qualify for the basic state pension then you would pay £1140 in National Insurance.

30 years of state pension payments @ £140 a week would cost approx £220,000

Most people will have paid more NI than that, I paid 11% of my income, plus my employer was paying in, and had to have done that for 39 years, and for men it was 44 years. I would have thought the correct BSP figures should have NI contributions deducted?

Or is that a spurious argument?

drc

Generali wrote: »

As oodles of posters have worked out (or Googled - naughty!) the biggest single line item is pensions and associated costs. Add to that things like care costs and you have over half the welfare spend going on aged care of one sort or another.

The solution according to Labour was to increase pensions. The solution according to Tories and Lib Dems is increasing pensions. I know most MPs are arts grads but can they really not count???

The difference is that most pensioners claiming a pension have contributed to the system over their lifetime. I am not sure the same can be said for those claiming the myriad other benefits.

StixUK

homelessskilledworker wrote: »

Interesting thread.
I have a few issues with the welfare state as it is today, the idea of a system that picks you up when you fall down is wonderfull. And then when you are dusted down and fixed you are then encouraged to get out there again and fend for yourself, who in their right mind could be against that.

The problem today is that it is a lifestyle choice for far too many people, there are women who in an era of good quality and available free contraception are having countless babies, i really do see it as a form of stealing from the state, I don't want to support these women, where is my right to choose.

I am also a supporter of honest moral capitalism and free trade, and this is where I think supporters of a property crash of the type that visit sites such as this have a huge problem.
I am more than happy to compete with the next man or woman on the UK work floor, if he/she does better than me and because of that is able to get a better house then I say good luck to them and I deserve to live in more sub standard housing.

But the problem we have today is that I am earning more than most, I pay for my housing every month out of my pocket, and have done for the last 20 odd years. What I cannot compete with though is people who just give up and are then handed £1500 a month free housing in the form of HB.

I am a big supporter of the new welfare ceiling that is coming, but it is still far too much. And I would halve HB payments overnight by 50%.

I agree with you in some respects and disagree with you in others.

The welfare state is a "game" that people have learnt to play, I can safely say this because I see it in my everyday life as my dad is one and I debt collect and serve utility warrants, so I can see what goes on.

I myself have been on all sides of the spectrum, claiming just benefits, working and getting just tax credits and then working and receiving nothing.

I have made my choices in life and live with them, but I cannot see how someone can so fruitlessly advise that a housing benefit allowance should be cut by 50% overnight. Lest we not forget that the Conservative Thatcher government created the ideal of a free market and wealth creation that even the poorest can buy into (i.e by owning your council house, you WILL feel pride and take care of yourself). This has then created an inherent problem in the next generations to come where children are raised to believe they can achieve.

This can then create a comparison of yourself to the rich in society as you can now achieve greater wealth and ownership, you can feel deserving of anything (as supported by the Conservative government at the time).

The point I am trying to make is that the rich are greedy, always playing the markets and games to achieve further wealth and control over their lives, they use tax loopholes and accounting methods to further increase their wealth and self-importance. How can you berate the poorest for wanting the achieve the same, except it is based on an entirely different level (i.e income). The poor are greedy as well as the rich, they instead of having accountants use the system to their advantage to further themselves and achieve more income.

Take my example, I have a degree, ambitious, but I have four children. My wife chooses to stay at home and I receive approx 20k per year. Due to my income we recieve child tax credits, but due to our circumstances for every £1 extra I earn at present, I only receive 18p (net), a gain nevertheless, but in theory, I would be more financially secure if I was purely working 16 hours per week and claiming all relevant benefits. The help you get to achieve in this situation is amazing. I could get free evening courses, free prescriptions, free dental treatment, I could spend more time with my children, I could not take on the extra responsibility that I do at my current workplace, take away the worry of the extra miles I put on my car, get another degree, and the list goes on.

I don't disagree with you, I just think it is too brash to change it overnight, it needs to be a gradual, generational change and other factors need to change at the same time as the cut.

drc

The main problem is the cost of housing but it really is crazy how easily it all adds up. If you have a workless family with 2 kids in London they would be entitled to the following benefits per week;

Housing benefit - 2 bedroom rate (or 3 if different sexes/ages)= maximum of £290 - £340.
Income support/Jobseekers allowance= £105.95
Child tax credits= £108
Child benefit=£33.70
Council tax benefit= approx £33
Free school meals= approx £2 per day so £20 per week.

Total = £589 per week.

This does not include any disability benefits or other benefits such as free prescriptions that they might need. So, you can see that quite a lot of people in London will be affected by the cap.

drwho2011

Jennifer_Jane wrote: »

Most people will have paid more NI than that, I paid 11% of my income, plus my employer was paying in, and had to have done that for 39 years, and for men it was 44 years. I would have thought the correct BSP figures should have NI contributions deducted?

Or is that a spurious argument?

I was giving numbers based on today's requirements, i.e the threshold of £139 per week (23 hrs at NMW) along with the 30 years requirement. As this is in line with government plans for universal credit.

However

30 years @ national average salary of £26,000 means NI contributions (including employer conts) of approx £145,000.

Wonder what annuity that would buy these days?