The Most Important Document You Will Never Read....

Generali

...because it's 162 pages long

http://cdn.budgetresponsibility.independent.gov.uk/FSR2012WEB.pdf

The short version is contained in a single paragraph:

Population ageing will put upward pressure on public spending. In our central projection, spending other than on debt interest rises from 35.6 per cent of GDP at the end of our medium-term forecast in 2016-17 to 40.8 percent of GDP by 2061-62, an increase of 5.2 per cent of GDP or £80 billion in today’s terms.

Add to that the fact that the UK Government spent 3% of GDP in 2011 on Gilt coupons (interest on Government borrowing), a figure that is likely to rise as debt rises, the outlook is bleak for Government finances.

This is central to my position on house and other asset prices in the UK over the next few decades: pensioners can't receive the money they have been promised as there isn't enough money to pay them. The result? They will have to sell their assets. For most people their most valuable asset is their house.

How many couples/singles are going to want to eat cold baked beans while living in a £300,000 place in SE England? Better to move to Northern France or Northern England and release some of that capital.

If you want a pinch of salt with that:

http://en.wikipedia.org/wiki/Confirmation_bias

alleycat`

It's ok all the oldies will just go back to work.
Saw it on the Beeb last night - problem solved (tongue firmly in cheek).

MacMickster

Unfortunately, the position of succesive governments has been that we can continue to support our ageing population by encouraging immigration to the UK, so that we have more people of working age paying taxes. This, however, is yet another case of can-kicking as the immigrants will become elderly and we would eventually need the population to increase exponentially for this plan to continue to work.

By the way, I think that the cheapest housing for our pensioners will soon be on the Spanish costas.

Generali

MacMickster wrote: »

Unfortunately, the position of succesive governments has been that we can continue to support our ageing population by encouraging immigration to the UK, so that we have more people of working age paying taxes. This, however, is yet another case of can-kicking as the immigrants will become elderly and we would eventually need the population to increase exponentially for this plan to continue to work.

Part of the central case for the OBR is that net migration halves (I read this stuff so you don't have to;)).

MacMickster wrote: »

By the way, I think that the cheapest housing for our pensioners will soon be on the Spanish costas.

I agree. In an ideal world, entrepreneurs would be buying up half built blocks from the receivers of bankrupt developers and turning them into cheap but decent sheltered housing.

I predict that hell will freeze over before that happens. I'm happy to be proved wrong of course!

wotsthat

Generali wrote: »

This is central to my position on house and other asset prices in the UK over the next few decades: pensioners can't receive the money they have been promised as there isn't enough money to pay them. The result? They will have to sell their assets. For most people their most valuable asset is their house.

What's quite frustrating about this is that it's been obvious that governments don't want to have to pay for pensioners in decades to come for a long time.

I reckon I twigged that the government wouldn't pay me a bean in retirement about 15 years ago and I've been taking appropriate steps since.

There'll be all the arguments about "well I've paid in so why shouldn't get something back" but anyone that's under the age of 55 and thinking that the government of the day is going to fund them in retirement is a deluded fool.

Generali

wotsthat wrote: »

What's quite frustrating about this is that it's been obvious that governments don't want to have to pay for pensioners in decades to come for a long time.

I reckon I twigged that the government wouldn't pay me a bean in retirement about 15 years ago and I've been taking appropriate steps since.

There'll be all the arguments about "well I've paid in so why shouldn't get something back" but anyone that's under the age of 55 and thinking that the government of the day is going to fund them in retirement is a deluded fool.

Especially when you consider that the chances are that at least one of my 2 kids are going to see their hundredth birthday if they don't smoke or drink to excess.

grizzly1911

wotsthat wrote: »

What's quite frustrating about this is that it's been obvious that governments don't want to have to pay for pensioners in decades to come for a long time.

I reckon I twigged that the government wouldn't pay me a bean in retirement about 15 years ago and I've been taking appropriate steps since.

There'll be all the arguments about "well I've paid in so why shouldn't get something back" but anyone that's under the age of 55 and thinking that the government of the day is going to fund them in retirement is a deluded fool.

So are they are only increasing pensions to £140 per week for a couple of years then?

chewmylegoff

wotsthat wrote: »

What's quite frustrating about this is that it's been obvious that governments don't want to have to pay for pensioners in decades to come for a long time.

I reckon I twigged that the government wouldn't pay me a bean in retirement about 15 years ago and I've been taking appropriate steps since.

There'll be all the arguments about "well I've paid in so why shouldn't get something back" but anyone that's under the age of 55 and thinking that the government of the day is going to fund them in retirement is a deluded fool.

I've thought the same from when I start working. I have 3 years of civil service pension scheme contributions which I have transferred out because I don't believe that in 35 years time the government will pay, and the chance of me getting a state pension (given that unless things go horribly wrong, I will probably have a private pension which will be sufficient to keep me alive and in housing) are zero, in my view.

What I wonder though, is what will crack first. The electorate might well be given a choice at some future election with one party saying that it will start to means test state pension (and then two choices - apply retrospectively to existing pensioners, or just change for new pensioners), and another saying that it will scrap significant parts of the NHS.

RenovationMan

wotsthat wrote: »

What's quite frustrating about this is that it's been obvious that governments don't want to have to pay for pensioners in decades to come for a long time.

I reckon I twigged that the government wouldn't pay me a bean in retirement about 15 years ago and I've been taking appropriate steps since.

There'll be all the arguments about "well I've paid in so why shouldn't get something back" but anyone that's under the age of 55 and thinking that the government of the day is going to fund them in retirement is a deluded fool.

Yep, totally agree. I had the same 'lightbulb' moment around the same time, not because I'm particularly insightful (though I am), but because all of the experts were saying so on the media.

I was convinced that I would have to sort myself out, hence my heavy investment in my pensions, property and other investments. Any state pension I receive with be an unexpected bonus.

This whole pensions thing is shaping up like the endowment crisis is today. We've had a decade (more) of warnings saying that there is a shortfall and people really should look at sorting themselves out. Many people do exactly that and set up different savings and investment plans to deal with the situation. Many people are content to sit back and moan about it and when the time comes, they jump up and down and act all surprised and crack on that it's the first they have heard about it and someone should be done for 'misselling'.

chewmylegoff

grizzly1911 wrote: »

So are they are only increasing pensions to £140 per week for a couple of years then?

i believe that they will continue to increase the basic state pension but at some point in the not too distant future it will start to be means tested.

Graham_Devon

The beeb are running an article on this, and some key figures are included:

The UK government must make deeper cuts or raise more money in the future to keep public finances in check, the Office for Budget Responsibility says.

In its annual look at the government's finances, the OBR says in 2017-18 public spending needs to be cut by another £17bn or the same amount raised in taxes to stop debt ballooning.

The OBR says this change would bring total debt back to 40% of GDP by 2061.

Without the move it says debt would reach 89% of annual income by 2061.
It says the main reason more cuts are needed, on top of the £123bn already going through, is the rising healthcare costs caused by more people living longer.

The frustrating thing for me is nothing get's done. While I welcome a fuel duty freeze, I'm not sure it should be funded by savings elsewhere, as that just laves us in the same position for longer.

If we have made the savings through cutting, what's the point in using those savings to cut taxes?! It's just halting the pain now to extend it until another day. In the meantime nothing happens and we all get gradually worse off....making the reality when it does hit, even harder.