Pensions Pyramid scheme

pension-newbie

There is an element of truth, in that people are promised more in return than gets put in. The difference is thanks to HMG they will actually get it!!

I am tired of hearing people say you can't change the pensions I've paid my stamp and I have earned the pension. Looking at the value of the state pension either at the £5-6K CPI protected p.a it is now or the £140pw it will be before too long. How much would that pension with its guarantees cost in the open market as an annuity?

I bet its a lot more than the expected value of the NI payments recieved over the years. Would be really interested to hear any actual numbers or if any analysis has been done

atush

More than 100K is for certain.

jamesd

If we look at the planned flat rate cut to the state pensions for employees there is a bit more of a characteristic of a Ponzi scheme today. Current and future NI payers will be paying for benefits for others at a level well above the level they are told they can expect under the proposed new scheme.

In this case it seems to be effectively vote buying by the current government. Money taken from future NI payers to effectively pay for increased state pension payouts to those not entitled to them under the current rules.

Jack_Griffin

Im not sure that is the right way of looking at it James, the new scheme kills the SERPS/SP2 burden on the government, most people who get a relatively large entitlement in this category (up to twice the regular £110 state pension) are the higher earners and therefore tend to live longer.

Though they 'say' the changes are cost neutral, I'm pretty sure they've done their sums & they believe this reduces the overall state pension burden in the long term, it certainly takes a degree of risk out if nothing else.

As the election comes before the new pensions kick in there are likely to be a number of disgruntled retirees who just miss out on the new rates & get less themselves.

jamesd

Even a low earning employee on minimum wage for a reasonably full working life is going to get a lower state pension under the new scheme. The loss is not limited to just average or high earners, though they also lose out. This happens because the changes make the accrual rate lower and cap the number of years of accrual from a whole working life to just 35.

The problem isn't the SERPS or S2P part, it's taking the money from the employees to provide it as a state pension to the people who didn't work much.

They don't claim that the new plan is cost neutral. The final plan turns out to have a 1-2% of GDB increase in spending, even though the initial objective was to be cost neutral.

One problem is that so far there's been relatively little fuss about how middle aged and younger employees are going to lose out. Assuming that happens come election time it could prove to be a substantial vote loser for the current government. But younger people tend not to pay much attention to pensions, so maybe the recon that this won't happen and that the votes gained from non-employees will be greater than those lost from younger employees.

I'm not keen in part because it's yet another transfer of wealth from the younger generations to the baby boomer generation and we should be reducing that, not increasing it like this.

There are other ways to do this. Instead of just giving money to non-employees it could be done by having them pay NI as part of their lifestyle choice not to work, when they aren't on benefits for those seeking work or unable to work. The self-employed could pay the usual NI rate, not a reduced on that buys less pension, now it won't buy less pension. That would still leave the problem of how to fund for those who will get the new payout before they have time to make any substantial number of payments for it but at least it'll help in many cases.

CLAPTON

jamesd wrote: »

The self-employed could pay the usual NI rate, not a reduced on that buys less pension, now it won't buy less pension. That would still leave the problem of how to fund for those who will get the new payout before they have time to make any substantial number of payments for it but at least it'll help in many cases.

Presumably then the self employed should be able to claim sick benefits and JSA like employed people?

jamesd

Yes, or pay a rate between the current rate and the full rate that only provided the higher pension payment.

Linton

jamesd wrote: »

..
There are other ways to do this. Instead of just giving money to non-employees it could be done by having them pay NI as part of their lifestyle choice not to work, when they aren't on benefits for those seeking work or unable to work. The self-employed could pay the usual NI rate, not a reduced on that buys less pension, now it won't buy less pension. That would still leave the problem of how to fund for those who will get the new payout before they have time to make any substantial number of payments for it but at least it'll help in many cases.

What money "given to non-employees not on benefits who have made a lifestyle choice not to work" had you in mind?? As a non-employee not on benefits having made a lifestyle choice not to work am I missing out on a source of income? Or were you thinking that pensioners should pay NI??

I think you have a fair point about the self employed as has Clapton.

But as to your complaint about wealth transfer from the young to people born 1945-1970, the subsequent generation will soon enough get all the loot and then have to put up with the complaints of those born since 1995.

System

On that silly argument everything is a ponzi scheme.
Insurance, because if we all crashed our cars on the same day the companies couldn't pay out.
The AA because they couldn't come and rescue everyone at once.
Doctors because if we all became ill at once they couldn't cope.
Freedom, because if we all exercised our right to go to the Isle of Wight at the same time millions would have to be forcibly turned away.

Linton

jamesd wrote: »

....
...yet another transfer of wealth from the younger generations to the baby boomer generation and we should be reducing that, not increasing it like this.

About a quarter of the first postwar generation, those born before 1952, wont be getting the new higher pensions because they will have retired by 2017 and many born afterwards wont benefit as they would have already earned enough in SERPs to exceed the new threshold.