What should the government do?

grey_gym_sock

antrobus wrote: »

There is a separate National Insurance Fund.

it's just an accounting convention. in reality, they could let this "fund" have any deficit or surplus if that's convenient. (they could also change the rules about what the fund is and isn't used to pay for.)

nobody is going to vote out a government because they've changed the rules governing the NI fund. they may vote out a government because of changes to actual taxes (including NI) or public spending.

quotememiserable

Option 5. Everyone wants payments to continue but don't want to pay for them. Any government that proposed reductions or increased payments will be unelectable, so their only way out will be to reduce the number of pensioners. It will have to be done stealthily, but reduced NHS care for over 65s, legalising voluntary suicide for the terminally ill, that sort of thing.

hugheskevi

My opinion is a 40% basic rate of tax on all income above £25k a year for all over 65s. This is the fairest and easiest method to implement. The alternative is forcing pensioners to pay NI, which would hit the worse off disproportionately. Having a much lower threshold for the 40% rate is a fair counterbalance to the lack of NI payments after age 65.

40% tax above £25,000 wouldn't be very fair to those who go tax relief at 20% and then have to pay tax at 40%.

Similarly with NI - many would have paid NI at about 10% on the initial contribution and got 20% relief. If they then have to pay 30% tax they could rightly feel aggrieved.

You need to be very careful with decisions such as this, as pensions need trust to work, trust in your counterparty, trust in compensation systems, trust in stable regimes after your mony is committed, etc. Governments haven't been perfect in this regard (increasing minimum age from 50 to 55, RPI-CPI changes) but by and large it is fair to say that those who saved in a pension got a decent deal. Change that, and it is hard to argue that anyone should save in a pension.

Lagoon

I voted for option one. I'm all for increasing the state pension age to 70, but I do say this as someone that's nowhere near 70 just yet. Therefore, I can't know how it feels.

I don't think, with current living expenses, retiring before 70 is something we can plan for. There just isn't enough money available in our household budget to begin thinking about pensions just yet, and we're in our mid-late 20s.

All of the 70 year olds I know are extremely active and capable. For most people, 70 just isn't 'old'.

I know that I personally hope to be capable of working into my 70s, and if I can then I will.

jamesd

How about just stopping paying the state pensions based on years when people weren't actually paying into the system? Lots of increases in that in recent years and more of it in the flat rate scheme, which adds freebies to the self-employed to the list.

One of the things that is being done is to cut the value of the state pension for employees in the flat rate proposal, by stopping the pension value increasing after 35 years, when it now continues to increase the additional state pension part for a whole working life.

Two other solutions that could be used, one of them easy:

1. Encourage immigration so the cost is spread over more people. Those with young families are particularly useful for this. Easy except politically and producing a bigger economy.
2. The bulge in pension costs as a percentage of GDP is in part due to the baby boom generation, who were not paying for their own pensions but for the smaller generation that preceded them. A tax specific to this group to provide for their future pensions while not taxing the smaller following generation could be used. Say an extra income tax on those due to reach state pension age in the next 5 years, a lower extra tax for those due in ten years, lower still for 15 and then 20 years and nothing extra beyond that.

Daniel54

Tancred wrote: »

My opinion is a 40% basic rate of tax on all income above £25k a year for all over 65s. This is the fairest and easiest method to implement. The alternative is forcing pensioners to pay NI, which would hit the worse off disproportionately. Having a much lower threshold for the 40% rate is a fair counterbalance to the lack of NI payments after age 65.

As for increasing the pension age - thumbs down. Working until 70 is a barmy idea and will prove unpopular with employers who will not want to be burdened with geriatrics - quite understandably in my view.

Assume in the interests of fairness you would also remove the tax exempt staus of capital gains on owner occupied homes -40% on gains above £25,000?

Brilliant idea to tax savers in retirement at a higher marginal rate than workers in employment

No better way to throw more financial liability on to the state than to deter earners from saving for retirement

I have not voted because none of these options are the ideal way forward

- birth rate needs to be above death rate -we are just about there

-those of employment age need to be able to work

-we need a growing economy to provide jobs for those who can work

-we need to educate our children so that they can fill the jobs available

This my friend is what government can do -bacause on a macro level that is their duty to the electorate.

Not saying this is easy

lvader

How about just implementing what has already been proposed?

BLB53

People are generally living longer so it makes sense to increase the age at which people get their state pension.

However, the bigger problem is the rate of increase in welfare benefits - child tax credits, housing benefits etc which is costing us over £100bn p.a.

hugheskevi

However, the bigger problem is the rate of increase in welfare benefits - child tax credits, housing benefits etc which is costing us over £100bn p.a.

It is all part of the same problem.

Welfare spend in 2017/18 is forecast to cost[STRIKE] £117bn[/STRIKE]£208bn in real terms, of which [STRIKE]70%[/STRIKE]56% will go to pensioners.

That compares with 50% of welfare being spent on pensioners between 1992-97, after which the proportion of welfare going to pensioners escalated, as well as welfare spend growing in real terms.

The amount of welfare spent on pensioners now is equal to the entire welfare expenditure for 1992/3 (real terms).

zagfles

hugheskevi wrote: »

It is all part of the same problem.

Welfare in 2017/18 is forecast to cost £117bn in real terms, of which 70% will go to pensioners.

That compares with 50% of welfare between 1992-97, after which the proportion of welfare going to pensioners escalated, as well as welfare spend growing in real terms.

The amount of welfare spent on pensioners now is equal to the entire welfare expenditure for 1992/3 (real terms).

I think you mean £167bn above. Thought it sounded way too low!

(£117bn is the pensioners' figure, not total).

ETA: still sounds too low, and in fact it is, that figure is only DWP benefits, it doesn't include HMRC paid benefits such as tax credits and child benefit. When you include those (third tab) , the total in 2017/18 is 208bn, of which 117bn is pensioners, so it's only 56% going to pensioners.