Balls on Pensions

chewmylegoff

Good idea. So double the current state pension, give or take. We just need to find £60 billion to fund that for next year alone. That'll be 12p on the basic rate or income tax or something like that. We could raise the higher rate band instead but it would have to increase from 40% to about 95% so may not quite work out.

Guess we could just tax bankers and fat cats. That could pay for a price freeze on energy bills as well. And a free 5 bedroom house for every voter.

Tancred

chewmylegoff wrote: »

Good idea. So double the current state pension, give or take. We just need to find £60 billion to fund that for next year alone. That'll be 12p on the basic rate or income tax or something like that. We could raise the higher rate band instead but it would have to increase from 40% to about 95% so may not quite work out.

Guess we could just tax bankers and fat cats. That could pay for a price freeze on energy bills as well. And a free 5 bedroom house for every voter.

Nonsense. Where did you get your figures from? Cloud cuckoo land?

Go to somewhere like Italy and the state pension is up to a maximum of 86.6% of net income - not average income, the actual person' income!! That's over 70% of gross final salary.

What I'm advocating is a mere 50% of national average salary, which is perfectly affordable if you introduce means testing. What I'm saying is that there should be a fairly steep taper to prevent the wealthier pensioners with ample private pensions from claiming the full state pension. This is the heart of the issue. To give out state pensions to over 12 million people as a universal entitlement is nonsense. The state pension should be what it was always meant to be: a safety net. Why should retired judges and GPs with long career pensions receive state pensions at all?

chewmylegoff

Well state pension is about £60 bn a year at the moment and you are advocating doubling it. So I did some complicated maths and worked out that would cost another £60 bn.

This estimates that 1p on basic rate equates to an extra £4.75bn of tax revenue. Call it £5bn to be generous and you need to add an extra 12% on basic rate to raise another £60bn meaning that the effective rate of tax for most people would be 44% accounting for NI (My apologies by the way, my sums were wrong on higher rate - you need to increase it to 120% to raise the same amount....)
http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/the-public-finances/structure-of-taxation/


Of course you didn't mention this whole means testing thing, so that changes things rather. So the "wealthy" don't get it. How does that work? Who are the wealthy? Will you base it on private pension income or total assets? What percentage of pensioners will not receive the full amount? You've said no judges or GPs because they get large pensions, but at the same time you want their pension schemes abolished.

If you knew you were going to receive a state pension of £13k a year in today's terms, why would you bother saving for retirement unless you were in the top few % of earners? Such a high basic pension is a disincentive to saving, a massive burden on the tax payer (now let alone in 20 or 40 years' time when the full effect of aging population is felt). Such a policy would cause an even worse pensions crisis than we have now as the state would have to pay for a large amount of the total pension provision which is currently covered by employer contributions to private sector schemes which people would stop contributing to under your proposals.

I think you are the one hanging around in cloud cuckoo land.

michaels

if there are half as many retired people as those working and we pay them all 50% of the average workers salary on a payg basis then that is 25% of all incomes going to pay pensions and that is before you pay for anything else like housing benefit, the nhs, defence, debt servicing etc. Sure means test but that would result in no one saving so there wouldn't be much saving there on the total bill.

grizzly1911

Tancred wrote: »

Go to somewhere like Italy and the state pension is up to a maximum of 86.6% of net income - not average income, the actual person' income!! That's over 70% of gross final salary.

Isn't Italy potentially the next basket case of Europe? Would that really be a good economic model to follow?

Andy_L

Thrugelmir wrote: »

Well it did cost UK pensions £5 billion a year. Not only did it impact final salary schemes but personal pensions as well. Resulting in the crisis we have today. Where there's a generation heading towards retirement with insufficient provision.

Like Mrs T. Brown will be remembered for all the wrong reasons when history reflects and judges him.

£3.5 billion a year, the rest came from other non-taxpayers (e.g. charities)

It was, like many New Labour policies, the continuation of a Tory policy to its logical conclusion. It came with a, partially compensating, reduction in corporation tax.

http://www.pensionspolicyinstitute.org.uk/uploadeddocuments/PPI_Briefing_Note_22.pdf

Andy_L

lvader wrote: »

Yes. You are confusing average income with middle income.

The middle (ie median) average is £26-27k

Andy_L

chewmylegoff wrote: »

I'm not so sure it's because they consider it "reasonable". Probably more to do with the fact that it they would likely have to raise direct taxation to pay for it, which people would immediately feel the effects of, whereas they won't notice the impact on their pension is for many years. Voters being voters are therefore unlikely to be supportive of the reintroduction of the tax.

They considered cutting the relief reasonable when they were in power so it would have been politically awkward for them to reverse it.

Tancred

chewmylegoff wrote: »

Well state pension is about £60 bn a year at the moment and you are advocating doubling it. So I did some complicated maths and worked out that would cost another £60 bn.

This estimates that 1p on basic rate equates to an extra £4.75bn of tax revenue. Call it £5bn to be generous and you need to add an extra 12% on basic rate to raise another £60bn meaning that the effective rate of tax for most people would be 44% accounting for NI (My apologies by the way, my sums were wrong on higher rate - you need to increase it to 120% to raise the same amount....)
http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/the-public-finances/structure-of-taxation/

There are taxes other than income tax, as you well know.

chewmylegoff wrote: »

Of course you didn't mention this whole means testing thing, so that changes things rather. So the "wealthy" don't get it. How does that work? Who are the wealthy? Will you base it on private pension income or total assets? What percentage of pensioners will not receive the full amount? You've said no judges or GPs because they get large pensions, but at the same time you want their pension schemes abolished.

It would be a simple means test based on the private pension income. The alternative is simply to introduce a high rate of income tax for pensioners above a certain income level, eg. 40% rate for all those with a pension income above say £30k a year. Seems harsh, but given that they don't pay NI contributions it's not that bad really. And the poorest pensioners would be protected by the higher state pension.

chewmylegoff wrote: »

If you knew you were going to receive a state pension of £13k a year in today's terms, why would you bother saving for retirement unless you were in the top few % of earners? Such a high basic pension is a disincentive to saving, a massive burden on the tax payer (now let alone in 20 or 40 years' time when the full effect of aging population is felt). Such a policy would cause an even worse pensions crisis than we have now as the state would have to pay for a large amount of the total pension provision which is currently covered by employer contributions to private sector schemes which people would stop contributing to under your proposals.

I think you are the one hanging around in cloud cuckoo land.

Rubbish. Saving for a retirement sounds all well and good but exposes the saver to huge risks and uncertainty. Under my system people could still save for higher pensions, they wouldn't be stopped. One other alternative would be to have a flexible state pension that would be based on how much NI you wish to contribute. So, if you want to get more state pension, simply pay more NI. Upon retirement age your pension entitlement would be based on how big your NI 'pot' is.

Tancred

grizzly1911 wrote: »

Isn't Italy potentially the next basket case of Europe? Would that really be a good economic model to follow?

Basket case or not this approach has been in place for decades and that country hasn't collapsed.