State or private pension?

DairyQueen

bostonerimus wrote: »

Pension age should be related to longevity...so maybe it will be lower in countries with a shorter average lifespan.

Yep, that was my conclusion also.

Thrugelmir

bostonerimus wrote: »

The max US social security pension for someone retiring at age 65 today is about $33k/year and the average is about $18k/year. It's calculated using your years of maximum earnings, but it's on a sliding scale so as you earn more your SS payment does not go up in a linear fashion so a dollar for a low earner buys more SS than the same dollar for a higher earner. However, eliminating even a modulated connection between benefit and earning as has been done in the UK would not be popular in the US. The UK flat rate reforms have reduced the benefit for high earners and haven't really increased it for low earners as they would have received a similar amount from the basic pension and pension credits. The people who did really well from the reform were people paying Class 2 NI that only qualified them for the old basic pension. ie the self-employed and expats.

1 in 3 Americans have less than $5,000 saved for retirement. Statistics can be very misleading. Averages in particular.

At least the UK system provides a base level of equality.

bostonerimus

Thrugelmir wrote: »

1 in 3 Americans have less than $5,000 saved for retirement. Statistics can be very misleading. Averages in particular.

At least the UK system provides a base level of equality.

Lifetime earnings is what determines US Social Security and not the level of other retirement savings. Most people with 30 or 40 years of contributions will receive a far higher benefit than in the UK. The value comparison would need us to compare the different tax rates and tax thresholds.

I like the flat rate approach that keeps everyone above some "poverty line", but it needs to be an adequate benefit and the OECD numbers show that the UK SP is one of the worst values so the UK needs to do better on the level of the flat rate pension. The idea of abolishing Class 2 is a good one as the rate is so low and I'd also like to see NI payed at a far higher rate above the current earnings threshold.....2% seems like a small amount to pay and maybe the age the SP starts pushed up too as longevity has increased a lot. Although maybe the UK could adopt the US approach where you can take SS early (age 62) and get a reduced benefit as that's allows you some retirement timing flexibility.

MK62

sevenhills wrote: »

We have a state pension paid for by ourselves via the tax system.
They are generally inaccurate, but I often see posts on facebook saying that the UK pension is poor compared to other countries. Is that true?

That depends on how you judge "poor".
The UK SP is lower than many of the developed countries, but you have to put that into context, in terms of cost of living, percentage of "average" wages etc etc.......and you also have to consider how much people in each country have to pay throughout their lives for whatever state pension they receive. Then you need to consider access to other benefits (if any) for the poorest....and in some cases, cost and access to healthcare etc.....
It's not as simple as just comparing headline levels.......

sevenhills wrote: »

Which country has the highest pension, is it fair?
Of the NI contributions, how much goes towards the state pension?

I can't answer the first question - but I would just say that there are many ways you could measure "highest".......
On the second question, in 17/18, UK NI receipts were £130.5B, and the cost of the state pension was £93.8B, so a crude calculation could say that around 72% of NI receipts are spent on the state pension.

sevenhills wrote: »

What size lump sum would be needed to pay me £165 per week in 10.5 years time?

As the SP is risk free and index linked, then you'd probably need to compare it to an annuity.....these vary for different people and even different parts of the country, but a ballpark figure would probably be in the region of around £210-240k (in today's terms, and at current annuity rates - though those rates could be quite different in 10.5 years time)

JoeCrystal

MK62 wrote: »

On the second question, in 17/18, UK NI receipts were £130.5B, and the cost of the state pension was £93.8B, so a crude calculation could say that around 72% of NI receipts are spent on the state pension.

I checked the OBR site and the estimate that it would be £96.6 billion in 2018-19 so an increase of £2.8 billion for this year. The forecast for 22-23 that the NI contribution would be up to £154.90 billion with state pension taking up £110.26 billion, so the percentage is pretty much the same. Still, I can't but worry about how affordable state pension is going to be when I get mine in 2054!

Thrugelmir

JoeCrystal wrote: »

I checked the OBR site and the estimate that it would be £96.6 billion in 2018-19 so an increase of £2.8 billion for this year. The forecast for 22-23 that the NI contribution would be up to £154.90 billion with state pension taking up £110.26 billion, so the percentage is pretty much the same. Still, I can't but worry about how affordable state pension is going to be when I get mine in 2054!

Remember that Gordon Brown (as part of the Labour manifesto) pledged not to raise income tax. Which he didn't. To raise revenue for his nanny state concept he targeted NIC instead, both employee and employers contributions. Thereby not breaking his pledge and spreading the pain. NIC became a pure tax at that point of time. Absolutely no connection to payment of pensions.

lisboa84

Just to throw some random numbers out there; compare UK to the nearest neighbour - Ireland (converted euro to pound) -

UK maximum SP (35 contributions needed for the maximum) - £164.35pw.
Ireland SP - (48 (yearly average) contributions needed for the maximum) - £211.37pw.
Ireland SP with 35 (yearly average) contributions is £190pw.

Ireland NI rates - 0% if earn under £305 a week.
UK NI rates - 0% if earn under £162 a week.

Ireland NI rates - 4% if earn over £305 a week.
UK NI rates - 12% if earn over £162 a week.

But Ireland social insurance doesn't pay for a NHS.

Cost to see a GP or go to hospital in UK - £0.
Cost to see a GP in Ireland - £45.
Hospital appointment in Ireland - £70.
Emergency department in Ireland - £85.

UK voluntary contribution to top up your state pension - £780 maximum a year for class 3.
Ireland voluntary contribution to top up your state pension - for most people it's 6.6% of reckonable income from the previous tax year. So a basic wage of say 18,000 would mean a payment of 1,188 if you didn't work the next year.

I guess the overall point is it's not just a case of comparing one SP figure with another when there are a multitude of other factors and permutations about measuring these types of social comparisons.

lisboa84

JoeCrystal wrote: »

I checked the OBR site and the estimate that it would be £96.6 billion in 2018-19 so an increase of £2.8 billion for this year.

Which is roughly 3% - which makes sense as the state pension is currently obliged to increase by a minimum of 2.5% each year.

JoeCrystal wrote: »

The forecast for 22-23 that the NI contribution would be up to £154.90 billion with state pension taking up £110.26 billion, so the percentage is pretty much the same. Still, I can't but worry about how affordable state pension is going to be when I get mine in 2054!

If the percentage keeps in line then I'm not worried!

Thrugelmir

JoeCrystal wrote: »

I checked the OBR site and the estimate that it would be £96.6 billion in 2018-19 so an increase of £2.8 billion for this year. The forecast for 22-23 that the NI contribution would be up to £154.90 billion with state pension taking up £110.26 billion, so the percentage is pretty much the same. Still, I can't but worry about how affordable state pension is going to be when I get mine in 2054!

Life expectancy is levelling off though. Many people aren't going to have long lives if they maintain their current lifestyles. Likewise the post war baby boom generation will have passed by 2054.

lisboa84

Thrugelmir wrote: »

Life expectancy is levelling off though. Many people aren't going to have long lives if they maintain their current lifestyles.

Reduce tax on cigarettes, alcohol, junk-food, then people will consume these products more, and die earlier.

Increase in NHS consumption -VS- decrease on years of state pension pay-outs.