Chancellor Rishi Sunak hints at ruling out 8% pension rise

OldScientist

molerat said:

OldScientist said:

Rather sadly I recently calculated my 'NI pot' - had it been invested at 6% nominal growth since I started work in the 80s, it would now provide an income (assuming a 4% rule of thumb) of about £7.5k. Of course, NI payments were originally intended to support the NHS as well as pensions and other benefits so only a fraction of this 'income' would actually be available to pay a pension based on what I contributed.

I have just done that - but went for a single life 3% escalating annuity with no guarantee as that is more or less what you get - and it came out at £4K, think I will stick with the £9K    Just goes to show what surprisingly good value your NI contributions can be.

You're right, the SP is much more like an annuity and is definitely excellent value...

OldScientist

mark55man said:

OldScientist said:

Notepad_Phil said:

beduth said:

steampowered said:

daveyjp said:

The world of the 60s, 70s when current pensioners were starting out in life, was very much different to today, even more so for women.

Sorry, why couldn't people who started work in the 60s and 70s save for their retirements during the course of their working lives?

If you haven't put aside anything from your retirement, why should it be the government's job to top that up through the benefit system (and the state pension is a benefit). It shouldn't. No more than it should be the government's job to give you a lavish lifestyle if you are on working age benefits. 

People who worked in the 70s did save. They also paid national insurance contributions for 50 years.
State pension is not a benefit,it’s an earned and paid for return on 50 years of investment. 

I think you may need to revise your opinions if you believe that the state pension comes from investing your national insurance. My first job was in the 70's and even at that young age I knew that my national insurance had nothing to do with being invested for my future state pension and that any bearing on state pensions was solely to pay the state pensions of those who were currently retired.

Rather sadly I recently calculated my 'NI pot' - had it been invested at 6% nominal growth since I started work in the 80s, it would now provide an income (assuming a 4% rule of thumb) of about £7.5k. Of course, NI payments were originally intended to support the NHS as well as pensions and other benefits so only a fraction of this 'income' would actually be available to pay a pension based on what I contributed.

There was a thread where I said something like the NI pot was worth 300K or so, and was better value than almost anything and like I couldn't see how it was covered by contributions.  I got slightly taken to task in an educational sort of way, in that the NI doesn't just do pensions it covers a lot of other spending (although no-one will ever set firm boundaries), but that the reason why it could afford all this is that it is like the annuity only more so, in that some people die before ever seeing a penny back, and others before they see a return of contributions.  But that's OK because it might be you who lives to 100+

I'd agree that my contributions won't really cover it (and I was briefly a higher rate taxpayer)... also agree that if you live a long time you win but that the opposite is also true (e.g. neither of my parents lived long enough to claim the SP).

OldScientist

xylophone said:

but I'm pretty sure that state pension is not paid out of a wealth fund type arrangement but this years pensions are paid out of this year's funds (may be some sort of "balance" but not from decades ago)  

https://www.researchgate.net/publication/228426465_The_History_of_State_Pensions_in_the_UK_1948_to_2010

Thanks for that link - looks like there's some interesting reading in that document (only read the introduction so far).

Andy_L

bostonerimus said:

I rarely find myself agreeing with this Government, but I'd support breaking the triple lock if it dictated an 8% rise to the state pension as that's a one time anomaly. The criticism I have is for politicians coming up with veinal policies like the triple lock designed to buy votes. The bigger issue is the staggeringly low level of the UK state pension compared to other developed countries and the decades of austerity forced on great British institutions by recent governments. Funding cuts to NHS, police, broadcasting, and worst of all the introduction of  students being charged university fees. and the lack of regard for rules and standards exemplified in the Grenfell disaster and the recent  conviction of Southern Water for polluting have turned the UK into a second world country...third world status looms.

Wasn't the point of the triple lock to, slowly/affordably reverse the decline of the state pension caused by ~20(?) years of it being linked to inflation rather than wage increases as it used to be

german_keeper

Forget the promise. Brown had to fund his expansion of the welfare state and growth in public sector headcount. One way or the other tax revenues had to be raised. Giveth with one hand and take away with the other. Burying the detail in the red book was the deceitful aspect. 

People will argue till the cows come home about the respective merits of Prime Ministers. I tend to look at how they conduct themselves when they leave office. Of recent PMs I think Gordon Brown and John Major have shown great dignity and principle since leaving office. In contrast to David Cameron and Tony Blair who seem to me to have only wanted the office to enable them to increase their personal wealth. Mind you I reckon when the current encumbent leaves office he will show that Messrs Blair and Cameron have only been playing at it on that score.

hugheskevi

Andy_L said:

Wasn't the point of the triple lock to, slowly/affordably reverse the decline of the state pension caused by ~20(?) years of it being linked to inflation rather than wage increases as it used to be

Reviewing the Coalition Programme and the 2011 Consultation on single tier, there are no references to any policy of slow increases in the rate of State Pension, although that is the inevitable numerical outcome of the policy. All discussion is about Triple Lock protecting the value of pension for current pensioners and 'maintaining its value over time' which is interesting, as that phrase could very easily have been something like 'slowly increasing its value over time' but was not drafted to say that.

There are 3 clear intentions in State Pension policy over the last decade:

Indexation - protect and maintain value of State Pension, as discussed above

Single-tier - to standardise the rate paid, increasing the lowest amounts and reducing the highest amounts over time. The policy leads to significant reductions in longer term compared to what would have been paid under previous system, rather suggesting that there is no desire for an increase in the value of State Pension over time.

State Pension age - to ensure the proportion of adult life spent in retirement is managed through adjustments to State Pension age. The current target (from 2017 State Pension review) is 32%.

So based on stated and enacted legislation, the policy intent is for most pensioners to receive the same State Pension rate, from an age set to pay pension for 32% of average adult life, at an amount that is around 25-30% of median full-time earnings (based on single-tier amount when introduced, which the Government had freedom to set, so can be viewed to reflect policy intent).

It has been criticised for years that the Triple Lock is unsustainable in the long-term given it leads to ever increasing pension - reflected in Office for Budgetary Responsibility assumption of annual single-tier uprating of 4.2% against earnings growth of 3.84% in the longer term. A more logical configuration would be to determine the percentage of average earnings that is desirable, eg, 30%, and then set rates to be the higher of:

(a) The rate required to set State Pension at the desired target

(b) CPI change in last year

(c) 0%

That would ensure that the State Pension is never below target, protect the value in real terms when earnings fall below inflation, and ensure that in the rare times when both inflation and earnings are negative the amount of pension in payment does not fall. You could have a figure higher than 0%, but that would only be for presentation reasons and doesn't have any particular coherence other than people not understanding inflation and deflation. If the pension has risen above target level at any time due to low earnings growth, the pension is automatically uprated for a period by the higher of CPI or 0% until it returns to target. That would be a sustainable configuration of the Triple Lock.

zagfles

german_keeper said:

Forget the promise. Brown had to fund his expansion of the welfare state and growth in public sector headcount. One way or the other tax revenues had to be raised. Giveth with one hand and take away with the other. Burying the detail in the red book was the deceitful aspect. 

People will argue till the cows come home about the respective merits of Prime Ministers. I tend to look at how they conduct themselves when they leave office. Of recent PMs I think Gordon Brown and John Major have shown great dignity and principle since leaving office. In contrast to David Cameron and Tony Blair who seem to me to have only wanted the office to enable them to increase their personal wealth. Mind you I reckon when the current encumbent leaves office he will show that Messrs Blair and Cameron have only been playing at it on that score.

Nobody would beome PM "to increase their personal wealth". There are far easier ways to do that. CEO of a big company for instance. Footballer. BBC journalist. Better paid jobs, less pressure, less judgement, less people telling you how incompetant or nasty you are all the time.

mark55man

I agree with you that as a target people become PM for a range of reasons mostly ego, partly lack of alternative choices.  I think the more interesting observation is having been PM what do people do with it.  And I agree with the poster above you who says that is increasingly (Brown and May) excepted to try and make out like a bandit.  That said, that aspiration is much more in tune with the 21st century zeitgeist than that of the 20th 

german_keeper

zagfles said:

german_keeper said:

Forget the promise. Brown had to fund his expansion of the welfare state and growth in public sector headcount. One way or the other tax revenues had to be raised. Giveth with one hand and take away with the other. Burying the detail in the red book was the deceitful aspect. 

People will argue till the cows come home about the respective merits of Prime Ministers. I tend to look at how they conduct themselves when they leave office. Of recent PMs I think Gordon Brown and John Major have shown great dignity and principle since leaving office. In contrast to David Cameron and Tony Blair who seem to me to have only wanted the office to enable them to increase their personal wealth. Mind you I reckon when the current encumbent leaves office he will show that Messrs Blair and Cameron have only been playing at it on that score.

Nobody would beome PM "to increase their personal wealth". There are far easier ways to do that. CEO of a big company for instance. Footballer. BBC journalist. Better paid jobs, less pressure, less judgement, less people telling you how incompetant or nasty you are all the time.

So Blair and Cameron could have been professional footballers good enough to earn millions but they chose not to? Really? I would suggest the only route either of them had to make the money/achieve the fame that they did was the one that they chose. 

bostonerimus

Thrugelmir said:

bostonerimus said:

I rarely find myself agreeing with this Government, but I'd support breaking the triple lock if it dictated an 8% rise to the state pension as that's a one time anomaly. The criticism I have is for politicians coming up with veinal policies like the triple lock designed to buy votes. The bigger issue is the staggeringly low level of the UK state pension compared to other developed countries and the decades of austerity forced on great British institutions by recent governments. Funding cuts to NHS, police, broadcasting, and worst of all the introduction of  students being charged university fees. and the lack of regard for rules and standards exemplified in the Grenfell disaster and the recent  conviction of Southern Water for polluting have turned the UK into a second world country...third world status looms.

For a US resident of many decades. The expression "people who live in glass houses shouldn't throw stones springs to mind".  American exceptionalism is what's polluting culture on many levels globally.  

You assume that I agree with everything that happens in the US. As a UK expat I hate the exceptionalism and lack of perspective inherent in many American policies and attitudes, but as a US resident I think I have the distance to see the same things in the UK. Please don’t criticize my pulpit, criticize what I am saying.