Will the state pension exist for a 42 year old?

Pat38493

Albermarle said:

Pat38493 said:

Andy_L said:

Linton said:

Andy_L said:

MetaPhysical said:

Brenster said:

I am 43, and i dont see how they could just stop it.  As has happened over the past 20 years, the age at which you get it may increase, however thier would be riots if they just pulled it, and if they did scrap it, we would all be owed thousands in a rebate as we have been paying into the pot via NI since starting work. 
Also to make it means tested would just be another kick in the teeth for those who have planned and made sacrifises throughout thier working life, so this would be unfair also. 
We do not have a crystal ball, but i personally feel i will get it age 70/71, it rises to 68 soon, and i can see it rising by 1 year per decade on average to keep up with extended life expectancy.

There is no "pot" and there never has been.  We pay NI and taxes and they disappear to people who are currently retired, amongst other things.  We do have a National Insurance record where it is stated quite clearly we are entitled to a pension at SPA with the maximum years of contributions (like I have for example) but that it is subject to change.  It does not come out of our personal "pot" as such and no money or provision has been explicitly ring-fenced for you or me.  What would happen to millions who had bought more years of NI to cover holes if the government then decided to means test the SP after all?  Do they pay us all back? It would wreck the plans of people who have been saving enough to add to the SP anchor to give them a reasonable income, saving with great sacrifice elsewhere in their lives.  To pull the carpet on that now would wreck the lives of millions of people, 99% of everyone over 45 I'd venture to say.  It would be an unholy mess of historic proportions to pull the rug on this one.  Never say never though, politicians are nuts, all of them are.

If bankers operated like this they would be prosecuted.  "Yes we know you have been contributing Mr MetaPhysical all these years but, actually, the money in your retirement plan is not your money, it's not ring fenced for you"

"The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers, and the self-employed. Voluntary contributions are also paid into the Fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension."

https://www.gov.uk/government/publications/national-insurance-fund-accounts/great-britain-national-insurance-fund-account-for-the-year-ended-31-march-2023

That does not mean it's a large pot with £multi-trilions waiting for your retirement.  AIUI the NIF is more like a current account than a savings account, the money going in balances the money paid out.  In practive it's an accounting fiction.

In 2022 it had a closing balance of  £56,874,726,000
In 2023 it had a closing balance of £72,486,113,000

looks like a large pot to me

Yes but it's a theoretical number in an accounting balance sheet - there is not that amount of actual cash sitting behind it waiting to be paid out.

Actually I think that there is 'cash' in this account. It is like a current account for state pensions and few other benefits. NI in and pensions out each year.

However of course if you calculate the size of pot needed to cover all current and future state pension liabilities, it was £3.8 Trillion at the last count. Approx a 45 times larger sum, than was in the National Insurance fund account at the end of 2023 and equivalent to the whole economic output of the UK for over 2.5 years.

To get more scary if you add in unfunded public sector pensions, this figure increases to £5 Trillion.

Thanks then I stand corrected, but even if that's the case, as you point out it's not nearly enough to be the full pot of everyone in the country who has an entitlement.

Also philosophically, even if the money exists in a government bank account, it doesn't really exist as such - there is no gold or physical assets behind it - it just relies on the perceived solvency of UK Goverment - but i guess that's the same with all money these days.

Albermarle

BlackKnightMonty said:

I’m 46. My suspicion is that it will be means tested.

There’s just not enough money being raised through taxation to afford it.

Less than half of all UK households are net contributors to tax after benefits/services are considered.
https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2022

As the demographics shift to more retirees and less workers, the tax base will reduce further.

What needs to happen is a focus on raising wages after years of stagnation. That is what brings a sustainable future.

I think a hard look at the £50k and £100k marginals would help smooth the earnings base. It’s hard enough already to argue for a +£100k salary. Which might sound a lot; but with 60% marginal income tax actually isn’t!

As the demographics shift to more retirees and less workers, the tax base will reduce further.

Which is why, despite all the problems involved, the economic argument/pressure is for accepting a high level of immigration. Most migrants are young and willing to work, which redresses the demographics to some extent, although not without some cultural and political difficulties and short/medium term pressure on public resources.

BlackKnightMonty

Albermarle said:

As the demographics shift to more retirees and less workers, the tax base will reduce further.

Which is why, despite all the problems involved, the economic argument/pressure is for accepting a high level of immigration. Most migrants are young and willing to work, which redresses the demographics to some extent, although not without some cultural and political difficulties and short/medium term pressure on public resources.

Perhaps. I think we need to look at 3 more things.

1. More effectively taxing wealth, and intergenerational wealth.

2, Better taxing large businesses, especially those who offshore.

3. Encouraging UK investment (by all - but especially UK pensions). Improve infrastructure and productivity, and win-win.

SouthCoastBoy

Imo, benefits need to change. The uk just cannot afford to dish out such generous allowances, the major reason for productivity issues. The incentive to work is not there, especially when out of work benefits track close to inflation whereas in work wages struggle to keep up with inflation.

Immigration is not the answer, that will just create further inflation in my opinion, more people chasing less goods. BoE seem fairly confident inflation will be around 2 to 3% in 2025, I don't think this will necessarily be the case while the non productive are being given free money that is increasing with inflation which means they can continue to consume goods and services.

400ixl

Albermarle said:

As the demographics shift to more retirees and less workers, the tax base will reduce further.

Which is why, despite all the problems involved, the economic argument/pressure is for accepting a high level of immigration. Most migrants are young and willing to work, which redresses the demographics to some extent, although not without some cultural and political difficulties and short/medium term pressure on public resources.

Only if you are taking a very short term view of economics.

As less people are required to do the work due to automation, the economics shift from taxing the person to taxing the corporation. This whole model is evolving today, with Switzerland being one of the countries at the forefront of it.

LHW99

SouthCoastBoy said:

Immigration is not the answer, that will just create further inflation in my opinion, more people chasing less goods. BoE seem fairly confident inflation will be around 2 to 3% in 2025, I don't think this will necessarily be the case while the non productive are being given free money that is increasing with inflation which means they can continue to consume goods and services.

And just rolls the problem further along the line when all those people need to retire and be provided with state pensions.

Albermarle

400ixl said:

Albermarle said:

As the demographics shift to more retirees and less workers, the tax base will reduce further.

Which is why, despite all the problems involved, the economic argument/pressure is for accepting a high level of immigration. Most migrants are young and willing to work, which redresses the demographics to some extent, although not without some cultural and political difficulties and short/medium term pressure on public resources.

Only if you are taking a very short term view of economics.

As less people are required to do the work due to automation, the economics shift from taxing the person to taxing the corporation. This whole model is evolving today, with Switzerland being one of the countries at the forefront of it.

It is a fair point, but not sure how automation helps with all those jobs that many British people do not want to do, but migrants are willing to do for minimum wage. Like dealing with older people with dementia, incontinence etc 

Linton

Andy_L said:

Linton said:

Andy_L said:

MetaPhysical said:

Brenster said:

I am 43, and i dont see how they could just stop it.  As has happened over the past 20 years, the age at which you get it may increase, however thier would be riots if they just pulled it, and if they did scrap it, we would all be owed thousands in a rebate as we have been paying into the pot via NI since starting work. 
Also to make it means tested would just be another kick in the teeth for those who have planned and made sacrifises throughout thier working life, so this would be unfair also. 
We do not have a crystal ball, but i personally feel i will get it age 70/71, it rises to 68 soon, and i can see it rising by 1 year per decade on average to keep up with extended life expectancy.

There is no "pot" and there never has been.  We pay NI and taxes and they disappear to people who are currently retired, amongst other things.  We do have a National Insurance record where it is stated quite clearly we are entitled to a pension at SPA with the maximum years of contributions (like I have for example) but that it is subject to change.  It does not come out of our personal "pot" as such and no money or provision has been explicitly ring-fenced for you or me.  What would happen to millions who had bought more years of NI to cover holes if the government then decided to means test the SP after all?  Do they pay us all back? It would wreck the plans of people who have been saving enough to add to the SP anchor to give them a reasonable income, saving with great sacrifice elsewhere in their lives.  To pull the carpet on that now would wreck the lives of millions of people, 99% of everyone over 45 I'd venture to say.  It would be an unholy mess of historic proportions to pull the rug on this one.  Never say never though, politicians are nuts, all of them are.

If bankers operated like this they would be prosecuted.  "Yes we know you have been contributing Mr MetaPhysical all these years but, actually, the money in your retirement plan is not your money, it's not ring fenced for you"

"The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers, and the self-employed. Voluntary contributions are also paid into the Fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension."

https://www.gov.uk/government/publications/national-insurance-fund-accounts/great-britain-national-insurance-fund-account-for-the-year-ended-31-march-2023

That does not mean it's a large pot with £multi-trilions waiting for your retirement.  AIUI the NIF is more like a current account than a savings account, the money going in balances the money paid out.  In practive it's an accounting fiction.

In 2022 it had a closing balance of  £56,874,726,000
In 2023 it had a closing balance of £72,486,113,000

looks like a large pot to me

How/where do you think it is held?  1500 tons of gold? 


In any case £72B is less than 1 year's  expenditure on State Pension.  See here

hugheskevi

Linton said:

Andy_L said:

Linton said:

Andy_L said:

MetaPhysical said:

Brenster said:

I am 43, and i dont see how they could just stop it.  As has happened over the past 20 years, the age at which you get it may increase, however thier would be riots if they just pulled it, and if they did scrap it, we would all be owed thousands in a rebate as we have been paying into the pot via NI since starting work. 
Also to make it means tested would just be another kick in the teeth for those who have planned and made sacrifises throughout thier working life, so this would be unfair also. 
We do not have a crystal ball, but i personally feel i will get it age 70/71, it rises to 68 soon, and i can see it rising by 1 year per decade on average to keep up with extended life expectancy.

There is no "pot" and there never has been.  We pay NI and taxes and they disappear to people who are currently retired, amongst other things.  We do have a National Insurance record where it is stated quite clearly we are entitled to a pension at SPA with the maximum years of contributions (like I have for example) but that it is subject to change.  It does not come out of our personal "pot" as such and no money or provision has been explicitly ring-fenced for you or me.  What would happen to millions who had bought more years of NI to cover holes if the government then decided to means test the SP after all?  Do they pay us all back? It would wreck the plans of people who have been saving enough to add to the SP anchor to give them a reasonable income, saving with great sacrifice elsewhere in their lives.  To pull the carpet on that now would wreck the lives of millions of people, 99% of everyone over 45 I'd venture to say.  It would be an unholy mess of historic proportions to pull the rug on this one.  Never say never though, politicians are nuts, all of them are.

If bankers operated like this they would be prosecuted.  "Yes we know you have been contributing Mr MetaPhysical all these years but, actually, the money in your retirement plan is not your money, it's not ring fenced for you"

"The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers, and the self-employed. Voluntary contributions are also paid into the Fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension."

https://www.gov.uk/government/publications/national-insurance-fund-accounts/great-britain-national-insurance-fund-account-for-the-year-ended-31-march-2023

That does not mean it's a large pot with £multi-trilions waiting for your retirement.  AIUI the NIF is more like a current account than a savings account, the money going in balances the money paid out.  In practive it's an accounting fiction.

In 2022 it had a closing balance of  £56,874,726,000
In 2023 it had a closing balance of £72,486,113,000

looks like a large pot to me

How/where do you think it is held?  1500 tons of gold? 

This is a very important point. The National Insurance Fund Accounts say:

Income from NIF Investment Account

In 2022 to 2023, the NIF Investment Account (NIFIA) was almost entirely invested in the Debt Management Account

The Debt Management Office states:

The key objective of the DMADF (Debt Management Account Deposit Facility) is to provide users with a flexible and secure facility to supplement their existing range of investment options while saving interest costs for central government.

So almost all of the National Insurance Fund pot goes into an account at the Debt Management Office where it is used to reduce the amount of government borrowing required through gilt issuance.

Therefore to use the National Insurance Fund for anything, government borrowing would have to rise to pay out the National Insurance funds. If the Fund didn't exist at all, any new expenditure would have to be funded by additional government borrowing - which is the same outcome as if the Fund were to be used to fund expenditure.

So the Fund only exists in accounting terms - for all practical purposes it doesn't exist and certainly isn't a ringfenced lump of invested assets which could be called upon if needed without any impact on government financing.

Linton

BlackKnightMonty said:

I’m 46. My suspicion is that it will be means tested.

There’s just not enough money being raised through taxation to afford it.

Less than half of all UK households are net contributors to tax after benefits/services are considered.
https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2022

As the demographics shift to more retirees and less workers, the tax base will reduce further.

What needs to happen is a focus on raising wages after years of stagnation. That is what brings a sustainable future.

I think a hard look at the £50k and £100k marginals would help smooth the earnings base. It’s hard enough already to argue for a +£100k salary. Which might sound a lot; but with 60% marginal income tax actually isn’t!

Consider:

A) 1972:  GDP   £900B Total SP   £34B  Ratio: 3.8%
     2022: GDP  £2270B Total SP £112B  Ratio 4.9%

But life expectancy at SP age has also increased significantly which would seem to more than account for the increased %.  SP age should have been increased much earlier.

I see no reason to be particularly concerned about the SP being affordable as long as SP age changes in line with life expectancy.

B ) Increasing wages without increasing production doesnt benefit anyone.  It simply causes inflation.

C) Most people earn less than what someone earning £100+K would be living on if 60% tax applied to all their gross income.