Video entitled 'The state pension is being phased out' ...

Linton

Grumpy_chap said:

hugheskevi said:

Inflation is one thing - pension keeps its real value (but declines relative to earnings and GDP growth, at least in normal times)

Earnings link is another thing - pension keeps its value relative to the spending power of workers

A random 2.5% underpin makes no sense at all, except to avoid headlines of "Disgrace - State Pension goes up by 75p!)"

Over the long term, wages and inflation roughly track each other, but they do not do so in sync.

There was an article on the BBC in the past few days that showed a graph of inflation and wage growth last year and this.  Last year inflation was much higher than wage growth.  This year wage growth is higher than inflation.
Working people only get the wage growth.
State Pensioners get the most favourable for them each time.
Plus, and unper-pinned 2.5%, which is a notional figure and can exceed both inflation and wage growth (indeed has for a fairly long run until the current chaos on the world stage).

Ultimately, the current rules for Triple Lock mean that the State Pension is an increasing proportion of GDP year-on-year.  Eventually, if the rules do not change, State Pension will exceed GDP.  Things will crash some time before that.

I can't find the article I saw recently about wages and inflation, but I found one from November 2023:
https://www.bbc.co.uk/news/business-67402491

UK GDP £2.2 trillion. Annual cost of SP £112 billion.  So UK SP is about 5% of GDP. This is one of the lower values in the developed world.  US is 7% , France about 14%. Japan 9%. So we have a little way to go before that becomes a serious problem.

poseidon1

Linton said:

Grumpy_chap said:

hugheskevi said:

Inflation is one thing - pension keeps its real value (but declines relative to earnings and GDP growth, at least in normal times)

Earnings link is another thing - pension keeps its value relative to the spending power of workers

A random 2.5% underpin makes no sense at all, except to avoid headlines of "Disgrace - State Pension goes up by 75p!)"

Over the long term, wages and inflation roughly track each other, but they do not do so in sync.

There was an article on the BBC in the past few days that showed a graph of inflation and wage growth last year and this.  Last year inflation was much higher than wage growth.  This year wage growth is higher than inflation.
Working people only get the wage growth.
State Pensioners get the most favourable for them each time.
Plus, and unper-pinned 2.5%, which is a notional figure and can exceed both inflation and wage growth (indeed has for a fairly long run until the current chaos on the world stage).

Ultimately, the current rules for Triple Lock mean that the State Pension is an increasing proportion of GDP year-on-year.  Eventually, if the rules do not change, State Pension will exceed GDP.  Things will crash some time before that.

I can't find the article I saw recently about wages and inflation, but I found one from November 2023:
https://www.bbc.co.uk/news/business-67402491

UK GDP £2.2 trillion. Annual cost of SP £112 billion.  So UK SP is about 5% of GDP. This is one of the lower values in the developed world.  US is 7% , France about 14%. Japan 9%. So we have a little way to go before that becomes a serious problem.

The UK state pension is not funded from its GDP, it is of course paid out of annual NIC and more recently taxes from all sources.

In 2022 Gross UK taxes and NIC intake was just £ 789 billion, so £112 billion as a percentage of that, is already a scarily high number. The UK's tax base is simply not growing fast enough to support the burgeoning annual cost of the SP, and like it or not a future government will have to address the widening generational inequality this is creating.

Rest assured, the international investment community will be ruthless with any government attempting to support the runaway cost of the SP by increased government borrowings.

Linton

poseidon1 said:

JLinton said:

Grumpy_chap said:

hugheskevi said:

Inflation is one thing - pension keeps its real value (but declines relative to earnings and GDP growth, at least in normal times)

Earnings link is another thing - pension keeps its value relative to the spending power of workers

A random 2.5% underpin makes no sense at all, except to avoid headlines of "Disgrace - State Pension goes up by 75p!)"

Over the long term, wages and inflation roughly track each other, but they do not do so in sync.

There was an article on the BBC in the past few days that showed a graph of inflation and wage growth last year and this.  Last year inflation was much higher than wage growth.  This year wage growth is higher than inflation.
Working people only get the wage growth.
State Pensioners get the most favourable for them each time.
Plus, and unper-pinned 2.5%, which is a notional figure and can exceed both inflation and wage growth (indeed has for a fairly long run until the current chaos on the world stage).

Ultimately, the current rules for Triple Lock mean that the State Pension is an increasing proportion of GDP year-on-year.  Eventually, if the rules do not change, State Pension will exceed GDP.  Things will crash some time before that.

I can't find the article I saw recently about wages and inflation, but I found one from November 2023:
https://www.bbc.co.uk/news/business-67402491

UK GDP £2.2 trillion. Annual cost of SP £112 billion.  So UK SP is about 5% of GDP. This is one of the lower values in the developed world.  US is 7% , France about 14%. Japan 9%. So we have a little way to go before that becomes a serious problem.

The UK state pension is not funded from its GDP, it is of course paid out of annual NIC and more recently taxes from all sources.

In 2022 Gross UK taxes and NIC intake was just £ 789 billion, so £112 billion as a percentage of that, is already a scarily high number. The UK's tax base is simply not growing fast enough to support the burgeoning annual cost of the SP, and like it or not a future government will have to address the widening generational inequality this is creating.

Rest assured, the international investment community will be ruthless with any government attempting to support the runaway cost of the SP by increased government borrowings.

The comparison with GDP is to give some measure of the significance of SP in the overall economy. SP is currently covered by NI.

However looking at things from the top level, it does not matter whether pensions are paid from taxes, voluntary savings, or by the generosity of employers. You still have a particular number of people working and the remainder not working. Collecting the money in different ways is a second level detail. The only way to mitigate the effects of demographics in the short to medium term is to encourage or force people to retire later.

SP has the great advantage that it is cheap and simple to operate. Any other method of funding a basic level of income would have a far greater cost in overheads and would greatly increase the costs of means tested benefits. SP is hardly over-generous, being about half the full time minimum wage. Without that guaranteed  minimum you will go back to the 1970s when every winter there would be headlines about OAPs going hungry and unable to heat their homes.

It is illogical for the young to press for a reduction in SP. Any major change to SP will take decades to have any significant effect and so will affect them far more than it will affect the current generation of pensioners. If they want even a basic standard of living in old age they will need to pay a far higher % of their income into their pensions now. Young workers won’t be any better off before retirement and will be poorer afterwards.

However I do think the tax system is unfair in that it penalises earners to a far greater extent than those who get their income in other ways.  Furthermore the low marginal rate of NI for those earners with high income is difficult to justify but is rarely questioned. The easiest way to correct these imbalances would be to move some of the tax burden from NI to income tax and CGT. Also tax avoidance schemes which mainly benefit the rich, like ISAs, could be significantly cut, say by reducing then maximum annual contribution to £5K.

Pollycat

LightFlare said:

Under the current system, it is totally unaffordable 

The problem we have today is an unprecedented amount of “old” people who are receiving far in excess of their contributions.

It is true when they say that current pensioners have never had it so good - they only had to work untill they were 60 and yet the are using massive amount of resources health wise and socially

Its the first time we have experienced anything like this since the 2 wars killed a vast amount of young men who never made it to old age

How many males currently receiving their pension got it at age 60?

There are also a lot of female pensioners who didn't receive their pension at 60 - and I'm one of them.

GibbsRule_No3.

If the Triple Lock is got rid off would it be more likely that more Pensioners would need Universal Credit (Pension Credit) to make ends meet, if so how much more would it cost?  I still don’t understand how a person working can get Universal Credit, when was UC introduced and what did it replace? UC seems to be a gateway for gaining a lot of “extras”.

sgx2000

Government intent is clear....
SP is paid from NIC
They have just cut NIC

I could see a future where people with private pensions could be allowed to take SP earlier at a heavily reduced amount. The small saving from this being used to keep SP age lower

400ixl

Pollycat said:

How many males currently receiving their pension got it at age 60?

There are also a lot of female pensioners who didn't receive their pension at 60 - and I'm one of them.

How many men of the same age as you got theirs at a younger age than you? Or does equality shift only work one way?

There is going to be a whole working and social shift over the next 50 years which is going to bring the whole benefits and pension systems into a new era, along with the taxation system. It is not going to be viable to tax the individual in the same ways in the future, as automation, robotics and AI continue at pace then it is going to change the workplace considerably and thus the workforce. Taxation is going to have to shift heavily to the corporation rather than the individual. There is going to be a very uncomfortable transition stage though which only some countries like Switzerland are getting ahead of.

SouthCoastBoy

The bigger issue that needs to be addressesd is productivity and the reliance many households have on working age benefits, including those that are working. There needs to be a paradigm shift. Is any govt willing to do it? I doubt it

Pollycat

400ixl said:

Pollycat said:

How many males currently receiving their pension got it at age 60?

There are also a lot of female pensioners who didn't receive their pension at 60 - and I'm one of them.

How many men of the same age as you got theirs at a younger age than you? Or does equality shift only work one way?

There is going to be a whole working and social shift over the next 50 years which is going to bring the whole benefits and pension systems into a new era, along with the taxation system. It is not going to be viable to tax the individual in the same ways in the future, as automation, robotics and AI continue at pace then it is going to change the workplace considerably and thus the workforce. Taxation is going to have to shift heavily to the corporation rather than the individual. There is going to be a very uncomfortable transition stage though which only some countries like Switzerland are getting ahead of.

Equality does not come into this discussion.
I have never supported WASPI.
I have always believed that a woman and a man doing the same job should be paid the same.
I always believed a man and woman born on the same day should receive their state pension on the same day.

FTR - no man got his state pension at the same age as me.
I became eligible for my state pension aged 64 years and 9 months.
A man born on the same day as me got his aged 65 years.
That is equality working in the right way - a move to equalise state pension ages for both men and women.

My point was that the post by LightFlare was inaccurate.
This is not true:

LightFlare said:

It is true when they say that current pensioners have never had it so good - they only had to work untill they were 60 and yet the are using massive amount of resources health wise and socially

As far back as I can remember, the state pension age for men has been 65.
So a large number of 'current pensioners' i.e. men never had to "only work until they were 60'. 

TadleyBaggie

Pollycat said:

As far back as I can remember, the state pension age for men has been 65.
So a large number of 'current pensioners' i.e. men never had to "only work until they were 60'. 

The state pension age for men has never been lower than 65, when introduced in 1948 it was 60 for women and 65 for men.