The Lifespan Fund plan - a state pension idea from the Tony Blair Institute for Global Change

Grumpy_chap

https://forums.moneysavingexpert.com/discussion/comment/81986511#Comment_81986511

I am interested in the National Insurance fund and claims that it is in surplus. When NI was first introduced, that amount was specified as funding the state pension, NHS and welfare state. So, is the NI receipts exceeding the same metrics in full or is the NI fund only in surplus by considering only SP?

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81986550#Comment_81986550

Since the major restructuring of NI in 1948, there have been numerous changes as to what it funds. It nowadays funds only 'contributory based benefits', such as the state pension, maternity pay etc. The current situation is probably best explained by this from the IFS.

Some NICs revenue (about a fifth in recent years) is allocated directly to the NHS. That is topped up from general taxation to whatever the government wishes to spend on the NHS in total: how much of that total notionally comes from NICs revenue is irrelevant. The remaining NICs revenue is paid into the National Insurance Fund. Notionally, the NI Fund is financially separate from other parts of government and is used to fund contributory benefits. In reality, however, this separation is illusory. In years when the fund is not sufficient to finance benefits, it is topped up from general taxation revenues; and in years when the fund builds up a surplus, it is used to reduce the national debt: essentially, the government lending money to itself. This makes the separation of the NI Fund from the main government account more or less meaningless. The government decides how much to raise in NICs, and how much to spend on the NHS and on contributory benefits; the amounts need not be related to each other, and generally are not.

horsewithnoname

https://forums.moneysavingexpert.com/discussion/comment/81985686#Comment_81985686

yes. If Blair has his name on it, no thanks.

GunJack

Thing is, the SP doesn't need another revamp, especially so close to the last one. All that needs happening is remove the triple lock and raise it by CPI every year, job done. The newSP was designed to save costs already, it's simple and straightforward, and moving to CPI-only increases will save more over triple lock.

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/81986862#Comment_81986862

It's not really happened for the past couple of decades but historically, earnings have outstripped inflation which is why we are relatively better off than our grandparents. Arguing for the SP to be linked to just CPI is an argument that pensioners should not benefit from any improvements in prosperity that the rest of the population might enjoy. I would be interested to hear why you think they don't deserve that.

The report suggests an adjusted average earning increase which IMHO makes much more sense since it means that pensioners also benefit from any overall increase in wealth. Under that scheme SP increases with earnings unless inflation exceeds earnings growth in which case it increases with inflation until earnings catches up with it. So the SP would never decrease in real terms but over the longer term it would only match the increase in earnings.

GunJack

https://forums.moneysavingexpert.com/discussion/comment/81986969#Comment_81986969

Because the SP isn't related to a pensioner's current earnings. If you look at DB pensions generally they only increase by CPI or capped CPI, why should SP be any different? It would also start to redress the perceived spiralling cost of the SP and help the country to get borrowing down over time. Pensioners would then share in the prosperity by having better public services without having to have taxes increased, but maintaining a standard of living.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81986862#Comment_81986862

The same was done during the first term of Margaret Thatcher's Govt.in 1980 - the earnings link for the state pension was stopped, and it was linked to inflation instead. Between 1980 and 2003, the real value of the SP compared to earnings dropped from 26% to 16% . So yes it saved a lot of money, but increased pensioner poverty.

In 2003 Blair/Brown introduced a minimum 2.5% , that at least stopped the drop.

In 2011/2012 The coalition Govt/George Osbourne brought in the Triple Lock, which has seen the real value of the New State Pension increase to around 25% of earnings ( the basic one is about 20%)

Davesquire

Another 'not so great idea'. "Based upon your lifestyle habits", so I presume that doesn't include being exposed to hazarous substances by a callous employer or even living somewhere like Teeside with exposure to petrochecmicals, etc. for a good deal of your life.

GunJack

https://forums.moneysavingexpert.com/discussion/comment/81987477#Comment_81987477

However, the perceived poverty is only when compared to earnings, not actually being badly off, surely?

Silvertabby

https://forums.moneysavingexpert.com/discussion/comment/81987614#Comment_81987614

A recent quote reckoned that Blackpool men had the lowest life expectancy in the UK. But that it was more down to a diet of fags, chips and beer rather than postcode or income.