The attitude to pensioners and pension provision was aptly illustrated in the Budget and is prevalent both by politicians and the Industry overall. They are not seen as people but as statistics and a source of ready money.
The majority work hard all their life, pay their Taxes and National Insurance for some 50 years, which is meant to invest in their retirement and establish their position in Society for its support in later years. In this day and age this is a forlorn hope, a promised dream that will not be realised in the UK.
The State readily takes National Insurance contributions, keeps a record of what has been paid and for how many years to build up a pension profile on what they should get in that expected retirement. However instead of carefully putting aside those hard earned savings contributions, the State takes the money into their Treasury coffers using it as taxation income.
The reasons given for this apparent massive fraud, is that the State can give secure Bonds or promissory notes for the future and therefore do not need to put such savings away and will be able to keep all and any promises. The reality proves different as recent events in Europe show; Governments are not so secure and safe as witnessed in Greece, Portugal, Eire, Italy, etc.
The UK is no different, progressively successive Governments have failed to keep pensions up to the levels that the contributions made, earn, or deserve and even to meet the barest minimum of cost of living inflation. The latest raid of the “Granny Tax” is justified with the “never had it so good” inflation rise in April, but little is made of reductions in Pension Credit that also came in, cancelling out a major part of the rise, which many now depend on.
Pensioners have been forced into poverty by a steady decline in real terms of the earned State contributory pension, which is now blatantly referred to as Welfare . Meanwhile the real welfare benefit, represented by the Pension Credit, paid to those who have made little or no contributions or for a short number of years is at a much higher level than the earned Basic State Pension.
From April the BSP has its much publicised rise to £107.45 per week, for a couple this is £172.10; however the Government maintains that the minimum a single person can live on is £137.35; for a couple this rises to £207.90. These higher values are the basis of Pension Credit and those eligible will also get substantial Council Tax and Housing benefit, prescription and dental costs, plus other benefit help, overall some half as much again.
The State pension is therefore meaningless and NI just an extension of taxation; further new proposals are even worse with the abolition of State second pension and SERPS relief, with a “munificent” £32.55 increase in BSP, which will still leave pension contributors poorer than welfare benefit, which pensioners will unwillingly be forced into.
Public Sector pensions are moving in the same direction with increasing contributions, lower pensions, for a shorter time and private pensions are also deteriorating. The increased Life expectancy deception continues, used to delay and reduce pensions, of course we are living longer, but at what rate and on what scientific basis (future blog).
The tax allowance reduction for pensioners, announced in the Budget, appears ill- conceived and ill-thought out; a back of envelope jotting of the day before, with little positive benefit to pensions and just tax grabbing. It was always the principle that the average pensioner should be freed from taxation and NI in retirement, which reduces the demand on Pension Funds and at one time the State, until their pensions dropped so low. There is little good reason to change this, Pensions are ploughed back into the economy and are a valuable regional income source.
Pensions are a mess which could be effectively sorted out if the blinkers were removed and the problem tackled in a realistic and innovative manner, standing back and looking at what could and should be done and achieved if they were treated as long term personal savings, with a proper assessment of the needs and demands of an ageing population to give them the Community care and attention they deserve, with savings self sufficiency and dignity.
The way forward has been outlined in previous blogs, but it is uncertain whether this has been understood and an attempt will be made to repeat this in a simpler way in the next few blogs. Funded schemes are essential and defined benefit the only satisfactory method of implementation.
Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport, Comment
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