John’s Blog No.77 – Pensions – Liability

The Government’s Office for National Statistics have just released a report on Pension liability in the United Kingdom, the first for many years, which shows that the liability for State Pensions at a massive five trillion pounds . That is five plus twelve noughts               £  5,   000,   000,   000,    000

It is stated that this is not a National debt but only a future commitment and illustrates the fantasy world that State pensions live in.

Meanwhile in the real world, Private pensions, with a liability of two trillion, are forced to show that they have these funds available in assets, investments or cash or pay into the Funds to make up any shortfall, causing many to close schemes they cannot afford. The Post Office is a good example and in order to sell it the Government intends to take it under its wing as a commitment and spend its assets.

The State Public Sector pension liability is  £1.2 trillion , for which they pay substantial contributions with mediocre returns and the commitment promise, soon to be joined by the lucky postmen.

The balance of £3.8 trillion is the State basic and additional pension with the former already at subsistence poverty level, with payments projected to rise from the present £69bn to £400bn by 2050, even if wages keep up with inflation it is still a rise of over two in real terms. How are we going to afford it?  as the working population is expected to hardly increase over this time

The Government is proposing to default on its additional pension, currently some £14bn, which is the second pension many depend on, another commitment on retirement age will go as this is raised to 70. This is a triple whammy, five years less pensions and more NI contributions plus the fact that up to 30% will not live that long to collect any pension at all.

Even then there will still not be enough people working to support the older population without major increases in taxation, the other solution is to make them contribute more in to their own private pension, which comes into force in September. Many do not realise the effect this will have on their income.

Of course the real solution is to start converting some of this liability into real pension fund savings as private pensions are expected to do and as put forward in earlier blogs. The present pension payments are in fact contributions from those in work into the NI pension scheme which have been stolen to pay existing pensions.

If some of this was put aside as an NI rebate or issue of Pension Bonds over a 20 to 40 year period, the transition to a fully funded self-sufficient scheme could be accomplished. Restricting entry age to 25 to 44 age gives a 20 year period for fund build up, which could be combined with the new contributory scheme.

The main advantage is that as money is put aside it can build up and grow like any funded or savings scheme, yielding a much better return than the spend today unfunded scheme. Savings increasing with inflation and growing at 4% over a 40 year period yield returns some 3.6 times the annual savings alone, converting £69bn per year into final payments of £248bn per year in real terms.

In other words if the present State pension spend was put away in a funded scheme at a modest return it would yield sufficient  return to meet the pension demands of 2050 with sufficient over to increase pensions to a good living standard and even meet elderly care needs.

Over the 40 years the money need not stand idle but could be invested in the Capital projects we so sorely need whilst creating jobs and economic growth, converting the present fantasy world into reality. These would need to be good reliable long term investments in bricks and mortar, transport, energy, industry or anything that would give a steady return over many years and not the cash quick fairies.

The State needs to meet the same rules and regulations applied to private pensions and put assets away on pension funds to meet the liabilities. It seems to have a disdainful attitude to assets, which is writes off, scraps or gives away without thought. There are more than enough contributions and pension payments to meet all future pensioner needs, it just needs to work hard and grow over the 40 years available.

The days of fantasy are over and a stable and guaranteed future is needed for our youth, working and elderly population who deserve a country free of poverty, anxiety and uncertainty. Our politicians need to earn their keep and start planning long term and sensibly with their feet firmly on the ground.

Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport,

John’s Blog No.76 – Pensions

In recent years my wife and I have had need of health services due to increasing age and working parts showing signs of wear, with a greater demand than for the whole of our working life. This has led to my changing my attitude for NHS reform and the need for change, but not in the present approach.

After a working life in Industry on research, manufacturing and management, one is immediately struck by the different way of life. In Industry you have to make things happen by careful planning, organising and management whereas in the Public Sector there is the Manana syndrome, events and computers run people.

Things happen naturally at a slow pace and if left that way events do not occur or are much later; action and decisions are postponed, there are endless meetings, minutes and memos or now emails as excuses for the non-events, with the associated lack of responsibility.

In successful business, there are weekly action meetings at a non- disruptive time, progress reviews without the blame game, decisions made and everyone leaves with a clear sense of purpose and what they need to do, with little need of excessive and time consuming paperwork.

Also people matter and so does stability, if the workers are singing it is a good production day. The Government are trying to effect major changes, but at the same time they are fighting and demoralising the workforce¸ enforcing change without adequate planning and consultation.

The impression is one of instant cost driven hatchet work without planning or forethought, regardless of the consequences; there are redundancies, wage freezes, changes to working agreements, particularly pensions  and general uncertainty and often little sign of progress.

Change is necessary, not some half baked idealism, but well thought out, planned and organised programmes, which take these essential services forward in an affordable manner, using fully the public and private resources available to meet the ever increasing needs.

The NHS is a good example, in order to break the Consultant/ Doctor and Trade Union power grip, a new strata of management was brought in from outside the profession and services contracted out, leading to an  uncontrollable and disorganised system for which no-one was responsible, including Ministers.

Any contact or visit to a hospital viewed with an industrial eye can see the problems, overworked doctors and nurses, thin on the ground, long waiting times and the lost matron discipline, cleaner groups pushing dirt and germs around, streams of people moving around clutching folders and general chaos.

In spite of all this there is still a high degree of clinical excellence and devotion to duty, this should not be exploited or abused but fully utilised, putting GP’s in charge will not solve anything but only introduce another layer of confusion. Shared responsibility and trust is essential and good communication, now easier than ever.

Normal health care needs to be separated from self inflicted and accident damage, which should be fully charged for on Insurance, with health care divided into the various levels and responsibilities fully defined, liased and integrated with well defined communications, including charities.

Cost for the ideal system should be evaluated and decisions made on what can be or must be afforded without post code lotteries and the necessary money found, if we cannot afford a healthy nation then we are lost.

This approach applies to all essential services, whether education, police, fire, local government, social care or general services, we have to establish what we need, the cost and how we can afford it without waste and in the best manner possible using all resources including charities, unpaid carers and volunteers.

Certain costs are relative things, particularly labour, where the money circulates internally, becoming important only when shortages occur or by undue wastage particularly by unemployment in skilled, qualified labour and youth potential and losses overseas. . Good Pension savings offer a key to meeting elderly costs and funds for capital investment, in addition to adequate pensions.

We need to make things happen in a well ordered manner and the sooner the better

Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport, Comment

John’s Blog No.75 – Pensions – Elderly Care

Elderly Care is of concern to all who are, or about to retire and has been receiving increasing attention recently, but mainly of a negative nature on cost, increasing demand and existing failure.

The State solution is a retirement tax suggested at about £30,000 and taken from pension funds at retirement as an insurance premium against possible future care. The State says it cannot afford to fund the existing pensioners or projected demand.

Yet no one has applied commonsense or logical thought to the problem and analysed it, what are the needs and extent, what percentage of the retired and at what age? All straightforward questions needed to establish costs and how to deal with them.

Although there are a lot of reports there are little facts, real information or statistics available, except on a detailed specific and confusing basis.

The best found was a general report stating that a retiring person at age 65 had 10 years of healthy living, with 13 years before disability for the average life expectancy of 18 years. Does this mean one has an even chance of good health to 75 and in a wheelchair at 78, even though expected to work until 70!

What we need to know is at age 75 to 90 the proportion of us who will be alive and how many will be active, in need of social and luncheon clubs, home care, sheltered or residential housing or need intensive care. Information that is available but which just needs sorting and simply presenting.

The best and most cost effective way of meeting this and the staffing required can then be established and how to fairly reward carers and charities, who mainly carry this out. The present bodged and panic approach will not meet the present or future.

Well managed pension funds could meet a lot of the costs, however three quarters of the working population have no pension savings and could not raise £30,000 at retirement, and it unrealistic and unfair to expect the remainder to meet the cost.

The aging population is a major stumbling block, yet preliminary data from the 2011 Census, essential for economic planning, will not be available until July, 15 months after the event, with the bulk not until mid 2012. Imagine businesses working on that timescale

This is only the tip of the State bureaucratic iceberg; the Government decide on a 20% cut in spending but don’t analyse where these cuts can be afforded, resulting in chaos, u-turns and general hardship and discontent.

The Health Minister admits to angry nurses the loss of 4,000 jobs, yet we all know from experience that they are thin on the ground, as are the police, doctors, firemen etc.; there appears to be “too many chiefs and not enough Indians”. Yet the Defence minister announces savings of £35bn, how much more wasteful overspend is hidden in the woodwork; get real and sort it out properly.

I am sick to death of the blame game; it is all the fault of the previous Government, the Banks and now the Euro. We elect Ministers to run the Country not make excuses, the whole of Europe is fed up with austerity getting nowhere, with vested interests and the Commercial sector dictating terms and manipulating affairs, with Ministers cosying up.

The main problem is overspending abroad and getting us into the hands of the moneylenders, who set interest rates at their whim, of course internal imbalance is important, but much of it costs nothing in real terms, particularly labour, and can be controlled more effectively.

We need to tackle the whole question of the economy, the needs of the population and the effectiveness of budget cuts in a more professional manner to make ourselves independent of external control, that i s to run our own Country ourselves.

John’s Blog No.74 – Pensions – Queen’s Speech

A Pension Bill is a part of the parliamentary work for the next year and followed on from the Budget punishment of pensioners, it effectively heralds the end of the National Insurance contributory Pension scheme, besides introducing further delays for the NEST scheme.

It is proposed to replace existing State pensions and SERPS with a single inflation linked pension of £140 per week (£7,280pa); this is just £2.65 above the minimum the State says a single person needs to live on, the poverty level and the basis of the welfare Pension credit.

The whole system is reducing down to an all grey pensioner Society all receiving the same State subsistence poverty level, whether you pay NI or not; in fact you are better off on welfare as you are then entitled to quite substantial Housing and Council Tax benefit, free dental care etc..

The State answer to this problem is the introduction of a compulsory contribution NEST scheme, which is now being delayed further due to Employer objections and is unlikely to come into effect for 2 or 3 years. They are objecting, quite rightly, to the requirement to pay 3% pension contributions in addition to the quite hefty 13.8% NI, as should the 29 million people in work who pay 12% NI contributions.

Part of these contributions were intended to pay pensions to those in work to secure their retirement future, instead they are lost in Exchequer revenue and not put aside for the purpose for which they were intended, now effectively part of the taxation system, as they give no benefit.

If you earn the average wage, now £498 per week, you will pay £68 tax and £42 NI per week and your Employer pays £49, if only half of this NI contribution was put away on your behalf into a private contributory scheme, you could expect a pension at 65 of £250 per week over 40 years in real terms.

From October, or possibly later, with no other pension provision, you will be required to pay £20 per week, after tax relief and your Employer £15 for what is an uncertain pension benefit in the new high risk defined contribution scheme NEST.

It is uncertain what happens to this money, it will be collected apparently by the Treasury and could probably end up in their coffers as a repeat of the failed NI scheme. Although there will be Trustees from the existing Pension Industry, there is no guarantee of independence from State control or clear investment policy. This could be a splendid opportunity for basic Pension reform which will be missed.

Delayed retirement is still firmly on the agenda and being brought forward whilst elderly care is pushed back out of sight. There is no logic or commonsense in the approach, the savings are minimal compared with the possible costs to youth unemployment and elderly wellbeing and population claims are not proven, substantiated or even studied. There is no elixir of life to cause the over 65’s to double in number.  

The concern with the urgent elderly care seems to be more with costs than needs, with proposals for a care tax at retirement and any other means of parting the elderly from their assets and savings. There appears to be little readily available information or statistics on needs, the percentages from age 75 on in care and whether this is social and recreational clubs; home care; sheltered housing; residential or intensive care. The position is made worse by illogical population projections and failure to tackle the ethics of prolonging vegetative existence.

The intention to press ahead with Public Sector pension changes was also given in complete disregard of those involved or the known facts. One has the strong impression that there is no one in Government that understands Pensions or possibly even democracy, let alone good PR.

This was on top of a poor budget for pensioners with detrimental tax changes and inflation increases given with one hand and taken away with the other, loudly proclaimed as being better off, whilst costs continue to rise.

There is a degree of cost cutting panic in the penny pinching policies, without thought or consideration, resulting in miserly austerity, unemployment and stagnation which undermines the economy. Forced redundancies; reduced services can cost more than they save unless combined with a clear forward policy.

Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport, Comment

John’s Blog No.73 – Pensions

Well managed Pension Funds are the key to the UK future and prosperity, allowing investment to meet the needs of the growing and diverse population. Instead of taking the begging bowl round China and the rest of the world, asking them to buy our assets or build our infrastructure, we should sort ourselves out.

There is no clear economic policy in the UK; we have lost our way and are too busy following the myth of the global economy and pacifying the business Mongols, the Commercial sector and large global Business, who are more concerned with profit than ensuring a future.

The global economy does not exist, it is a pipedream, like the European Union; what we have is a collection of individual Nations, who by necessity and nature are insular. If the World’s wealth was spread out equally, we would all live in a grey world of poverty; of course the aim should be to improve the human lot, but this will not occur in the anarchy and exploitation, which is the Third World today.

We need to get our own house in order first, balance our budget with the rest of the world and then control overspending at home. The Government appears to have no clear policy or sense of direction; they are making drastic cuts in internal spending, tightening the belt so hard that some are starving, whilst others can loosen a notch to grow a paunch.

There is an obsession with labour costs; Public Sector spending, which is mainly labour cost, is being reduced with redundancies, but what is this cost?. A| third of the wages paid goes straight back into the Treasury in taxes and NI, the other half circulates paying for food, services and goods with the majority going back to the Treasury again. It is then replaced by increased benefit spending to support the new unemployed and their families. Only spend abroad is lost unless covered by income from exports.

The overseas spending is the real cause for concern and need for drastic cuts, every penny spent has to be earned by exports otherwise it undermines our living standards. Loans to the IMF have to come from somewhere, it may appear as fictional paper money but it is a real spend, if you lend your children the deposit on a house, you have to find the money, it is pointless borrowing it and paying interest.

We spend and buy too much abroad from food and flowers we can grow ourselves, to toys, hi-tech gadgets, clothes and luxury goods that we don’t really need. What is more worrying is the invisible “imports, the defence spending abroad to maintain the British image, the EU costs, Foreign aid and  the money exported by immigrants to support their families.

Another major area are the Pension and other funds being invested abroad to create growth and prosperity there, meanwhile we have a growing sell off of our own assets abroad and the consequent critical loss of control.

Our basic Utilities and a large part of our manufacturing base and even property are owned abroad, their profits and rents are “exported “  and we are dependent on overseas generosity to keep our jobs alive and are subject to their uncontrolled cost rises. New Nuclear Power Stations, deemed essential, are cancelled as the French and Germans no longer wish to build them, they cannot be relied on.

Yet the Pension funds essential for our retirement future could supply our investment needs, even ignoring the present funds, current annual contributions and the new NEST ones represent a large potential, which would be considerably increased by a NI rebated universal pension scheme.

This money would not be lost and if run as an ongoing dynamic scheme need not be repaid only serviced at a modest return to give adequate pensions after forty years. The amounts are large, some £100bn per year, which would build almost two million affordable homes, many many hospitals and schools etc.etc.

This is just a bonus to the adequate pension provision and worry free retirement, taken when you want and under your control, not at the dictate of petty officials or Ministers. Only people pressure will cause the change and the return of pension savings to their true owners, who have saved and paid NI and other contributions all of their working lives. Our MP’s don’t even realise there is a problem.

Annuities, Public Sector, NHS, Teachers, Police, Local Government, Hutton, State Pensions, Transport, Comment