John’s Blog 89 – Pensions – Retirement

Retirement is the first opportunity to sit back and enjoy life. Having completed education, started work, married, built a home and raised a family, it is the first break in the endless grind of modern life. It can never come too soon, but needs 40 to 50 years to complete all the basics, making 55 the earliest time to start the new way of life. It should be one of personal choice of when, where and if; some people’s lives exist around work and all should be able to do what they choose. Throughout work, you think of the things you would like to do, places to visit, hobbies and sports to indulge in, at a leisurely and enjoyable pace, free of the day to day worries and financial pressures. At 55 you have some 18 years of healthy life to do this; at 65, normal retirement, you are down to 8 and at 70 only left with three. Today pensioners are seen as a burden, retirement as unaffordable and old age as a liability, but this viewpoint is political brought about by economic considerations and the improvidence of successive Governments. In reality the opposite is true, pensioners are an opportunity, a source of large disposable income and experience that can give more to a community than it takes out. Economically there are large amounts of money in pensions, most of which does not work hard if at all and much wasted. The State is the worst offender and National Insurance and State pensions a good example. The Exchequer cannot save or put aside money, it is geared to collect and spend taxes within a fiscal year with no facility to carry over money for future years. National Insurance is what it says, premiums or contributions put aside for future rainy days and needs and therefore should be completely outside the Exchequer’s grasp and in the hands of someone who can put it aside and make it grow. The decision needs to be made and urgently, is NI taxation or Insurance for those in work; it is collected as contributions, varies with income and intended for the benefit of members and therefore legally should be dealt with in that manner and the outcome not benefits but rights and fully accountable. We need to get back the sense of value about work, endeavour and savings and control the greed, envy and idealism; work is the basis of our modern society in which all need to contribute and be given that opportunity. Welfare and benefit should not be restricted to the poor alone or given on a universal scale, whether you have contributed or not, the difference between earned and charity needs to be maintained. If you have worked hard, paid your taxes but been prudent and saved, whether for a pension or to buy your home, why should you be penalised, because you are deemed to be better off than someone who has not bothered. There has got be a clear distinction for benefits earned and paid for and poverty welfare. State Pensions and National Insurance are a glaring example of this, we are now moving to a single tier poverty pension with little regard to contributions paid or timescale, such redistribution of wealth is basically unsustainable and wrong unless the contributions have worked hard and give a good return, creating surplus. In fact the money is there, the total NI contribution for someone on the average wage of £25,000 per year is £4,500; 70% of this is spent on the State pension, some 12.5% of wage and properly invested giving a 6% return would yield a pension of £17,500, even if it only kept pace with inflation it would give £7,500 the present State pension level. If one now adds the new 8% contribution , one gets a total of 20.5% of wage with a potential pension of 117% final wage after 40 years, we would all be delighted to retire on that, it illustrates that Pension provision today underperforms, is overcontributed, undervalued, and does not give value for money, even with private pensions. The facts suggest that we need to increase retirement time; the Census results indicate that we are not living longer, at age 60 we have an even chance of living to 80 and healthy living to 73, therefore we need to make the most of it. We can afford it if pensions were managed correctly, particularly the State. We should have the choice to grab every minute of the rewarding twilight time, it is by nature uncertain and we need to improve the odds and enjoy it to the full.