Therre were two events this week that emphasised the general failure to recognise that NI contributions are your money and should be treated as such and as a commons sense approach to present problems.
The Autumn statement was the expected non-event of doom and gloom, with little major effort to promote growth and the economy, some release for investment in infrastructure, pinched from other budgets, but nothing like the amounts available a bold approach to pensions would create.
State basic pension increases of 2.5%, although welcome do little to redress the balance of years of neglect or the fact that even the full pension is over £30 per week less than pension credit and nothing said about S2R, which rose last year but not previously.
The inflation rates for pensioners are much higher than the published rates, they buy few i-phones, computer games or fashion clothes, etc. and are hit harder by energy and food increases. The whole position needs to move away from welfare and charity hand outs separating true welfare from benefits earned by hard work and payment over many years of Taxes and National Insurance, to real entitlements.
More worrying was a report from the Institute of Fiscal Studies discussing a unified simplified tax system merging Income tax and National Insurance contributions as a single tax, paradoxically, they also refer to the Contributory State pension system, but fail to say how this would work.
Although this is the way the Exchequer is trying to move, it would throw away years of endeavour to establish a welfare state for those in work; at the time this was brought in our society was work based and centred, we had a strong sense of paying our way and earning our keep, now sadly missing in many elements of our Society.
National Insurance needs to return to just that; insurance and pension contributions for those in work related to the amount paid in with only essential minimum redistribution of wealth, your money intended for your use. If the State cannot manage such contributions in this manner, then it needs to be removed to somebody who can.
The amounts are large, for someone on the average wage of £500 pw, the combined NI amounts to 20% of wage; if unified it would give a basic tax rate of 40% rising to 60 and 70% plus VAT, fuel duty etc. etc. etc. Again nobody has thought it through, imagine this as the mainstay of the next election manifesto, very popular in opposition.
Other autumn statement proposals hit those in work, limiting benefit rises to 1%, many of which were again part of original NI benefits, of course the wealthy had tax relief reduced on pension contributions, now £40,000 pa with £1.25 million maximum. At 6% return this would limit the pension to £750,000 per year, we should all be that lucky.
A more realistic level would be the 40% tax level, which with allowances starts at over £50,000, with average contributions at 20% of £10,000 pa, this would still give appreciable relief at 20% and a much fairer system. If you are on average wage you would only get half of this and the revenue savings could allow misery relief elsewhere.
The whole of NI income raised is spent on Pensioners, currently £108bn, with a further additional £54bn on working age benefits; if transition to a fully funded pension scheme was made, expenditure could be contained within 50% of income in a more secure pension regime free of demographic and age dependency effects.
The resultant funds created would meet all the projected cost rises and release equivalent funds for investment in the UK, at levels not seen since the Industrial revolution, and secure our future growth and economic prosperity.
The £54bn released would meet the working age benefit bill, but should be targeted at those in work and ensuring work for those unfortunate unemployed, a labour waste we cannot afford!
That could fulfil my aims on pensions and work, but will only occur if the voting population demand it. Your money, your choice, your pension.
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