John’s Blog 91 – Pensions – The Great State Pension Robbery

Criminals who rob trains; Businessmen who take and hide money from their Company; Solicitors who spend Client’s money are all prosecuted with long prison sentences for theft, fraud or embezzlement. Why can the State collect Pension contributions from worker’s pay packets as National Insurance and spend it without the same questions being asked? Of course there is the pretence of pension distribution but the poverty amounts are becoming the same whether you pay NI or not. The sums of money are huge, some £3,200bn of liability, equal to twice GDP and the final benefits are small and not related to the contributions made and the wealth redistribution is large. It is questionable whether this is a contributory pension scheme, it was certainly set up and run as one, with individual records and eligibility contribution years. There the similarity ends, the money is not put away as in any normal pension scheme in Funds which earn interest and grow, which should give a factor 3 to 5 enhancement of the annual contributions made. The money is lost in the bottomless Exchequer coffers and begrudgingly paid out as a benefit not a right. It does not stop there, the rules are changed without the consent of members, eligibility levels lowered, proposed abolition of the second pension and changes to the retirement age, which are completely unjustified. In a normal pension scheme, you can retire from age 55, providing you have built up an adequate fund and your final pension will relate to contributions made. In the State scheme it is a fixed poverty amount, unrelated to contributions from 65 but increasing up to 70, again the amounts lost are not trivial and represent theft from the individual. Every year that retirement is delayed, has the following consequences:- • Some 530,000 people lose a year’s pension equal to some £3.2bn • A year’s extra Tax and NI are paid, which at the average wage equals some £4bn • Some 6% die losing pension altogether, a potential saving of 4bn or more • A year of healthy retirement and enjoyment are lost; value immeasurable. These are not trivial or just petty theft, but loss of rights earned by hard work over a lifetime, which is made worse by the lack of historical evidence that we are living longer after 65 and estimates of only eight years of healthy living from 65, before old age sets in. It is not helped by the all grey liberal Society which does not recognise work or endeavour, taking no account of the contribution made and promoting envy of those that work, save and prudently look after their future. Tax the better off, who can afford it, but these are not the obscenely rich high earners but the middle society who make the effort to improve them-selves. The over 65 population is increasing rapidly and individuals need to save for their own retirement as the only way forward. National Insurance should return to just that; insurance for those who work and part should be put away for retirement in individual pension funds independent from the State for those who contribute, reflecting the amounts saved over their lifetime. It should not be squandered by the State in welfare, benefit and other payments which should be paid for by normal taxes. 

John’s Blog 90 – Pensions – Comment

There have been several items reported this week, all indicating similar trends. Our modern lives and futures appear to be based on a purely monetary basis, not whether it is the best course, is affordable or will even work, yield results or give benefits. It would not be so bad if we were being run by business experts in a modern financial system, who knew what they were doing I was surprised at the result of the North West Rail franchise auction, although I should not have been, with the decision having been made on the highest bidder rather than ability to deliver. Of course the passengers will have to find the £5.5bn involved, in addition to the twice inflation annual rises being applied and the money will not end up in improving the railway system, but lost in the Exchequer coffers. Virgin have built up and improved the West Coast line meeting all of the targets and the bid continued the prudent way this was done and passengers deserve a similar attitude. Then we had the proposal that the larger high reputation hospitals should go commercial, selling their services at home and abroad and opening offices and even hospitals there, with no guarantees that this will not affect services here. All part of the move to privatise the NHS. It is already occurring and would make sense if we had surplus capacity here, but coincided with reports of a chronic shortage of doctors, units being closed down, empty beds, long waiting lists and all other indications of a failing system, whilst doctors emigrate due to lack of posts. Meanwhile drastic changes to working conditions and the NHS structure press ahead without the consent of those the system depends on. Changing emphasis to more community and local care makes sense only if you build up adequate facilities, but is not compatible with cottage hospital closures and large specialist units at remote distances. Remote consultations are possible with robot doctors and TV links to specialists, allowing local clinics with GP’s present but need better expanded surgeries combined with local care in small hospice and hospitals and better co-ordination of local Council and NHS services, particularly for home care. Then we have the post Olympics euphoria, with talk of greater encouragement of youth activity, meanwhile School playing fields are still being sold off, swimming pools closed or with limited services and parks and open spaces with limited and poorly managed facilities. There are now proposals to sell of high valued properties and build more affordable homes, of course the sales will happen but not followed by the build. Part of the present shortage results from the sell -off of Council houses, but then not allowed to build replacement stock with the money. Housing associations do a great job, but building needs more financial support, cheaper mortgages, smaller assisted deposits and less Stamp Duty. Exam results are out with the discussions on again changing exams, downgrading results etc., and Industry and Commerce stating that students do not have the basic skill of maths, communication, spelling, reading and writing. In my days it was the three R’s with times tables, mental arithmetic and phonetic spelling and reading; Primary schooldays were happy ones with little stress or competition in group working and pairing work of strong plus weak, so one took 11+ with balanced and strong basic skills. The problem today is too much change and interference; teachers should be left to do the job without constant assessments, targets and league tables, they ran their own tests and kept performance records to supplement exams. These and coursework should be part of final exams not solely a two hour test. Downgrading results to suit politicians is also unfair, inconsistent and devalues the exams. The Government should govern and like any good business delegate and let the professionals do the job they trained for with checks but free of interference; teachers should teach, doctors and nurses care and cure and Local Government look after the Community. They should not be rigidly controlled by Central Government.  Enough problems exist with the economy, budget overspend, balance of payments, infrastructure, foreign affairs, unemployment, inflation, outdated laws and general policy to keep any Government overworked without doing everyone else’s work. We need a common sense balance, delegation and sharing of workload.

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.

John’s Blog 88 – Pensions – Olympics

The spectacular opening ceremony and panorama of British history brought a major reaction to the mix of reality and fantasy and the surreal results of children’s literature, music, entertainment and special effects, with the transition from agriculture and hard work of mining building and manufacturing to fairytale land. This was a real reflection of modern life in Britain today, where we do not appear to be able to separate the real from the imaginary, part of the reasons for the Bank crisis and recession and a major problem. Our financial Institutions buy and sell coffee beans before they are grown, gas, oil, coal, steel and copper before they are mined and refined and many other imaginary items or “futures” and make real money, which they hide away. The approach is extended in many areas, we all buy things we cannot afford, spend money we have not got and have assets well above their worth. Houses are a good example, the property boom raised values well above the cost of agricultural land and the cost of rebuilding them, putting homes and rents beyond the reach of ordinary people, especially youth and reducing mobility on existing owners. This extends globally to Countries, who play with “board game” money: borrow above their means and then are crippled when the “gnomes” revise their risk and raise interest rates to unaffordable levels. Is this money real? You work hard and are paid by transfer to your Bank, whose cash machines issue you with paper notes promising to pay the bearer; this promissory note is part of modern culture, depends on confidence and is lost when major debt occurs. The modern day problem resulting from moving into this fantasy world. Nowhere is this more apparent than in pensions today, in the real world of funded Company and Private pensions, schemes are expected to have adequate assets to cover pension liabilities, without sufficient flexibility to meet market downturns causing the closure of many viable schemes. The State however moves in a fantasy world without any such restrictions, spending contributions as they are deducted and dependent on future taxation or contributions to meet liabilities with no serious planning. Even modest population projections show increases of 50% in the retired over the next 40 years in real terms. Recent figures released show the total liability of State and Public Sector pensions at £5 trillion, with the Government trying to avoid payment by increased retirement age and the abolition of the second pension. It is time to return to reality and take positive steps to meet this liability. All pensions need to work on a level playing field, with pension liability amounts returned as positive funds to members, although difficult, it is not impossible. Liability amount are overstated, probably due to the current low annuity rates being taken to estimate return and general pessimistic actuarial values. We can move back to reality by combining reality in the form of the new contributory scheme with a rebate of part of current working members NI contributions; or a modernising change of NI into two parts of pension contributions and work insurance, turning this effective tax back into NI for the benefit of those in work. This could involve age 25 to 44 initially building up to 65 over a 20 year period, the promissory note part could still be retained by the issue of State Pension bonds to cover existing pension liability or even the NI rebate. The majority of the UK live in the real world; have to make ends meet and stretch resources to do this, keeping their feet firmly on the ground. The Politicians, Financial Institutions, Think tanks and Social leaders appear to have floated off into this fantasy land. Is the recession real or is it self inflicted, is growth stagnant because of the stringent economies and cutbacks, the redundancies and services we apparently cannot afford?. We are spending beyond our means, but is this because we import food we can grow ourselves, or goods we do not need or could make. The balance of payment deficit is at its highest ever, is this not the real problem? Now that the Olympic fantasy is almost over, perhaps we could get back to the real world, find the solutions that work, forget the idealism and concentrate on the essential priorities of survival.

John's Blog 87b- Pensions -amendment

There was an error in blog 87 so that para's 6 and 7 are misleading, they should read:- If one looks at the population distribution from age 65 and decline per 1000 from there, one finds that at age 70 it has reached 71% and by 75 it is 47% and decreases rapidly to 14% by 85; in 2001 it was 72, 47 and 12% and the curves since 1991 are a good match overlay, indicating little change in longevity. There is no justification whatever for increasing retirement age by even a year, if as proposed it is moved to age 70, then 8% some 800,000 of the present over 65 population will have no retirement at all and the rest will lose 5 years of the best years of their retirement lives.

John’s Blog 87 – Pensions – Census 2

I have completed my initial analysis of the Census 2011 results for England and Wales for the over 65’s and the comparison with earlier Census results and can state emphatically that we are NOT repeat not living longer. This is a myth put forward by successive Governments as a penny pinching measure to save money on pensions and increase taxation income by delayed retirement and increased NI / contributions, which is not in the best interest of the working population. The problem is the increasing numbers entering retirement, which distorts longevity effects, as these numbers pass through the ages. However a major part, some 80%, of these have paid good taxes and NI and do not deserve to have their retirement eroded or diminished. We may have gained the odd six months or even a year over the past ten to twenty years, but not the five or ten years we are being told, and of course there are more of us about over 65, up 13% since the last 2001 Census. The population is growing and we are living longer, but this is not confined to the retired. The number at age 64, who will hopefully pass into retirement has increased by a massive 46% since 2001, that is almost three people for every two then. Some 85 % of males and 90% of females will survive from birth to age 65 and this is the major difference, although this trend is just moving into the 65 to 70 ages, it has not had a large impact yet. With modern living excesses it may not even do so. If one looks at the survival from age 65 and decline per 1000 from there, one finds that at age 70 it has reached 71% and by 75 it is 47% and decreases rapidly to 14% by 85; in 2001 it was 72, 47 and 12% and the curves since 1991 are a good match overlay, indicating little change in longevity. There is no justification whatever for increasing retirement age by even a year, if as proposed it is moved to age 70, then 29% some 2.7 million of the present over 65 population will have no retirement at all and the rest will lose five of the best years of their retirement lives. Recent report on health in retirement state that from 65 there are 8 years of healthy living and some 12 years before some form of disability sets in, so reducing this by even a year is criminal deprivation. There was outrage at child labour, forcing children to work from 8 years on, so what is the difference when one comes to the elderly, why should we force them to work in their twilight years. The problem is money, resulting from the improvident way the State has managed pension provision, we all pay substantial National Insurance contributions, which are checked to ensure we have adequate qualifying years. Then the contributory scheme stops dead, because the money has been spent and there is nothing in the kitty to pay pensions. This is fraud on a grand scale, resulting in the State paying out minimal benefit pensions at a poverty level and now even conspiring to avoid doing that. NI is no more than a tax burden and needs to revert urgently to its original aims. It is not impossible, it just needs a little of the financial juggling the Government appears so adept at. On an individual level, there is lot you can do to protest, initially on retirement age and then pressure for a better more equitable return on NI pension contributions, it is your retirement time and money, so shout about it, tweet like mad, email your MP, Ministers, Employers, Trade Unions and any one else concerned. We need a new pension regime which recognises the contributions made by individuals as their personal savings, put aside for their own benefit and subject to their will, flexible enough to allow them to retire when they want to, as soon as they have adequate funds, and secure enough to guarantee a good return. There will be a need to pay something more, but this is already in hand with increases in NI and Public Sector contributions, and in October Nest starts, to cover all in work and not at present in a Private scheme. This money needs to be put aside and made to work hard, directly for member contributors alone, not to meet the existing liabilities and debt the State has built up or to pay benefit pensions for those not working. Contributory Pensions are not a social benefit and should not be made so, you should take out what you put in plus a reasonable growth and return, it is no different to personal savings, although there could be room for some wealth redistribution amongst members. It is time for a change to a sensible economic and fair system!