Also included in the State pension reform was the abolition of the SERPS rebate, which automatically follows the stopping of the State second pension. This will occur in 2017, although existing benefits will be retained.
Again this has not been thought through, a 4.9% NI rebate contribution to pension funds will be taken away, reducing further the incentive to save for pensions and putting at risk many funded schemes, which are having problems meeting existing stringent Fund liability demands.
It is almost as if the Government has a Pension death wish and wants to see the end of the successful funded pension schemes, forcing all into the loss making Defined Contribution schemes and outdated, uncertain and minimal annuity situation which is currently failing all entering retirement today.
Originally all were able to opt out of the second State pension if their income and NI contributions exceeded a certain threshold. Although some were worse off, many benefited and in fact were able to retire from 55 and take tax free lump sums and were better off.
Of course it became unaffordable, taking too much out of the Exchequer revenue from NI contributions, and was restricted to the major schemes of which Public Sector pensions were the largest. This rebate was taken in and represented as part of Employer contributions, which they were not, making schemes appear generous.
On Public Sector pensions, the position becomes more mysterious, as it is being stated that employee NI contributions will increase by 1.5%, their part of the rebate, yet the scheme did not work that way. Employees paid full NI and the rebate was then supposedly repaid to the scheme.
This suggests that in practice the rebate did not exist in Company and Public Sector schemes where pension provider and employer are the same entity. It raises many questions, particularly with the State scheme which is not accountable.
Do the State make any payments into pensions at all, or do they just pocket contributions and pay out the minimum when forced to do so? Only the non- subsidised areas of NHS, Teachers, Police and Fire are affected, who all pay full contributions.
At the present high level of members contributions, if the State paid for the use of the money for some 40 years, then the average pension level could be met on members contributions alone, without any Employers or SERPs contributions. The schemes are just Employee savings schemes without any saver protection or savings!
The alleged taxpayer’s cost of these schemes is just payment for past sins, to meet the present pension liability and has nothing to do with existing contributors. They deserve to be given value for money in a well managed and funded scheme; they pay extra contributions for extra pension above the present NI welfare pension.
If the National Insurance Scheme had been properly drawn up and specified with amounts allocated for pension provision and if the State had dealt with these in a proper business manner, then all in work would have seen decent pensions and accountability. It is not too late to correct these errors, but time is running out.
Such a transition is possible in a cost acceptable and almost neutral manner, the NHS could almost go it alone as contributions exceed pension payments. If a suitable alternative was available all could opt out and be no worse off and the State would be forced to find the money for existing pensioners.
The State should stand up and accept its pension liabilities, if change to a funded system were phased in, then the initial extra cost burden over existing pensions could be met by the SERPS saving and savings from the unfair tax relief system, plus potential benefit savings.
Additional funds could be made available from pension welfare reform; in fact the cost of paying all pensioners the single tier level is some £20bn less than the current spend. The State would save money in the longer term; members would receive the pension excellence they deserve and considerable investment funds would be released into the economy, with many other far reaching benefits.
Pensions are a mess and becoming extinct and need urgent action or do we all move into the workhouse at retirement.
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