I downloaded the latest State pension figures for December 2012 from the DWP website, which made interesting, but not exciting reading and illustrated how far out of hand State pensions have become.
The total cost for pensions alone, before any welfare costs is now £79 billion for some 12.84 million pensioners; of these 1.29 million are females between 60 to 64 and 1.21 million are Britons living abroad, which also includes their dependent relatives.
Some of these are non UK Nationals and even include persons who draw dependent pensions from the UK and a second pension from their own Country; it is a nonsense state of affairs, particularly if they never lived here.
The UK resident remainder over 65, appears to equal the last total population count for the UK, in other words every pensioner in the UK is drawing State pension. This is contrary to the impression given by the NI contributory pension, where members have to meet a contributory number of years or pay extra NI contributions to qualify.
We are living in an imaginary never-never pension land, where what you believe you see is not actually there, it is already a universal State pension and the single tier proposals just reduce it to a single grey level for all; a Tory Government meeting full Socialist principles.
One can also realise the full cost saving penny pinching motives behind the change, when fully implemented the large rise in basic pension will result in real terms in a reduction in cost to £63bn, a saving of £16bn, which is a trick worthy of thee best magicians.
Such a saving, with the expected additional drop in welfare Pension Credit and other costs could fund the transition to a true defined benefit contributory pension scheme using NI contributions in the manner in which they were originally intended.
Over 20 years, this would create real savings to the State and meet the stated intention of rewarding those who work and save to ensure their own pension future. Your NI contributions would build up your pension fund to secure your retirement and even your potential care needs.
The benefits do not stop there, the effects of population increases would be met by such self sufficiency, without any dependency on those in work, who would not need to support you. Large investment funds would be generated to meet all our infrastructure needs and even the State would save money.
When combined with the new automatic workers pension scheme, which is necessary because the State has misused NI contributions, reducing State pensions to below the poverty level, all contributory members would receive a pension of at least half the average wage, the aim of most DB schemes.
Of course such a scheme would have to be expertly well managed and there are many examples of private schemes here and elsewhere who do just that, giving good returns at low costs. This is been discussed in previous blogs and over forty years pensions of four times annual contributions are possible in real terms.
This means that a saving spend of £20bn per year over forty years would meet pension costs of £80bn per year, much greater and real State savings than those presently envisaged, of course you could just halve present spend and double pensions to even £288 per week.
Everyone would be a winner!
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