John’s Blog No 97 – Pensions- Welfare Benefit 2

The population in work cannot afford the present level of State pension and welfare expenditure and future population increases, particularly over 65, will make these completely unsustainable. Present charges are:-

Weekly  £	200	300	400	500	600
Annual  £	10,400	15,600	20,800	26,000	31,200
Tax	460	1,500	2,540	3,580	4,620
Nat’l Insur	580	1,204	1,828	2,452	3,076
NEST  5%	520	780	1,040	1,300	1,560
NI Emp'yer	667	1,385	2,103	2,820	3,538
NEST  3%	312	468	624	780	936

Members and Employers in defined benefit schemes pay two to three times the contributions of NEST.

With NEST Employers total deductions at average wage are 28% and Employers cost is 14%; total NI is 20%.

This is a substantial direct drain on employment and individuals.

Recent published figures show the pension liability of the State at a massive £3.2 trillion, this is effectively the value of the NI pension Fund from member’s contributions and even if it gave a modest 4% return would result in an annual investment income of £128 bn, almost twice the current basic and State pension costs at £68bn.

Although not recognised as such, this level of debt shows the extent of the problem and questionable legality of State pension provision in the UK through an unfunded scheme. Yet the money is being collected from wages with the DWP keeping a database of members and their NI contributions and their pension eligibility.

The system is run as a compulsory contributory pension scheme, without the controls or membership protection that the State insist on with private schemes and in fact without the benefits or rights, as welfare pensions pay more. The mode of operation and accountancy practices of the Exchequer make the State an unsuitable Pension Manager or Provider; it is unable to cope with member’s savings, degrading into the present “pay as you go” chaos.

In fact the same charge could be levelled at many private Insurance providers, with members of defined contribution schemes losing money in real terms (DWP report). Yet the successful Company and other schemes are being driven into extinction by the State from taxation, pension levy and inflexible and excessive Fund liability demands requiring extra investment at a time of recession, which the State itself does not observe.

A similar position exists with the main Public Sector schemes with a liability of £1.8 trillion and is likely to occur with the new compulsory NEST scheme. The tragedy is that the State is the main UK Pension Provider and two thirds of the population in work are contribution or have paid into it for their retirement future.

That future is bleak, the second pension is being abolished to be replaced by a single pension of £140 pw, some 28% of average wage; the NEST scheme is projected to give a further 14.4%, a total of 42.4% av wage, some £217 pw. Yet at £500 pw (av. wage) total NI contributions are £101 pw  (20%); if half of this was allocated to pensions combined with 8% NEST at 18% in a well managed scheme with current 5% growth over 40 years would yield £400pw pension.

Even in Private schemes dependent on annuities, the return has dropped so low making them unstable and not worthwhile, which could also apply to NEST on the same defined contribution basis. 

The case and need for major changes in State and private pension provision is overwhelming, the solution would be transition to a universal fully funded defined benefit scheme, but is not quick or easy; pensions are long term and changes would be similar and major State transition could occur over twenty years.

However the advantages and benefits would be large, both to the State and the individual with pension cost related to income resulting in major expenditure savings and a scheme giving greater benefits, which are linked to total contributions made. These have been considered in previous blogs but dealt with again later.

John’s Blog No 98 – Pensions- Welfare Benefit 3

Last week my disabled son received a letter regarding benefit changes. The Gestapo could not have devised a letter better designed to create fear, anxiety and terror; a Psychologist would have had difficulty, but for DWP it was easy. A little humanity and common sense could have softened the bureaucratic message. The letter indicated a questionnaire, followed by a re-assessment; the last time there was a purge, he was subject to a cross examination, asked to walk up and down stairs and even stand on one leg on a table (will catch you if you fall). The local Supermarket also wet- nursed him through several weeks of general work, but did not take him on. There are some people who are incapable of work and should be recognised and registered as such and exempted from re-assessment, their GP’s, Consultants and various excellent charities know this and should be consulted and believed. Registered and known disabled should be given benefit for life similar to a pension. Benefit costs and fraud need to be drastically reduced, but the policy of guilty until found innocent and disbelief needs to change. Inability to work ranges from permanent to partial to temporary, all medically certifiable and subject to checks by or visits to GP’s. anyone outside these limits should be subject to assessment. Many charities say the simplified assessment will make many disabled people substantially worse off, this is a ridiculous state of affairs. Statistical information on living costs, household spend etc. is readily available to establish monetary needs and allow income continuity; anything less is penny pinching economy. The State appears to have a current policy of universally offloading costs to Local Councils, business, charities and individuals, expenditure which rightfully and traditionally belong to the State. This is wrong; they should face up to their responsibilities; sort out the economics/ budgets; decide what they can afford and implement it properly. Charities and individuals do tremendous work, saving the taxpayer millions but do not get the support or recognition they deserve. We need to decide on the type of Society we want and how we can afford it, the problems are universal for pension provision, education, health, housing etc. all are closely related. As a Nation we apparently cannot afford to educate our children, support those incapable of work or even look after our older generation, yet our taxes keep rising, whilst no-one appears capable of doing the basic sums on what we need or can afford, preferring to plod on day by day and from crisis to crisis, with massive waste. It is time a well thought out, co-ordinated and common sense policy was thrashed out, linking all parties concerned to establish and match the needs and resources of UK Society and the most effective and economic way of meeting the demands. Are we an advanced Nation or just a Third World “has been”?

John’s Blog No 96 – Pensions- Welfare Benefit

An increasing number of pensioners are becoming dependent on welfare, even the Government refers to State pensions as benefit, not an invested right from contributions made, mixed in with other benefits and the total cost for all pensioners exceeds the National Insurance income. If you retired twenty years ago, even with State pensions, you were relatively well off; if you also had a private pension you were laughing all the way to the Bank, with annuity rates at 16% your pension fund gave at least three times the income in real today’s cost terms. Over those years, the State pension has been steadily eroded by rising living costs, which have not been matched by pension increases up until last year. This was the first time that both the basic and second pension matched inflation at a high rate of 5.1%; it is likely to be the last, judging by the official reaction and the moves to use lower indices. It is now at the basic poverty level, in fact those who have not worked or saved are now better off, during both their working lives and retirement, than those who work contributing National Insurance, a nonsense state of affairs. The truth is that those in work cannot afford the cost of welfare and unfunded pensions and this is going to get worse with the retired population projected to double in the next 20 to 40 years. The system is unfair and unsustainable, without even the guarantee of a good return from NI contributions when you eventually retire. Welfare Benefit is a problem in all developed Countries, with the solution ranging from let them starve to over generous housing and payment benefits. The Victorians created workhouses, which were just that and to be avoided at all costs, whilst landowners created tied cottages and large Employers built villages complete with schools, shops and recreation for Employees to encourage work. Today conscience and the heart rule over the brain and common sense, we need to create a compromise between starvation and “better than work” situation. Present standards are based on what we expect when in work and fairly paid; good housing, ample food including the luxuries and all the musts of modern living, which Society cannot afford and also resented by those who do for those who do not contribute. Benefit should provide the most basic living, the minimum to survive, it should discriminate between those who worked diligently, paid taxes but have fallen on hard times, deserving good treatment and the new entrants which divide between young citizens and immigrants. Benefit should not be long term, replacing work but a short term expedient. Those incapable of work, like disabled or full time mothers should be treated differently on a longer term basis, as should students. Earned work insurance and pensions should be treated as a right and not a benefit, although the latter may be needed in borderline cases. There needs to be a clear distinction between these, which requires the National Insurance contributions to be separated from State accounts, i.e. the Exchequer, in an independent body or Trust, serving those that work, the borderline is fudged with increasing numbers being forced into benefit. Benefit should not be a right but a concession and the State should manage the economy to minimise the cost; not by short term and penny pinching economies, but by planned policies and budgets to ensure maximum use of assets, which includes labour. Any able bodied unemployment is a waste. To be continued in next blog.

John’s Blog No 95 – Pensions – Provision

The latest information shows that members of Private Pension Schemes have fallen to the lowest ever at 2.9 million with the Public Sector remaining the same at 5.4 million. This means that there are some 21 million people in work who are entirely dependent on the meagre poverty level State pension. Next month they will be progressively enrolled into the new compulsory pension scheme with member contributions of 5% (4% after tax) and Employers at 3% of gross wage. Someone on average wage will therefore find extra deductions of £20 per week at a time when they and Employers can ill afford this cost. This has not been given the publicity it deserves and little real information exists on what is going to happen to this money and how it will be managed. We are talking large potential sums, at an average of £2,000 per head over 21 million gives £42bn per year, almost 80% of the current basic pension cost. It is being collected by the State and if it disappears into the Exchequer coffers it will be just another major increase in National Insurance contributions, who are just absorbing the large Post Office Pension funds, and could end up as just another unsustainable Public Sector scheme. It has been indicated that over 40 years saving the replacement rate would be 1.8 that is the total contribution of £2,000 would give a pension of £3,600 per year at today’s living costs, i.e. in real terms. This is well below inflation proofed level at 2.4 (£4,800 pa) and the current good private scheme potential of 4.5 (£9,000) and only half of the proposed State pension of £140 per week, which would require contributions of £4,000 pa at this lower level. The State is the major pension provider in the UK and is unable to efficiently or effectively carry out this role; it should restore National Insurance to its original purpose to provide for those in work and contributing, when unemployed or in retirement and in relation to contributions and timescale paid. This is member’s money deducted for this purpose, their personal savings against hard times and old age. It should be treated as such in a sensible and prudent manner and outside direct State control. Mutual Pension Societies or Super Trust associations are two possible ways, with possibly a National Protection body. We should also forget the idealistic rubbish of wealth redistribution which affects the prudent middle wage earners, leaving the wealthy unscathed. You should get what you pay for in proportion to the amount and time you have paid taxes and NI, whether it is child, fuel allowance or any other universal benefit; fair without envy. Currently 69% of net NI contributions are spent on the basic State and S2R pensions on a “pay as you go” basis, with today’s contributions paying today’s pensions, a very unsatisfactory state of affairs, it gets worse when you include welfare payments to pensioners some 33%, using up the rest of NI income. Half of this money, invested in a well managed funded pension scheme would yield similar or better results, if combined with the new contributory scheme, the sky’s the limit. It could guarantee the minimum £140 pw pension to all in work, which would double for those with full average wage new contributions and could generate surplus to allow for elderly care and even limited wealth redistribution. The State would have the problem of the present pension liability, which it has already squandered, but even this could be accommodated in a controlled transition period on an almost cost neutral basis. The other main problem is the over 65 population increases, which need detailed study; projected at doubling over the next forty years they make the present State system completely unsustainable and unaffordable. Everyone in work will need to be pension self sufficient, carrying a pension pot, sufficient for their personal needs, into retirement, which if managed correctly could meet their expected increased retirement time. Currently the major cause of the over 65 population rise is due to increased flow into retirement which demands self sufficiency. Pension provision for all in retirement is possible, it just needs a different and personal approach, it also has to be perceived as worthwhile which many schemes are not; the combination of the new scheme with a NI rebate results in quadrupling members contributions, giving a very attractive and substantial outcome.

John’s Blog No 94 – Pensions – Transport

Last week’s tale of futuristic travel could occur within ten years, the technology and engineering are all available with four and five foot pressurised gas pipelines being laid overland , underground and sea at modest cost. A four foot underground pipeline over 197 miles from Milford Haven to Shirly, Gloucs was completed at a cost of £800 million, a dual pipeline would have cost little more; this is over twice the HS2 London to Birmingham distance with expected cost of £34 billion. The Norway to UK pipeline under the North Sea cost £1.7 million per mile and overland can halve it again. Once the initial speed is reached, travel in a vacuum, as in space, is perpetual motion with no energy expenditure needed to overcome air resistance, a green no fuel cost transport system, even the acceleration energy can be recovered in braking. Air travel, which we all routinely make, is in a partial vacuum, travel on the Underground or the Channel tunnel is under land and sea, all similar in time to a high speed pipeway, could be less hazardous and something we would adapt to. Pipeway travel due to the high speed favours long distance, at 300 mph it takes 6 minutes to travel 30 miles, less than the time taken to organise departure. Although speeds up to 1,000 mph are possible, in the UK there seems little advantage, with higher energy needs, acceleration and spacing distances and safety considerations. Optimum speeds of 300 mph with junctions no less than 35 miles seems a good solution. The average small car internal space could fit into a 1.2m (4’ dia) tube , although 1.5m (5’) would be more comfortable and probably not much more expensive, drive could be by a linear motor or coil gun impulse, both well developed with ”engine” in the lower cylinder or aerodynamic end plates. Pipeways could be above or below ground or both; above in transparent tubes could be frightening, below claustrophobic, but travel times are short, London to Birmingham 20 minutes, Manchester 40 and Edinburgh 70. Safety could be high with emergency decelerators, diverter tubes and even air input. An underground freight system would be a good starting and proving point, without H & S problems, justified in its own right and linking main distribution depots, ports etc. The green low energy distribution costs, the reduced congestion on the roads and rapid transit would recover the system’s Capital costs, possibly in a yearor even from present transport expansion plans. Magnetic levitation train systems exist and could be used or 4 jockey support wheels running off the tube walls; an alternative could be aerodynamic lift in a partial vacuum with a shaped nosecone, which could still offer substantial reductions in wind resistance and energy savings in a cheaper system. A simple network of two north-south links and say five transverse E-W links would cover the whole UK with 1,400 miles of pipeway at a cost of some £10bn plus normal rolling stock, less if over ground. The benefits would be large; a dual pipeway can carry the traffic of a 32 lane highway at a tenth of the build cost. Railway and air are the safest forms of travel; pipeways would be no different even safer with almost complete automation, now being built into many cars. The Sci-Fi “ beam me up Scottie” may not be so far away.

John's Blog No.93 - Pensions-Diversion

A light diversion this with ashort tale of futuristic travel, which could become real within ten years if HS2 was replaced by vacuum transport VT1 at a tenth of the cost. The technology is there and proven. We were up early and excited, it was our first adventure into the newly opened rapid transit system, which all our friends were raving about. It was dubbed as extra terrestrial travel because it was out of this world. The Day Out - Our electric taxi arrived on time at the door of our Manchester home7.00 am to take us to the terminal; we had paid for and downloaded our boarding passes on the web, packed our bag for a day break in London, whose main object was to travel on this new high speed airless system. The terminal was not what we expected, it had neither the vastness of a railway station or the endless corridors of an airport, just a small building with two doorways, arrivals and departures, the latter having two entrances standard and reserved, leading to a single boarding platform. Inserting our boarding pass released the gate and we entered. There was a line of car like capsules waiting with passengers stepping into them, it was instant boarding and we stepped into the first one available. It was a bullet shaped car with three rows of seats, two facing and one back to back to take six passengers with luggage space at each end. The two children scrambled into the front seat and my parents, wife and myself slipped into the facing seats, stepping down from the platform and slipping our bag into the back compartment. Once seated we were told to insert our boarding card and fasten our seat belts by a voice inside the car and then a canopy slid up from one side, over our heads to seal the car. We moved off immediately into the airlock, paused momentarily whilst a large door sealed behind us, cutting out the remaining daylight; we could feel a change in pressure much like in an aircraft and then we moved off again. We could see lights from other cars in front and behind us, as we were travelling in a convoy. The voice reassured us that all was well and that the cabin was pressurised and air conditioned even though there was no air outside, the lack of air meant no wind resistance with thermos flask insulation and the need for air conditioning. The same voice confirmed our destination, said there was little traffic and we would therefore be travelling at the top speed of 340 mph with a journey time of 30 minutes. There was a monitor with a route map and speed indicator plus all the normal travel items of music, TV, Computer terminal, etc. We could see the speed rising rapidly and in less than a minute we were at full speed, there were no motor noise and the silent linear motor had switched off by then, it was uncannily quiet no noise at all and a little claustrophobic. The trace on the map moved slowly and steadily towards London. However we appeared to have barely settled down, when we were well on our way with little time to read the short leaflet explaining our revolutionary mode of travel, to be followed very shortly by a five minute arrival warning. We hadn’t really noticed that we were underground as the journey time was so short, just like a long tunnel or a Metro journey and so smooth that one could not believe that one had been travelling at all. It was a bit of a shock to step out at the London terminal, realise one was actually there, that it was just after eight with the whole day ahead.

John’s Blog N0 92 – Pensions

I am at a loss for words this week or have run out of them, having exhausted all the points on pensions and in danger of repetition, if not already done so, and will therefore review recent events. The total Olympics are almost over and apart from the hype and media attention, the several main points stand out; first of all that investment paid off if measured in medals, although the worrying thing was they were the same people as at Beijing and also the pop idol presentation of these athletes. The other aspect was that we can still get things done, make decisions and take instant action, the facilities were built to time and cost and rapidly in today’s timescales; when the Security firm failed to deliver (surprise, surprise) there was a quick response of Army and police. All sensible anti- terrorist measures were taken, including the unpopular deployment of missiles, etc. Why does this attitude not apply to the rest of the major decisions and action we all know the Country needs?. We did it in the past and as recently as sixty years ago after WW2, when much of our infrastructure had been destroyed, but we did not spend years discussing what to do, who not to offend and how to do it. Common sense prevailed, it was obvious what needed doing and we went ahead, planned thoroughly and made it happen, even though we were in worse debt than we are now. Pre-fab housing was built, meant as temporary and still in use today, their much superior modern counterparts are available cheaply today and could be readily and quickly erected on any available spare land, at the bottom of the garden for grown up children, who can no longer afford to leave home. Education and exam results remain unresolved, the goal post were moved during the match, why not restore them now and sort out the problem sensibly and fairly for the future. Exam grades are higher but this is because the children are brighter and better taught, the levels need raising but not overnight. Why not leave the experts to decide, the teachers, they know their pupils best, cut out the rat race of who’s best and let them do the job we spent a lot of money training them to do and to agree standards with the exam boards. The list is endless, with health “managers” dictating to consultants, doctors and nurses, measuring everything in monetary terms and wasting fortunes in the process with little account of social and local needs, known best by the hands on staff. In all areas of State, Local Councils, Transport, Welfare, Charities etc.: draconian across the board Budget cuts are made without commonsense or freedom of action to decide best areas, resulting in short term easy decisions. The third Heathrow runway raises its head again without a coherent Transport or growth policy, can we afford to continually expand the South East. Airports are a blight and should be placed where they can do the least harm, with transport links built to suit. London apparently needs a new airport and the Thames Estuary is a good place to dump one, I was born in that area and it needs as much revamp as the East End. Let’s get on with it, not wait for an election but treat it with the same urgency as the Olympic Park and the same time scale, the Romney marshes have little to lose and transport links are already quite good to Greenwich, can be extended with even a fast ruver hovercraft service. There is also talk of closing the Olympic Park for two years for modifications, why? Everything is there, let’s turn it into a Sports Academy, leisure and events centre and build on what is there to encourage youth activity. The immigration fiasco continues, hard working citizens and students are to be deported, because they haven’t the right documents or the Authorities failed to check, who was attending lectures. Meanwhile we debate what to do with rogue landlords who exploit and harbour illegals and how to detect them; a couple of night surveys with heat seeking cameras would soon find the sheds, garages and overcrowded attics. Meanwhile the Banks continue to absorb billions of pounds, meant to stimulate the economy, but not passed on to Business, infrastructure investment or the house buyer, money sorely needed to promote growth and employment; used to bolster losses, mis-selling and bonuses. It is time to stop talking, get off our backsides and get on with what we all know needs doing, following our Victorian ancestor’s example.