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.

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.