These things were not addressed in the autumn statement:
- The bedroom tax
- The falling incomes of those on benefits
- The lack of business investment in the UK
- The increasing national debt - to continue until 2019, and almost certainly afterwards
- The falling income of the self employed
- The vast majority of the tax gap
- Cuts in staff at HMRC which deliberately drive the need for austerity
- Zero hours contracts
- The living wage
- Increasing personal debt
I could go on, and on.
This was an autumn statement that did not tackle the reality of life for most in this country.
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Nothing for savers, alas, while spending continues to propel growth. I imagine that the deflection of the Funding for Lending Scheme towards businesses is likely to nudge mortgage rates back upwards without offering any relief to the savers who suffered as a result of them falling. It’s also a decidedly poor show that the travesty involving the conversion of Child Trust Funds to Junior ISAs is allowed to rumble on.
He has announced that people must work until they are 70 to claim a full state pension despite the NI fund being £30 billion in surplus and that we are in the middle of a baby boom, which surely addresses the issue of pensioners living longer!
By 2029, there should surely be enough people of working age to provide for future OAP needs!
Liabilities in respect of state pensions already accrued amount to almost £5 trillion.
Your £30billion surplus is pure fantasy!
Nonsense – such calculations suggest we’ll buy an annuity – and we won’t
At the end of 2010, the total accrued-to-date pension obligations of **all UK pension
providers** were estimated at £7.1 trillion, nearly five times the UK’s Gross Domestic
Product (GDP).
The total comprised £5.0 trillion of government obligations and £2.1
trillion of private sector obligations.
Of the £5.0 trillion pension obligations for which the UK government was responsible
at end-2010, £3.8 trillion were in respect of state pensions (263 per cent of GDP).
The latest comparable EU-level estimate (for end-2007) was 278 per cent of GDP.
Obligations relating to unfunded pensions for public sector employees in the UK at
end-2010 were estimated at £0.9 trillion (58 per cent of GDP). The latest comparable
EU-level estimate (for end-2007) was 52 per cent of GDP
The UK government’s obligations in respect of funded and unfunded workplace
pension schemes at end-2010 were estimated at £1.2 trillion (80 per cent of GDP).
UK private sector obligations in respect of workplace pensions — all of which were
funded — were estimated at £1.7 trillion at end-2010 (118 per cent of GDP)
http://www.ons.gov.uk/ons/rel/pensions/pensions-in-the-national-accounts/uk-national-accounts-supplementary-table-on-pensions–2010-/art-mainarticle.html
Thanks for this. It supports my point,
And if you read the detail of the basis used to calculate those numbers, you’ll see some fairly heroic assumptions have been made to ‘minimise the damage’. On a more market based valuation basis the numbers would be 30-50% higher.
Somehow Richard appears to be suggesting that the money will just appear by magic!
WHat are you suggesting?
We cull the elderly?
Suggestions please
If you have none we will pay
Richard – What a strange response!
Just because I’ve pointed out the stupidity of your previous statement, you suddenly try and align my views with ridiculous statements about “culling the elderly”…
Quite simply, the obvious thing to control costs is to increase the state retirement age (and the age for public sector workers) to reduce the burden on the taxpayer. Which is exactly what has been proposed and which is exactly the right thing to do.
Why?
Do you really think humanity, care, physical ability, ethics, compassion and respect don’t come into this?
Because I do
Of course, that’s why the changes are being made 20+ years into the future.
And that compassion, humanity, ethics etc equally applies to those future generations that are going to have to fund these pensions!
Surely there’s nothing particularly humane or ethical in your suggestion that other people should survive on less to allow other people to survive on more?
You ignore physical reality
Most cannot work forever
Many cannot at 65 now
But you are demanding that they must
That’s the workhouse mentality
No, wrong again.
People are much fitter now at age 65 than they were years ago. And there is no reason why that should not continue.
Further, if people want to retire earlier, they should be allowed to, but they will either have to support themselves until their normal retirement pension kicks in or have that pension actuarially adjusted downwards.
There is no other sensible way to make the numbers work, anything else just forces the problem onto future generations – that’s the physical reality you are continuing to ignore.
And re stupid comments about ‘workhouse mentality’ don’t strengthen your case.
That is an absurd generality
Please read what i have written on this issue
My comments are well founded
@Richard
It may be the workhouse mentality, but unfortunately it is reality. Do you have an alternative suggestion?
Read my ‘Making Pensions Work’ – google it
State pensions are paid directly out of NI earnings of workers and do not have any real liabilities.
If they do, it is money that is owed to the fund by the government due to them borrowing from the NI fund.
Just because they are funded that way, does not make them any less expensive.
And such an approach is only viable when the assumptions about longevity in retirement are valid and the proportion of workers is sufficient to fund the volume of retirees.
However, in effect it is just a Ponzi scheme that is doomed to collapse in the future – increasing the retirement age simply postpones the inevitable collapse for a short period.
No, it is not simply kicking the can down the road – it genuinely reduces the expected liability in respect of each potential beneficiary as it reduces the amount expected to be paid to each such beneficiary.
We have to take pensions out of the City
“Just because they are funded that way, does not make them any less expensive.”
Yes it does! I think the key word here is “estimates”. The government estimates what it has to borrow to afford future pensions. Richard can correct me on this, but at the moment, no such borrowing for state pensions is taking place at the moment as they are fully funded by the tax and NI contributions of the present workforce.
We are continually told that pensioners are living longer and in the future we won’t have enough people of working age to support state pensions.
For a start, we have over one million young people sitting idle. What would be the estimate of new tax and NI contributions if they were all given work?
Plus, for the past few years, we have had a baby boom! There will be a new generation coming up of working age. If we have a proper living wage introduced, contributions could rise slightly (as they have done already in the public sector – more contribution, LESS pension!)
This government is introducing a freeze on employer contributions – why? How is this conducive to affording pensions? Making pensioners work longer simply helps to take work away from younger people, which means the government is only going to have to spend more on benefits!
The government’s own figures state that the NI fund is £30 billion is surplus. It is a con to say we cannot afford decent pensions.
We can!
You are right
As it has become ever more obvious that private funded schemes are facing extinction — particularly since the Pensions Commission in 2005 pronounced private DB schemes to be in a terminal state — supporters of the status quo, led by the City-based fund management industry with its huge vested interest, have been desperately fighting a rearguard action designed to avert or postpone the inevitable. To this end they have disseminated a huge volume of misinformation and false propaganda, evidently driven by Dr Goebbels’ maxim that the bigger the lie the more credible it becomes in the eyes of the public — particular with regard to three monumental red herrings / delusions.
The supposed “unfunded liabilities” of public-sector schemes. Even though the Turner Commission found that the public sector occupational schemes were the healthiest part of the UK pensions landscape in 2005, there has been a seemingly concerted campaign ever since then by City / right-wing interests and media to suggest that they are unsustainable5. The main basis for this claim is that these schemes have “unfunded liabilities” of hundreds of billions of pounds which amount to an unseen and intolerable burden on future generations of workers / taxpayers. This is despite the fact that
since these schemes are not funded but financed on a PAYG basis out of current tax revenue — including the nominal contributions of scheme members who are still working — they cannot (unlike private funded schemes) have unfunded liabilities; rather their cost is simply part of the total national budget for current spending (as it has been for centuries);
as noted by the Turner Commission, based on the Treasury’s own projections their cost is not likely to rise significantly above its recent share of GDP (around 2 per cent) in the foreseeable future.
While the basic dishonesty of the unfunded liabilities argument for claiming that public sector schemes are unaffordable has been exposed many times — and has not been accepted by Lord Hutton in his recent review of public sector pensions6 — it has been effective in generating support for the totally unjustified view (which is reflected in the Hutton report) that public-sector pensions are unfairly generous by comparison with those in the private sector. This seems to be the main justification for Hutton’s proposals that public-sector workers should accept a severe downgrading of the terms of their pension schemes, even though i) there is no serious suggestion that they are or will be any less affordable than hitherto (although this has not prevented shameless media spin to the effect that such “sacrifices” are necessary as part of the overall programme of public sector cuts), and ii) the failure of the inherently flawed private funded schemes is obviously no reason for penalising pensioners in inherently more viable PAYG schemes. Unfortunately the unions’ position is compromised by the fact that they have already conceded some watering-down of their pension rights under the last (Labour) government.
The “demographic time-bomb”. The most widely touted argument of those claiming that pension entitlements for the vast majority of people must be reduced is that the population is ageing as life expectancy rises. Consequently, it is argued, the ratio of retired people to those still working — or “dependency ratio” — is rising to an unsustainable level, although neither the Turner Commission (which supported this argument) nor anyone else has been able to define what that level might be (nor can they explain why this trend of rising life expectancy, which has been observable at least since World War II, has now become a problem when as recently as the 1980s it was thought compatible with encouraging people to retire in their 50s). If this irrational argument is none the less accepted — along with the implicit assumption that the burden imposed by the retired population has by now reached the limit of what is tolerable — it follows that, if pensioners’ living standards are to be maintained,
taxes — or at least pensioners’ share of existing state revenues — must rise to meet the cost of their extended retirement, or
workers’ rate of savings / pension contributions as a proportion of their incomes must rise, or
workers must retire later.
Of these options the first was judged by the Turner Commission to be undesirable — though for no clearly defined reason — in favour of the other two. However, it was doubtful even in 2005 whether most workers had the capacity or will to increase their savings from their stagnating earnings — a doubt since reinforced by the evidence that investing in the financial markets represents an increasingly bad deal (see above). This points to raising the retirement age as the only option consistent with holding down pensioners’ share of total income (Gross Domestic Product).
In truth the whole argument in favour of seeking to limit or reduce pensioners’ share of national income is inherently flawed and illogical, in that
The very concept of the “dependency ratio” is bogus, since it implies that labour is the only source of value in the economy and that output per unit of labour is more or less fixed, whereas thanks to technological advances the output and value of labour (productivity) has risen by 3-4 times since World War II. Moreover, labour’s share of the value added (GDP) from which transfers to pensioners are made has been in long-term decline for 30 years7, indicating that the share of companies’ profits has been rising — even as their tax burden has been reduced.
Even if there were any shortage of resources in the economy to pay for adequate pensions, it is nonsensical to suggest the problem could be overcome by raising the pensionable age so that people would have to work longer till retirement. This is because there is already a large excess supply of labour — reflected in a high and rising level of unemployment — so that adding millions more to the workforce by raising the retirement age can only make this problem worse and increase dependency on welfare benefits among all sections of the labour force. Despite being repeatedly reminded of this rather obvious reality the political and business establishment unanimously continue to insist that working longer is an indispensable part of the solution to the pensions crisis.
http://harryshutt.com/pensions-failure/
No, you are wrong.
The true cost for a pension scheme is the net increase in accrued benefits in any particular year, less the increase in assets.
It is NOT the difference between contributions paid in and the pensions paid out in any particular year.
The only CON is you repeatedly referring to a £30 billion “surplus” and failing to understand why it is misleading and irrelevant.
You assume we must use a funded model
But for very good reason we don’t – because all it has done is benefit the City and not pensioners
Only funding models based on the fundamentals I outline can work
A securities based model is doomed to failure – and the creation of massive wealth disparity
Once again you are confused between the cost of a pension and the different methods of funding it.
If the government can magically create money out of nothing, and thus provide final salary pensions at a cheaper cost than can be achieved through a funded model, then obviously they should provide those for the entire population and not just for public sector workers.
They can’t.
Private pensions come with significant risks – market risks, interest rate risks, longevity risks, inflation risks – either for the employee for DC or for the employer for DB schemes. Those risks are present with the state pension and public sector pensions but fall to the government not the individual. It is the taxpayer picking up all of those costs.
Once again there is no reason why public sector workers should receive such huge subsidies from the rest of the taxpaying population.
And you are ignoring the fundamental pension equation i explain in the publication i refer to – which is that ultimately money does not matter
Fundamentals do
Your logic suffers from the fallacy of composition
You cannot infer a macro reality from a micro illusion
¨Despite mounting evidence for a growing food poverty crisis in the UK, ministers maintain there is “no robust evidence” of a link between sweeping welfare reforms and a rise in the use of food banks. However, publication of research into the phenomenon, commissioned by the Government itself, has been delayed, amid speculation that the findings may prove embarrassing for ministers¨
http://www.independent.co.uk/news/uk/politics/food-poverty-in-uk-has-reached-level-of-public-health-emergency-warn-experts-8981051.html
The trouble being; with interest payments low, private pensions are in no better state!
“The supposed “unfunded liabilities” of public-sector schemes. Even though the Turner Commission found that the public sector occupational schemes were the healthiest part of the UK pensions landscape in 2005, there has been a seemingly concerted campaign ever since then by City / right-wing interests and media to suggest that they are unsustainable5.”
[/quote]
Absolute rubbish – there are currently £2 trillion of liabilities in respect of public sector final salary schemes and precisely zero assets held against them. Further, the contributions made by employees are only a third to a quarter of the true cost of those pensions, with the taxpayer having to pick up the ever increasing shortfall.
” This is despite the fact that since these schemes are not funded but financed on a PAYG basis out of current tax revenue — including the nominal contributions of scheme members who are still working — they cannot (unlike private funded schemes) have unfunded liabilities; ”
That’s exactly what ‘unfunded’ means – there is no fund!
“While the basic dishonesty of the unfunded liabilities argument for claiming that public sector schemes are unaffordable has been exposed many times — and has not been accepted by Lord Hutton in his recent review of public sector pensions6 — it has been effective in generating support for the totally unjustified view (which is reflected in the Hutton report) that public-sector pensions are unfairly generous by comparison with those in the private sector.”
The schemes are only ‘affordable’ due to huge subsidies from the private taxpayer, which is neither fair nor justified. Anything is ‘affordable’ if you are prepared to sacrifice something else to pay for it. The fact that the value of these pensions is 3-4 times the accumulated value of the contributions paid by the employees and with absolutely zero risk to the employee is a dimple demonstration as to how “unfairly generous” these schemes are.
” This seems to be the main justification for Hutton’s proposals that public-sector workers should accept a severe downgrading of the terms of their pension schemes, even though i) there is no serious suggestion that they are or will be any less affordable than hitherto (although this has not prevented shameless media spin to the effect that such “sacrifices” are necessary as part of the overall programme of public sector cuts), and ii) the failure of the inherently flawed private funded schemes is obviously no reason for penalising pensioners in inherently more viable PAYG schemes.”
The unaffordability is everything to do with basic demographics and absolutely nothing to do with the failure (or otherwise) of private schemes – to suggest otherwise is deceitful in the extreme.
I entirely accept we have a pension problem
I reject this as a basis for estimation – as it is mainly intended to capture more funds for the City
The logics are of markets
We need the logic if macro economics
And common humanity
That’s simply meaningless rhetoric, rather than substantive comments.
Investing over a long term in the markets is uncertain and potentially expensive, but is visible.
The costs of government run schemes are also uncertain and potentially expensive, but are hidden due to the method of operation.
What we do know is that we face a huge liability that needs to be managed. You appear to be oblivious to that.
So we should not invest pension funds in markets
The only problem with state pensions is that we are not prepared to fund them properly, Richard.
These figures are meaningless estimates. Thatcher did away with the link to prices and linked them to inflation instead! An act of daylight robbery. At present, the funding of state pensions is around 77 billion.
Pensions are deferred wages! More goes in that actually comes out, hence the surplus.
Even if this figure was totally accurate of up to £5 trillion of liabilities (a totally ludicrous figure!) so what? A liability only becomes a liability in reality when someone stops paying! Are Tax and NI contribution payments going to stop anytime soon?
We spent up to £1.4 trillion bailing out the financial sector from its own mistakes! We have created £375 billion out of thin air to prop up the banks. This proves that there is ALWAYS money available when it suits governments Borrowing and pushing up the national debt to unprecedented levels to save the banks from their own greed was apparently not only OK, but seen as necessary.
Workers sacrifice their tax and contributions from their pay packet to collectively pay for state pensions now. When these workers reach retirement age, workers will collectively pay for their state pensions. Theinconvenienttruth can call this a ponzi scheme if he wishes, but the truth ism there are NO real liablilties for state pensions.
Previously, any surplus was put into treasuries. Now they only receive 0.5 percent in line with the BoE figure.
Again, it is a blatant lie that we cannot afford decent state pensions! We can!
“That’s exactly what ‘unfunded’ means — there is no fund!”
Well, there is, the NI fund! It pays for state pensions and the NHS. Funds are paid straight in from the contributions and taxes of workers. There is no fund built up as such as their is no pot of money built up, it is paid in and paid straight back out again, hence NO liablities.
We pay taxes towards privately run trains and pay subsidies to farmers, along with other corporate subsidies – in other words, we subsidise private profit from our taxes.
So what is wrong with subsidising state pensions for the common good?
By the way, doesn’t the private pensions industry receive public subsidies?
Why do you censor any comments that point out your mistakes?
I have not censored anything
I deleted a deluge of comments – all making much the same neoliberal point
“What we do know is that we face a huge liability that needs to be managed. You appear to be oblivious to that.”
Regarding state pensions, where is the liability? Private pensions have to build up a pot of money to pay out. As already pointed out, that doesn’t really happen with state pensions. Pensions, the NHS and other benefits are directly from workers pay packets.
If I take out a loan from a bank, the bank records it as both an asset and a liability. The liability exists due to the potential threat that I may not be able, or may be unwilling, to pay back that loan.
What is the liability of a government bond? My point is that it is guaranteed 100% that that bond will be honoured, whether the government has to roll over and refinance the debt or create (or print) the money from nothing.
A government bond is effectively backed by taxpayers money. There is zero likelihood that we will ever stop paying taxes or indeed borrowing. If we can’t borrow. we can create the money.
The liability of state pensions is totally theoretical. The debt will always be honoured.
“So we should not invest pension funds in markets”
And what of the horrendous charges and fees that accompany some private pensions? Those that have paid in sometimes find that their pension, due to hidden fees and charges, is worth up to 50% less than they were led to believe!