I have just published this video, which is based on the Twitter thread published today:
The transcript is as follows:
New data published by the UK government this week shows that subsidies to pensions and ISAs in the UK now cost £59 billion pounds a year.
Let me put that figure in context. It's enough to pay for the NHS for four months. It's enough to pay for education for well over half a year. And it's enough to cover the defence budget for almost two years. That is how big this level of government spending on subsidising savings really is.
And there's something particularly gross about this subsidy because over half of it goes to people in the top 10% of income earners in the UK who are already wealthy and who could already afford to save of course, because they can make ends meet.
In contrast, and in fact, in direct comparison, the amount of subsidy these people get per week is actually bigger on average than the payments of universal credit to those on low income so that they can afford to live.
I think that's gross. I think it's unacceptable. And it's particularly unacceptable when this money is simply used to save in shares and bonds and secondhand property, none of which creates new investment, and none of which creates new employment in the UK economy.
It's time that this subsidy ended. Or the pension funds to which most of the money goes - £55 billion goes to pension funds and the ISAs, to which £4 billion goes, must be required to invest in the new infrastructure: housing schools, hospitals, energy, transport, flood defenses and so on, that is essential if we are to transform our society so that it can survive now and into the future in a sustainable fashion.
But at the moment nothing about this subsidy makes any sense at all. And yet it is one of the biggest categories of unseen government spending a year. And it has to stop if we're to get social justice in this country.
It's time that our politicians woke up. It's time they took action and it's time this grossly unfair system of pension subsidy was transformed so that we can have a better society for everyone, now.
Comments in the video - which is a trial made in Descript - would be welcome.
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Excellent. Good points well delivered.
Thanks
Going very much better on Twitter than the thread right now
The Descript format you use works well for your content. Adding the transcript helps understanding, you throw a lot of ideas and concepts at people where precise words matter.
I was wondering about the pace/length then remembered, many people tweek the playback speed up. Not just ‘the kids’; but I did learn this hack from mine.
https://www.makeuseof.com/why-people-watch-youtube-videos-faster-playback-speeds/
Thanks
I feel this format gives greatest opportunity to absorb information
t seems to me that as you say the current system benefits nobody.
So why not return to something like SERPS with possibly the option to purchase extra pension and before anyone can invest in ‘private’ schemes?
SERPs is fine – is linked to investment
I saw an OBR website which tells us that interest on National debt is over £80 billion.
it was not clear if that figure included interest on bonds held by the Asset Purchase Facility as that money remains with the public sector.
That must have increased a lot in the last year. I suspect that much of that will also go to the better off.
Excellent point
Except of course it’s not an excellent point, it’s nonsense.
The biggest holders of gilts are Defined benefit pension schemes, which represents assets backing the liabilities of a large proportion of ordinary working people lucky enough to have historically been in final salary schemes.
Earlier this week you were Barry
Before that you were Sarah
Abd now you are Anne
And you are most definitely not an actuary – because if you were you would know how wrong that comment was
Using the crudest, plainest and simplest worked of estimates, it seems to me APF holdings potentially represent 30% of debt, if APF holdings are consolidated in total debt. This would imply 30% of interest of £80Bn (if APF consolidated) is in the APF; which means net interest is around £56Bn. Of course my assumptions may be completely wrong; but what is really wrong is that the status of this public debt and interest is so recondite so resistant to inspection, that we seem to know visrtually nothing about what it all actually means. What is really striking is how few economists, bankers, politicians, journalists seem the slightly interested in this issue. Extraordinary.
I might have written nonsense, and not even know whether it is nonsense, if you catch my drift.
You ate about right- but the figures will go higher
Pretty sure that this WILL include APF holdings because the OBR have yet to see the light on this issue.
Interest payments are income for many and I have no problem with that…. as long as it is taxed fairly – for me, this means at the same rate as labour… which it is not.
THe ONS have stopped corresponding with me on this issue….
The number is bound to include the APF – meaning it is, of course, in accounting terms a total misrepresentation of the truth
Hi,
I think I’ve missed something here. I pay into a company pension, and my contributions are sent untaxed. While 25K a year is a good income I’m not ‘wealthy’ and live in social housing.
While I understand that the wealthiest take advantage of pension schemes, if you remove the tax-free paying in that doesn’t help people like myself.
So which subsidies are being talked about here?
Martin
Yours
But you will note I am not saying anything likely to have any impact on your contributions
Thank you.
That’s what I missed, hence the question. I couldn’t see anything about it in your piece.
Aside from the tax breaks, I’m still not sure what subsidies are being talked about. Do they have a name? How do they contribute to pension funds?
I’m not fully cognisant with a lot to do with finance which is why I keep coming back to your blog and ask the odd question. You’re also very helpful in helping me understand the world of finance, such as govt bonds, BofE, taxes etc.
Again, thank you.
Martin
The subsidies are the income tax, corporation tax and NI subsidies given for pension contributions and the tax free status of the funds themselves. I have not allowed for the latter in my figures.
I wasn’t aware of those, so thank you for clarifying.
I now understand your article, and agree fully with it.
Martin
Thanks
money put into pensions is paid in tax free and on maturity is taxed.
money put into savings is already taxed and then taxed if above £1000 pa
Ah yes, you, again
So half the subsidy going in is NIC and there is none coming out
And you ignore differential tax rates
Time you stopped trolling, I think
In what world is not paying corporation tax on employment costs (i.e. pensions) counted a ‘subsidy’?
You do realise tax deduction for expenses is not automatic in CT?