Wednesday, 5 October 2011

Changing our pensions – a Westminster con?

Are we the citizens or subjects of the UK getting the unvarnished truths or simply Westminster sound bites designed to lead us in the wrong direction? 
Are the Con-Dem’s being honest on pensions?

Within the EU where do our pensioner’s stand?

It was quickly apparent the UK often gains the reputation of worst in the EU for pensions.

Could it simply be because pensions are a profit center for Westminster and little goes back to the masses who contributed? We do seem to contribute largely in line with our EU neighbours.

In 2007 UK retirees saw a paltry 17% of pre retirement earnings from the state pension. In the EU the average was 57%. Even the next lowest paying country was over twice the UK level. It has not changed significantly since and this was not the first year the UK had that shameful pride of place.

As research advanced it became increasingly clear that it does not appear realistic to save for retirement in today’s Westminster controlled Scotland when Downing Street raids both our private and public pensions simultaneously.

There are two main honest premises for requiring retirement age increases, firstly there’s the argument that we’re living longer. This could mean there are more retirees so those paying in can’t cover the expenses required of the system. Then there could be the fact that the system is already bankrupt. Mismanagement or fraud are not honest reasons.

We could also choose to voluntarily extend the retirement age if the healthy and productive years that we can expect before chronic illness or disabilities set in have expanded significantly.

In examining the average lifespan we do indeed discover it has increased dramatically over several centuries.  

In the 14th century life expectancy on the day of birth was about 35 years, however when taken only for those surviving past age 21 life expectancy was 64 for peasantry and over 70 for aristocracy. 

Today the office of national statistics tells us we have a life expectancy at birth of around 79, that doesn’t change much if adjusted to life expectancy from age 21. The disparity between aristocracy and peasant is still there at almost half a decade, but in today’s world is better described as the difference between the elite and the average individual.

From this we can clearly see that in the 700 years between medieval Britain and the present adult life expectancy has increased by about a decade, unless you live in certain areas of Scotland when you can now expect a shorter lifespan than the average 21 year old Englishman of 1314. Not including those who fought at Bannockburn.

The shocking discovery is the apparent Westminster fudge, yes we are living longer but the vast majority of the increase is due to a reduction in infant and youth mortality. Instead of dying before maturity these youngsters are now surviving in their droves, to pay into the system for decades. 

This indicates the system might not be as insolvent as Westminster would have us believe.

More retirees, yes, but there are many millions more active payees than a century ago.

For Scotland in 2011 the issue certainly doesn’t appear to be one of living longer.  Our average life span is significantly lower than England and creates a relatively light burden on the NI system. 

With the proposed changes the average time in retirement will only be at about ten chronically ill or disabled years.

In England they can anticipate almost half as much again.

We’re also propagandized into expecting the female retirement age to increase. Government data indicates it may be better to reduce the male retirement age.

In the UK there are presently around 10 million retirees. 

We know the approximate number of retirees against the theoretical number of payees, which is the UK’s 62 million population minus the young, old and unemployed; nominally 36.5 million.

Simple sums mean in 2011 there are 3.6 NI contributions going in for every 1 pension being paid out.

Government data shows the average state pension in Scotland is under £7,000 pounds, including all benefits and extras. It is higher elsewhere.

Understanding what a contribution level is takes a bit more research, basically BOS puts the average wage in Scotland at over £29K, that was a 2009 data release so these tax and income numbers are conservative.
This makes annual NI contributions about £2,850 for the employee, employer’s kick in about the same again

That’s £5,500 a year for each individual supporting the system.

NI doesn’t just pay pensions; the four classes of contributions cover jobseeker’s allowance at a little under £500 from an average yearly contribution, incapacity benefit approaching £350, contributory employment and support allowance rounds up at £150, bereavement benefits approach £100 and maternity allowance is slightly over £100. 

That’s a total of £1,200 from the contributions.

The NHS isn’t mentioned as an encumbrance in current documentation at Whitehall.

Conservatively the average contribution has £4,300 a year for pension payments. We will reduce that to £4,000 to allow for administration. 

This means we have £4,000 times 3.6 available each year for pensions, or about £14,400. Oddly that’s a number which might just get us close to the EU average. 

It’s not far from a 100% increase for our pensioners.

These numbers mean we should be able to give our pensioners almost twice as much, keep the payments the same and drastically reduce the retirement age, or reduce our NI payments.

In a full employment economy the numbers are even better than this.

In Scotland alone where we have slightly less than 1 million pensioners, that is about a £6 billion per year overpay to the UK Treasury. It’s not counted against Scotland’s revenues either.

UK wide it’s not unreasonable to believe Westminster is raking in a profit substantially in excess of the combined block grants of all the Celtic nations. 

David Cameron’s folk still argue and legislate for an increase in the pension age; it should be going in the other direction.

The only logical reason to enforce an increase in the pension age is if the UK is bankrupt and has to raise money from any hidden tax it can enforce.

Each year pension payouts are deferred, how much money does it retain for the Treasury?  

UK wide the pension payments potentially average up to£8,000 a year per individual, although most research still has it somewhat under that. 

Today, with 10 million pensioners deprived of payment, that’s £80 billion a year of treasury savings. All money kept from the poorest and most disenfranchised in our society. 

The proposed retirement age increases can net Westminster over £250 billion a year, cumulatively.

Examining the increases to the pension age, now set for 68 and possibly beyond the question still has to be asked “is the average individual physically capable of working that long?”

The answer lies with the UK government’s office of national statistics, they publish a PDF of life expectancy (LE) against healthy life expectancy (HLE), it’s below and the data is quite surprising.

Males                LE           HLE <95%            Females                    LE           HLE <95%
England              78.0         62.89                      England                    82.1         64.79                   
Wales                 77.1         60.07                      Wales                       81.4         60.18                   
N. Ireland          76.7         59.74                       N. Ireland                81.3         61.77                   
Scotland            75.3          58.26                       Scotland                  80.1          61.63      

The Con-Dem coalition’s own data from national statistics clearly puts the average healthy working limit on Scots, before chronic illness or disability sets in, at 59.94 years.

With a new retirement age set for 68 that means Cameron’s administration is going to require the average Scot to work the best part of a decade beyond what his own statistics say they are physically capable of achieving.

Taxing the citizens at a higher rate because they might live longer years from now is not how the system is designed to work. Today’s contributions pay today’s pensions. Anything else is somewhat like taxing a person this year on the pay raise that might come next year or the years after that. It’s just wrong on so many levels.

Westminster is a government living beyond its means on the shoulders of its people, the same people who David Cameron says should pay off their debts, while he’s encouraging us to spend more in a contracting economy, in which we have less disposable income. Eton apparently doesn’t do sums either, or perhaps Cameron just didn’t listen. 

The above data shows, as the Scottish charities themselves are saying, it is time and past time that the welfare systems were fully devolved. This would allow Scotland to set a retirement age, policy or formula more in line with the physical limits of her people, rather than sending the billions south as yet another Union subsidy.

Demanding more of the citizens of Scotland than your own data clearly states they are physically capable of giving is not respect Mr. Cameron, it is exploitation.

1 comment:

  1. Few points.

    NI does not pay for pension, nor does it pay for the NHS. NI is just an additional income tax.

    Pensions was originally to help those people who happened to live past the average life span. People used to work closer up to their death than they do now. With people retiring up to 30 years before they die, there is a huge amount to save to keep paying a pension of any reasonable amount for so long.

    Have you taken into account birth rate. The birth rate has dropped so there are fewer people entering the tax system to pay for the pensions of old people. This is because pension is basically a ponzi scheme. The payments of new entrants paying for the dividends of existing members.