Ed&#39;s journal

In principle, I support means-testing for pensions as I think pension provision should be a personal responsibility. However, in practice, means testing is a strong disincentive to save; this is bad.

I would abolish NI, and just have income tax. Residency should be the criteria for a pension to avoid penalising women who stay home and raise kids.

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Means testing always struck me as the opposite of 'personal responsibility' though.

In the sense that if you 'sort yourself out' nothing doing, but if you don't bother, you get the means tested handout.

*shrug*. Where does unemployment benefit fit into the model. That's by it's nature a 'means tested benefit'.

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Well, I wouldn't set the means tested pension much higher than unemployment benefit. It'd be: here's the dirt minimum you can reasonably live on; we're give it to you because it unconscionable to simply let you die through lack of money rather than we guarantee you £120 a week as it is at the mo.

Giving a good basic pension means that pension provision is the state's responsibility. Having no basic pension, and means tested benefits, means that stopping people starving or freezing to death is the state's responsibility.

I very much believe that we need to sort out our benefits system to get rid of the "benefit trap". I've known people who've wanted to go back to work but won't because they'd only end up £5 a week or so better off on the back of 30 hours work; that sucks. The solutions to this? Well, a very large tax free bracket (say £10k or so), and a sliding benefits scale so you're not loosing as much as you earn more.

IMO, the Labour government has got pretty much everything about benefits wrong (except for the New Deal). The Tax Credits have not only been farcical in execution but are fundementally flawed in principle, their means tested pension top-up have discouraged those near retirement from saving and their raiding of Pension funds has crippled our strong history of company pension schemes. Meanwhile they've done nothing to correct the inbalance inherent in tax-back on pension funds (since the rich pay more tax as a %, they get more back for saving thus incentivising the wrong people to save - it would be better if the government simply topped up all pension payments by, say, 30%) and failed to provide the central guarantee of pension funds that is needed to resure people deciding whether to pay in or not.

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I must admit, I've been giving serious thought to skipping a 'pension fund' and just saving cash and attempting to buy a pension outright at retirement age. Only thing that's stopped me really is that 'setting aside' a pot of cash isn't the easiest thing for me to do.

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Let us know if that works out worthwhile. I know you get tax breaks on proper pensions schemes. I may have a chat with my brother about this if he has time.

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Don't you get a company pension contribution? That, for me, closes the matter. I get an extra 5% of salary for free paid into it.

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There are employer pension contribs, and I'm currently in a 'final salary' scheme.

But I'm also considering doing my own arrangements, as I'm less than certain about 'the situation' with the pension if I clear off.

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Unemployment benefit may not be too high, but with all the extras it works out quite decent. You complain about tax credits, but actually it really does get rid of the benefit trap. If you are working on a low income you get substantially more than you do on benefits. The more you earn on your own steam the less they give you until you are well and truely clear of the benefits. When P first started working we weren't getting tax credits, and it was exactly as you said. They've also solved the childcare problem. There used to be no way I could afford to work, because the chilcare costs would be approximately half my potential income. Now tax credits pay up to 80% depending on the household income. The system really does seem to work. (Hard to tell for sure because, as you say, it's been so poorly executed.)

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Unemployment, extras or no, is still much lower than the pension; particularly for singles.

The problem with Tax Credits is that they are based on [i]expected[/i] income not actual income. Thus, if you undergo a change of circumstance either for better or for worse you get screwed, a problem compounded by the complexity of the system - it's extremely difficult to work out what you're owed, even if you possess a reasonable level of mathematical literacy. This means that those receiving the credit can't safely spend their money for fear of being asked for it back, probably just when they are least able to afford it.

I really don't know how you can describe the tax credit system as seeming to work when they are disproportionately underclaimed by those on the lowest incomes, and well over half of those who could claim them aren't - although, to be fair, that's partly down to the total farce of the first years implementation.

The system does have redeeming features, of course, but overall there better ways of acheiving the same results.

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I agree with some of what you're saying but it's spoken like someone who's never had to use the system, which I assume is true. The initial forms are a total nightmare, and ask for all the wrong information. But once it's sorted out, it's not too hard to use. When you're sent the documentation it gives you the threshold figures for the next brackets. If your income goes over or under them you give them a ring and let them know. At the end of the year they compare your P60 figures with the amounts they assumed you had earnt. If they owe you money they pay a lump sum at the end of the year. If you owe them money they reduce your payments over the following year to reap what they overpayed. If the amount they overpayed was a lot (like what happened to us right at the beginning because of their stupid initial form) they pay you a minimal amount that tops up your income to some basic level, and carry on deducting what you owe over future years. The only way you end up paying them back a lot of money was if the mistakes were all your fault.

It's not an ideal system, but it's not that hard to use. The reason people don't claim it is because they don't realise how much they could get, and because of the poor implementation and resultant horror stories. It's a lot of worry for possibly only a few pennies extra. Just because the farcicle implementation of the system is horribly flawed doesn't mean that the system itself is.

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crippled our strong history of company pension schemes
My brother was saying a lot of jobs are not going to be there soon in his field, because people are signing up to personal pensions, so companies aren't running their pension schemes for much longer. It seems to be because people change jobs/ companies so much more often that a company pension doesn't work out worthwhile. People don't pay into a company pension scheme if they're not planning on keeping the job, even if they then do. You don't get much for only a short number of years in the company, and you start from scratch again next time. Instead, a personal pension is a much better option.

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That's the problem I'm starting to have to think about. I've been at Alstom 5 years. That counts some towards their final salary pension scheme. But I'm still not entirely clear what happens if I stop or something.

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Yeah, I agree.

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At the moment parents who stay at home to look after kids are not penalised, because recieving child benefit gives you NI credit. The only problem is that you can't change the person without losing a year of credit.

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Really? Hmm. So what are they talking about on the BBC site when they say that the current system penalises women?

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I'm not sure. Link?

The way NI works is that if you've missed a year or bit of year, and don't think you'll make your minimum years to get a pension, they write to you and you can top it up in cash. So there's no reason someone should be without a state pension unless they didn't have the cash. Anyone claiming child benefit gets the NI credit, but it only counts in whole years. So if you swap over who's name it's paid in (say if I wanted to work and P wanted to stay home) then I'd have to pay up the whole year and P half the year.

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http://news.bbc.co.uk/1/hi/uk_politics/4465280.stm

"He will say the system must be fair, protecting the poorest pensioners and correcting inequalities in pension provision for women and carers who may pay less in national insurance contributions."

(By the way, I didn't mean my comment as a challenge, just RFI in case it didn't come across that way).

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No, that's fine. Just trying to get across more information, incase you're interested.

I guess that's because carers don't get the equivalent NI credit, and can't afford to top up their NI contributions. They haven't really sorted out what to do about carers. I think they get some benefits now, but I'm not sure.

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The problem is that they still 'thrash about' trying to draw the line between 'sponging parasites' and 'meaningful members of the community, that don't have much of an income'.

And unfortunately there's no simple comparison that can do that.

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the-g-man.livejournal.com

Universal benefits would probably be easier to administer as well removing financial disincentives to self-sufficiency. Think of the money you'd save by not means-testing. You can get the better off to cover the cost through taxation.

Financing university education is a slightly different question. Clearly having some proportion of your population have degrees is a general good but possibility not the 50% Mr Blair is gunning for. I suspect the way to do it is to finance the universities rather than the students, contingent on their demonstrating success at creating opportunities for those from a less advantaged background.

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Well, if you had a pension scheme that went 'prove you're over 65, get cash' it'd be a lot less red tape.

University is a difficult situation to handle. Perhaps you're right there - if Universities got a fixed amount of (fully funded) undergraduate scholarships, that was required to be 90% of it's intake, and 'next year' was conditional upon the numbers who actually graduated, that might actually work.

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I think means testing should be based on income not savings. We were in a horrible position a couple of years ago of being offered some money 'for a rainy day' while we were surviving off jobseekers, and if we had accepted the offer we would have stopped recieving the money we were using to live, the jobseekers allowance. If you means test based only on income, then you count interest earnt from your savings, but you don't count the savings themselves. That way, if someone has worked hard and saved money for those special things they want to do come retirement, or to fund a care home or whatever, they are not forced to spend the money on day-to-day living. The interest from such savings wouldn't eat into the capital they've put aside. Maybe you could also do a tricky thing with inflation.

If I had a dedicated private pension that was intended to double what the government gave me to give me a much better than basic standard of living, and I'd set aside some other savings, I would be happy for any additional income (say interest from savings) to count against my state pension. I would not be happy for my private pension to count instead of my state pension, and putting my standard of living back to basic despite my years of saving and hard work to prevent that.

On the other hand if I know when I start working as a young person that this will be the case, I would live a little closer to the breadline to make sure that I can maintain my standard of living in late life.

On a personal level, part of the problem is that I don't expect to live much past about 60, whereas my life excpectancy according to statistics is much longer than that.

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sebbo.livejournal.com

private pensions are both big and clever.

My company only pays a contribution if I choose to partake in the company pension scheme. 2nd drawback is that if you were to move, you only get out what you paid in, which may mean your contribution only, no company contribution, and certainly no gains or losses the fund may have provided/incurred.

I also disagree on the residency bit. I for one am not planning to live my whole life in the UK. If they aren't going to provide me with a decent pension relative to my contributions then i'd like those back, thank you very much.

Definately one of the topics that is of some concern to me. Savings, well.. i should start trying. Other provisions, I have as well. Some sort of savings scheem, not really looked at it, but I think sufficiently long term to count as a pension / provision for old age.

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jorune.livejournal.com

Pensions are very much dependent on a lot of unknowns. The general idea is that you have a sum of money from which you can draw an income from. This income can be either:
a) simple bank account interest where you can move the money around to find the best rate
b) higher than normal interest because you agree to lock away the money for a number of years. Term deposits, fixed income, bonds, etc, etc.
c) dividend payments from companies in the stock market, be they equities - LTSB, BA, P&O, etc or Unit Trusts. These payments are usually with stable companies which yield a high amount of money in comparison to other companies in the same sector/market/world/
d) Property or another business.
e) Mandatory purchase of an annuity which costs a lot and yields not amazingly much.

The big question are 'What will be the inflation rate at the time of your retirement?' and the 'What will be the political climate at the time of your retirement?'

Inflation reduces the spending power of any capital you have, inflation is defined as 'a period of rising prices'. If you end your working life with a fixed sum of capital and not much hope of increasing that then the rate of inflation is of great interest. If inflation races away then the purchasing power of your sum is reduced and you may end your life in poverty.

If there is a federal Europe in 30 years time then this could be a possibility: Southern and Eastern Europe vote that Northern and Western Europe should fund all their pension problems, it's only fair. Poor little Greece, poor little Italy. If you think the South and East have problems now, just wait for the future. The North and West can pay, they've always paid and why they should stop now? The Germans and the Dutch will just have to work that little bit harder to keep their good friends in the lifestyles they've become accustomed to. The British are a generous people and we thank them every year for the billions they send us. We are all one big happy family.

Pensions should be started early and be continously added to every month.

'The most powerful force in the universe is the power of compound interest' Albert Einstein.

You need this power to work for you, it takes time to build up and that is why you should start early.

Coming from a Scottish/Jewish background (my grandfather converted in his 20's) I am astounded that people don't take this subject more seriously. You need to save, You need to plan for the future. Who knows when the Tsar's forces will pillage the ghetto?

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paulw.livejournal.com

Why couldn't I opt out of paying into the old age pension and instead put that money into a personal pension. That way I know I will get the money I put in.

We could also make companies that pay additional sums into their own schemes be made to make the same contribution to those people who have opted out and have got a private pension.

This would make it fair to all, you get what you put in and companies stop screwing you just because you leave their scheme.

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