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July 25, 2017



While I agree with much of this argument it doesn't do much to persuade me that state pensions should increase now. Pensioner poverty is at historic lows and any increase now has huge deadweight cost of adding to the wealth of those who have benefited from high returns on housing and stocks, either directly or through generous DB schemes that were supported by these high returns.

My view is the worst suffering we see in this country is due to low incomes for those of working age and lonliness and isolation for older people. Higher state pensions will do nothing to address either issue.


«Unless we euthanize people in their 60s, we’ll have to pay pensioners an income. The question is whether this comes from taxes in the case of a state pension or from dividends in the case of a private pension financed by stock market investment.»

Well, there is a third and a fourth way:

* Reduce the standards of living of most pensioners to the point their barely survive. The state pension is not an either/or issue: the level matters a great deal too.

* Leave it to voluntary charity, and if voluntary charity is not forthcoming, declare that the will of the people has been democratically enacted by their own choices.


«This means that policies to increase productivity are essential not least as a way of better providing future pensions.»

If you know the location of a giant oilfield within UK waters or onshore, please let the Treasury know, almost nothing like extracting from one boosts productivity.

Alternatively if you have just invented a new source of energy which is cheaper and more energy-dense than oil, please let the world know, nothing like the diffusion of adoptio of a new better fuel boost productivity.



I get a bit tired by the endless and often biased debates about state and private pensions etc., the only issues that matter are:

#1 Self insurance against old age and poverty is phenomenally expensive and wasteful.

#2 Pooled insurance against old age and poverty via state-run schemes is very cheap.

#3 It takes saving around 30-40% of gross income to have a decent pension of around 60-70% of career average income, and somewhat more if one includes a survivor pension for a non-working spouse.

The big deal is #3 of course. That means that on average the savings rate for pensions should be around 25-35% of GDP just for pensions. Indeed countries who provide decent pensions do that, and if they do it via the state because of #2 have a share of government in GDP of over 50%.


The Tories have already limited the private pension contributions and will go further.
This applies to George Osbourne and Philip Hammond.


Abolish the Pension Tax Relief and you will abolish the private pensions industry, as it is dependent on this public subsidy to the wealthy.

(Monday 24 July 2017)

"At more than £50bn, tax relief on pensions exceeds government expenditure on defence."


"Or you could cut the numbers this way: while 1.6 million savers, earning up to £15,000, shared pension tax relief worth £1bn, 186,000 savers earning £150,000 or more shared relief worth £6.3bn. "


"When an annual pension management charge of 0.5pc applies, the end-value of the pot drops to £610,000. When an annual management charge of 1.5pc is applied – as is typical if not lower than many charges in Britain’s pension industry – the end-value of the pot falls to £465,800.
In other words, a taxpayer-funded subsidy to the insurance company of more than £200,000 over the saver’s lifetime."


The administrative costs of private retirement programs add up. EPI finds that if Americas social security system were privitized it would result in 26% less benefits for the same cost. Chile and the U.K. both privitized retirement programs and the results were a 30% decrease in benefits.


The state pension is politically different to other forms of welfare, it isn't presented as an insurance policy if you cannot work enough for some reason. It is presented as an entitlement that is earned, and millions of people have paid taxes for decades on the basis they will get a state pension in return. That is in effect the contract successive governments have entered into with the electorate and there is a major element of political legitimacy resting on honouring such commitments.

There are arguments about whether recipients pay enough in to meet what they get out (many past and present recipients did not), just as there are arguments about policy choices and decisions of successive governments that have directly and indirectly had positive and negative affects on private and state pension provision. There are arguments about the viability of a Ponzi model of state welfare, just as how things like nuclear weapons, foreign wars, bailouts for fat cats and subsidies to certain political clients are affordable when pensions might not be.

But we still come back to the point that governments have entered into an understanding with the public, and backing out involves a suicidal lack of political legitimacy. It's one thing for wealthy politicos and assorted wonks representing sectional interests (that basically don't want to pay taxes) float such views, but it's another convincing the public in the era of corporate welfare and billion £ bungs for the DUP.

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