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UK - Election 2015

Information Analyst said:
A bit like promising a fixed interest rate over period of time, then? Are there any calls to abolish government bonds because of such "unfairness"?
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Well, the timescales and clients are rather different, but even then holders of such bonds take haircuts, when using them as collateral and when redeeming them.

But in the context under discussion here "abolish" is hyperbole to describe what some are suggesting. To illustrate: the retirement age of 60 for women in the UK wasn't "abolished", it was changed. Some had been expecting for decades to retire at 60 but had, reasonably in my view, to lump it. Should MrsB have been screaming "unfair!" because she had to wait an extra couple of years? And it's set to rise again, because circumstances are changing.
 
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The Don said:
Mrs Don and I hope to be comfortably off in our retirement through a combination of luck, lack of children, hard work and shrewd investments (but mostly luck). If things go to plan it's likely that we'll have a retirement income in the £40k-£60k range. If this happy set of circumstances comes to pass, which is the fairer situation:

  • That we also get a £14k state pension that we either don't need or just fritter away
  • We don't get that £14k and it can go so someone(s) else for whom that money will make a real difference

I tend towards the latter.
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If you don't need the money then probably the best outcome would be to take the money you are owed from the pensions and invest it in a reputable charity where the money is less likely to be consumed by bureaucracy.
 
angrysoba said:
If you don't need the money then probably the best outcome would be to take the money you are owed from the pensions and invest it in a reputable charity where the money is less likely to be consumed by bureaucracy.
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That's one view. I still think that if it makes a significant difference then those on the highest retirement incomes should be ineligible to receive the state pension and the money redistributed to those retirees who need it more.

Even though I don't need the money I'll take it (I'm not sufficiently altruistic to refuse or donate it) and probably end up frittering it away. I suspect a lot of people are like me in that regard.
 
Craig B said:
So why pay contributions to a private pension scheme up to that point? Is that not unfair to private pension contributors?
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Well at least now the discussion has moved on to how such a system could be implemented. I've already said upthread that a 1:1 substitution of private pension for state pension up to the state pension amount would seem to be unfair to those in receipt of smallish private private pensions. A tapered cutoff of state pension may be fairer.

Alternatively, we could make minimum pension contributions mandatory for employer and employee (for medium and large employers) so there is no choice to opt out.

Then again a review of the whole thing could find out that the administrative costs of trying to target pensions more effectively outweigh the savings that could be made by not paying the full state pension to better off pensioners. I haven't seen studies into it (and I suspect that until there are concrete proposals there cannot be such a study).
 
The Don said:
Well at least now the discussion has moved on to how such a system could be implemented.
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I'm sorry to have left you with that impression. The principle of replacement of universal state pensions by means tested dole is not in any way agreed by me, and my observation on a particular point is not designed to move the discussion on from opposition to details of implementation. Very far from it.
 
Craig B said:
I'm sorry to have left you with that impression. The principle of replacement of universal state pensions by means tested dole is not in any way agreed by me, and my observation on a particular point is not designed to move the discussion on from opposition to details of implementation. Very far from it.
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I never got the impression that you had conceded the main point. I get it, for dogmatic reasons you'd rather that the 5, 10, 20% (or whatever) of the retired population who have less, or no, need for the state pension continue to receive it than the remaining people getting proportionately more.

OTOH, I'd rather that people like myself who have been fortunate enough to be in a position to have (I hope) made adequate provision for retirement to not receive a full state pension (and I hope in my case, no state pension) in order that those who haven't been able to make provision to receive more.

I'd like to find the least unfair way of doing that (bearing in mind that there will always be unfairness) and a way which is actually implementable. Any income check will have to work via the information gathered via the tax systems and will somehow have to cope with windfalls, capital gains and lump sum receipts. It may turn out that doing this will create so many loopholes that it will be effectively pointless as rich pensioners no longer draw a pension but draw money from schemes which are tailored to avoid classification in that way.
 
Simpler just to continue to pay everyone the state pension, and then tax private pensions in a way that recovers the state pension from the richest pensioners.

As a simple example if the state pension were £10,000 then you could tax the first £100,000 of private pension at 10%. That way anyone with a pension income over £100K would, effectively, receive no state pension - even though they would still be in receipt of the state pension payout.

You might want to leave private pensions, after the first £100K, untaxed if you were only trying to recover the state pension amount - but it would be simpler, and net the state more revenue, to just have a flat 10% tax on all private pension ' income'.
 
Francesca R said:
It doesn't really matter if public pensions are funded or not. "Funding" in no sense means that assets are matched to liabilities and even if it did, every time the matching was re-balanced the assets would be being drawn from people at an earlier stage of life to those the liabilities are paid to, so "fully funded" DB schemes do not achieve inter-generational equality of pay-in/pay-out. And this is the crux of the issue and very few people give consideration of it the time of day.

The point is that it is wholly wrong (inefficient and unfair) for "defined benefit" to be not contingent on the risks I mention repeatedly above. Defining a benefit based on final salary or career-average salary exposes beneficiaries and contributors to opposite sides of those risks. Nobody hedges those risks for either side. You can not hedge them yourself. It creates a lottery effect and--sorry and all--but the baby boom generation won the jackpot while generation Y was not even at the table when the bargains were struck.

I will not be responding to red-herrings and attempts to misrepresent my position on this matter I have been fully consistent about it here for years.

Meanshile I have to go to Australia now so excuse me.
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Am I allowed to renege on my promise to pay the bank back the money I owed them?
 
The Don said:
You may be able to renegotiate the terms or get them to accept a voluntary agreement.
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But I'm told that promises to pay money are not actually enforcable at all and that, if the expectation of repayment was unreasonable or if circumstances change. and my finances mean it's difficult for me to pay then any promises I made regards repayment can be reneged upon as they don't count.
 
Information Analyst said:
A bit like promising a fixed interest rate over period of time, then? Are there any calls to abolish government bonds because of such "unfairness"?
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3point14 said:
Am I allowed to renege on my promise to pay the bank back the money I owed them?
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What if a loan shark contracted a note where the borrower pays 5% per week, which is 1164% annualised? What if that loan was binding on yourself, yet you were not party to it being arranged in the first place because you were't actually born? Too bad, that's the deal, the loan shark has a promise?

The thing about analogies is when they don't capture the actual situation. Yours doesn't. And neither does mine. But mine contains an aspect of the situation that yours misses.
 
3point14 said:
But I'm told that promises to pay money are not actually enforcable at all [ . . . ] any promises I made regards repayment can be reneged upon as they don't count.
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Being told that by who?

Francesca R said:
On the dimension of "If you were promised something, then the promise should be honoured, if you were not promised anything then there is nothing to honour" then yes it is unfair to break promises that were made in order to make greater benefit available to those who were not promised anything (because they were not present when past promises were made)

On the dimension of "the give/get ratio of contributions to benefits should be stable across generations and not become highly skewed by exogenous changes in longevity, fertility, investment returns and insurance risk" then it is unfair to honour prior promises even though the same promises were not made to younger generations. And it was unfair ex-post to have made those prior promises in the first place.

YMMV.
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Craig B said:
The principle of replacement of universal state pensions by means tested dole is not in any way agreed by me
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That you wish to preserve universality in government welfare indicates you support the "from cradle to grave" element in the viewpoint you linked to, and that you do not subscribe to "to each according to need" element that the same viewpoint claimed to trumpet, but which universality flatly contradicts because it is "to each no matter what the need"

These two things further suggest that you favour expansion of the state because such a thing is good in and of itself. You claim this is "conventional left wing" wisdom. I don't believe that it is, or agree with it as it does not have merit.
 
Francesca R said:
Being told that by who?
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So your position is that the commitments mad should be honoured? Or shouldn't? I'm unclear.

If you think the commitments made should be honoured then all well and good.

If you think they shouldn't then I'm missing something.
 
Information Analyst said:
If your objection really just boils down to this, then we could much object to pretty much all long-term planned government expenditure.
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If my father dies, I believe I (or rather his estate and thefore his benefactors) am responsible for any outstanding debt he has regardless of how long he'd held this debt for. If he's had it since before I was born I believe I am still responsible?

I am unsure of the above.
 
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