Francesca R
Girl
No you couldn't. What other government outlay locks in benefits for current generation today while passing on transferable risks to later generations?
UK - Election 2015
- Thread starter The Don
- Start date
Francesca R
Girl
Correct unless it was a debt you jointly contracted into, or was secured on your asset which of course you would have to agree to--unlike the case with public pensions.
Francesca R
Girl
I believe I have been very clear, my view is that the commitments should be broken/replaced with contingent ones.
You can once you have negotiated your bankruptcy, voluntary agreement or rescheduled terms. There will if course be repercussions in terms of your future solvency and but then again if a decision is taken to re-jig the pensions system there will be a political price to pay.
3point14
Pi
- Joined
- Nov 4, 2005
- Messages
- 23,109
But those negotiations would be subject to approval by my lender? And, if they chose not to accept my offer then they could, if they wished, demand the whole amount and force me into bankrupcy?
I'm really just trying to work out how I tell a binding financial commitment from a non-binding one.
Information Analyst
Penultimate Amazing
Do the "later generations" not in turn enjoy the same benefits? I wonder how far back we can wind this? Presumably at the start the income - i.e. NI payments - exceeded contemporary outgoings - i.e. benefits and pensions. Perhaps since you're so keen to paint the whole arrangement as "unfair" you will be able to clarify whether it has always been so, or - if not - at what point it became so?
Last edited:
Changes to pension rules and provision are, at one remove, subject to change by the electorate. If a government makes these changes (and they're usually post-dated to allow those affected to make arrangements to mitigate the effects) and the changes are so unpopular then they can be reversed by the new government elected by a wave of support for future pension rights and the means to pay for them will have to be found through a combination of higher taxes and/or lower expenditure on other areas of government.
The "triple lock" has ensured that the cost of the state pension will at worst (for recipients, at best for those of us paying for it) be the same in real terms and if inflation is low it will increase in real terms. That will just intensify the squeeze on other areas of welfare, likely working age benefits.
Depends on ho "binding", binding is. There's always a way to avoid financial obligations. The degree of flexibility is significantly affected by the balance of power between the parties. As pointed out upthread, if you owe the bank £500 it's your problem, if you owe them £500 million it's theirs.
Francesca R
Girl
If they did enjoy the same benefits, it wouldn't be an issue would it? As above it became unfair when highly forecastable things like longevity and fertility started to rise and fall respectively, and when real risk-free interest rates and investment returns (which are not forecastable but most certainly knowable ex-post) both went south later. Failure to adjust pay-in / pay-out for all of those causes avoidable winners and losers who won and lost for no reason other than the year they were born.
Your responses so far are of a knee-jerk type, you do not really even start to think about it.
That's pretty common. But I think that to adopt the position you do is inexcusable and ethically destitute. I think you would agree that it was if the dimension of win-lose was one's skin colour or one's gender or one's sexual preference. But strangely one's age cohort of birth matters not a bit.
Last edited:
AFAIK, NI payments aren't ringfenced in any way and are treated as part of general taxation so discussing the point at which they became (or will become) less than the benefits and pensions they are notionally supposed to find is moot IMO.
An interesting figure is the number of workers supporting each retired person.
https://www.gov.uk/government/uploa...e/299886/auto-key-facts-enrolment-booklet.pdf
Which I guess means that each worker will have to contribute more to support the retired person, the retired people overall will get less (less per person, fewer people eligible or a combination of those), or a combination of the two.
That would mean that the people who wrote the thing I linked to supported some of what they themselves wrote, but rejected other parts of what they themselves wrote. That doesn't make much sense.
Francesca R
Girl
Yes it does mean that. It is self contradictory in that sense. How is universality consistent with "to each according to need"? At all? It isn't.
Francesca R
Girl
There seems to be confusion between state pension and public sector defined benefit pensions. The latter are ring-fenced. Until/unless they have to be topped-up from general revenue to deal with unsustainability, the costs are all born by current and future public sector employees and the benefits are all paid out to past employees. It works this way even if the schemes are unfunded, and funding ratio does not change the degree of inequity in the system either way.
Private sector defined benefit pensions contain just the same dimensions of inequity as well. And due to FRS17 a company has to fail before it can break outstanding pension promises. That would be highly contradictory to the self interest of all stakeholders, so they do what they are allowed to do which is close DB schemes to new members and increase contributions from existing members which is no different from what happens in the public sector and no more equitable. Corporations simply starter facing this reality--though still not in a way that deals with inter-generational equality--sooner than the government has done it (still not in a way that deals with inter-generational equality properly either)
Last edited:
Apologies, the mention of N.I. led me to believe that the subject in that case was the state pension rather than public sector occupational pensions.
Information Analyst
Penultimate Amazing
So you have no idea at what point the scales tipped, then? If the arrnagements ran at an effective surplus for years, as what point did it become a deficit, or - more pertinently - a deficit not offset by previous years surpluses?
Really? I see it more as not buying into your financial psychobabble, whicht obviously comes very easy for someone who presumably will not have to rely on either a public sector or state pension in retirement.
Last edited:
Information Analyst
Penultimate Amazing
But that's the most important point. It's suited successive governments not to ringfence NI and public sector pension contributions for precisely that reason. In good times they get to spunk the surplus on other stuff, and in bad times say," we can't afford this now."
I was completely wrong
According to this document, NI contributions can only be used to fund dependent upon them.
So there's no fear of them being used to fund other projects.
The issue however is that in 2013/14 the receipts were £107bn and of that £21bn was allocated to the NHS.
Spending on benefits in 2012/13 was just under £100bn on non-pensioners and just over £100bn on pensioners.
www.parliament.uk/briefing-papers/sn04517.pdf
Information Analyst
Penultimate Amazing
I was completely wrong
According to this document, NI contributions can only be used to fund dependent upon them.
D'oh! I haven't got time to read it properly yet, but it would seem that despite theoretical "unfairness" that Francesca rails against, the scheme has stood in good stead for the 104/67 years of operation. It would seem that what is needed is reasonable readjustment, rather that outright abolition.
Last edited:
Specifically with respect to the state pension and public sector occupational pensions where current contributions only cover current outgoings.......
From my perspective the unfairness is that today's NI and tax contributors pay for the current set of retirees. Because of a much larger number of retirees and a proportionally much smaller number of workers means that today's workers are paying a greater proportion of their salary to support retirees than in the past (and looking at demographics, the situation is likely to get worse).
IMO FrancescaR is correct that this is a transfer of wealth from working age people to the retired. When the currently retired people were starting their careers, there were twice as many contributors and benefits were significantly lower in real terms. They are getting maybe three times the benefit than they have paid for. There comes a point in time where such schemes become unaffordable especially when trying to square the circle of reducing government expenditure as a % of GDP and raising pensions in real terms.
We don't know that the current scheme has stood us in good stead (at the moment the NI contributions - after the NHS payment has been made - cover somewhere between 1/3 and 1/2 of the current liabilities, the remainder being made up from general taxation) but I agree that there needs to be revision.
The defined benefits route puts all of the risk and liability onto the employer, in this case the UK taxpayer. If we keep a defined benefits model then that risk remains with the employer (even if contributions are increased and/or benefits are reduced (by some combination of averaging rather than final salary, being able to buy fewer n'ths of salary or having to contribute for longer) and people currently working will bear the brunt of funding those pensions.
Defined contribution schemes aren't a panacea either. The employer has abdicated responsibility and the employee is at the mercy of the pension find manager for better or worse.
The trouble is that I cannot come up with a fair and reasonable shared risk model where both employer and employee have skin in the game.