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Britain should axe state pensions for the rich, OECD says

Pensions-savings-retirement-piggy bankThe UK should cut the state pension for the wealthy and “free up resources” to give a boost to poorer retirees, a member of the Organisation for Economic Co-operation and Development has stated.

The OECD’s deputy director of employment, labour and social affairs Mark Pearson said by dropping the state pension for the 5 to 10 per cent of the richest citizens would give a significant boost to the pensions of the poor amid Britain’s ageing population, the FT reports.

Pearson said: “Faced with these pressures, are you going to ask people of working age to pay more, or people to work longer before they can claim their pension?”

He added: “Or another way to ensure an adequate pension is to think about whether the pension should only be paid to those who really need it, to ease the tyranny of the maths. Giving less [pension] to the people at the top would free up resources to increase general benefits.”

The UK retirement benefit currently stands at £6,359 a year for the basic state pension, and £8,296 for the new state pension, which was introduced last year. The OECD claims this is among the least generous benefit of its 35 member countries.

Menawhile, the Office for Budget Responsibility expects spending on the state pension to rise from 5 per cent of UK’s GDP in 2021-22 to 7.1 per cent by 2066-67.

Pensions is also expected to be a key element for debate in the June’s general election in the UK, especially on the fate of the triple lock – a guarantee to increase the state pension every year by the higher of inflation, average earnings or 2.5 per cent.

Pearson said the triple lock should be scrapped altogether because pensioners gain an advantage over other groups,  suggesting state pensions should increase by either average earnings or prices.

Royal London director of policy Steve Webb disagrees with Pearson.

He says: “What happens to the rich has a knack of spreading and you could end up undermining the whole idea of a contributory system.”

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Comments

There are 25 comments at the moment, we would love to hear your opinion too.

  1. UK state pension – least generous of our 35 member countries and the UK should consider axing the benefit for the rich. Now there’s an economists contradiction! Do they not realise ‘the rich’ already loose 40 or 45% of the benefit they have contributed to through their working life – in taxation back to the state!

  2. What an idiot! The wealthiest pay more in and deserve a SP just as much as the next person. Stop paying benefits out to people that don’t deserve them and increase NI slowly to boost.

  3. Id think taking state pension away from anyone who has Protection, enhancement or has breached their LTA would be reasonable. So far the over 50’s haven’t taken any hit at all.

    I would add that to preserve the Public pensions they should be capped at £26,000 – average household income and escalation stopped at age 75. Unions would cry for a little but the threat of replacing them with an Autoenrolment scheme should shut them up.

    • “So far the over 50’s haven’t taken any hit at all.” I think there’s a fair sized group of ladies that would resent that statement……

  4. Trevor Harrington 27th April 2017 at 9:57 am

    Taking the state pension away from people who pass some arbitrary measurement of presumed wealth, dreamt up by a lifetime civil servant, sounds like some sort of communist decision from a banana republic.

    To do so when the over paid, underworked, economically risk free, excessively high earners in the public sector have gleaned underserved, and often fraudulently acquired, final salary pension scheme benefits, which are largely funded by the rest of the tax paying public …. sounds like the stuff of civil war to me.

    As I have said many times before – there is more than enough taxation revenue coming into the treasury, which enables us to afford ALL the benefits and public services that we could reasonably want. We are the fifth richest nation in the World.

    The problem is that successive governments of both political persuasions have spent our money on the wrong things. The cynic in me says that they have spent our money on electoral issues which they thought would return them to power at each general election – buying votes if you wish.

    The state pension is perfectly affordable, even at age 60 for all of our citizens, if only they would cease the fraudulent use of the final salary pension at the top salary levels of all public sector employments, such as early retirements. If they restricted the maximum public sector pension to £40,000 per annum per person it would save the treasury billions each year – but of course that might jeopardise their chance of re-election.

    • Couldn’t agree more with every word you have said.

    • basically i agree with all you say. Politics today is a dirty word. democracy has turned into dictatorship. Party rules dictate who the electorate can vote for. Party rules dictate what MPs must do. humanitarian actions for the UK “working man” are not allowed in party rules. As Cameron said in his last pre-election speech on pensions “what you pay in you get out”. what he did not say is that does not apply to half of the 1.2 million pensioners living overseas. their pension is frozen to that of the day they moved overseas. (some still on the pension they first received 30 years ago).
      to stop paying the rich, the payed for pension they are entitled to, is discrimination, as is the non uprating of frozen pensions. rich or poor if you pay tax then you are paying back some of that pension. or for the richer of the rich all of it.

  5. @ MontyG & PW

    Exactly right. Anyway please define rich. In my book rich is anyone with £10 million liquid assets and over.

    Anyway scrapping Foreign Aid should help a bit and what about the £350 million a week we will be saving (according to the Brexit Mafia) when we leave the EU. That should also ease the problem. (Or could it possibly be that we have been lied to?)

  6. Ps – So these Geniuses want to stop the ‘rich’ from having state pensions. They want to limit their private pension inputs with lifetime limits and contribution limits, they want to tax them more highly and reduce their tax allowances. I think what they really want is for there ‘rich’ just to leave and take their money and talent elsewhere. The French did it when Hollande became president – that’s why London is now the 5th largest French city. It looks like they may well go elsewhere accompanied by many of our own nationals. So there will be an exodus of the entrepreneurs, the wealth creators and those who spend the most to keep our economy running. OECD? Otherworldly, Ensemble of Complete, Dimwits.

  7. The level of stupidity displayed by both politicians and so called think tanks is absolutely breathtaking in the way it completely ignores reality.

    So the people that have paid for more in than anyone else both in TAX and NI should then not get anything. Those that have been responsible and provided for themselves should get ripped off for the benefit of those who have been irresponsible. I could go on, but the one thing that seems to utterly elude these people, is what eluded Hollande.

    That the very wealthy, will up sticks and leave if you make things too unattractive for them, then instead of getting a very nice amount of income tax etc, you will get absolutely nothing, because even 99% of nothing is still nothing.

    And that’s before you even consider the “fairness” of such a stupid idea. Have they not realised why Labour is totally unelectable currently?

  8. Any change to the universal state pension based on means testing would just be the thin end of the wedge to ultimate abolition. If the UK is so hard up we can’t afford to look after our own, perhaps we should reduce foreign aid. After all does charity not begin at home?

  9. As a 30 year old who has and will pay NIC’s all my working life, who is just about managing to buy a modest 2 bed flat with my partner and who will never benefit from a DB (aka golden egg) pension, I absolutely agree with this post. The problem being ‘the rich’ find loopholes, whilst those who have reached or exceeded the Lifetime Allowance would seem a ‘reasonable’ limit, you can bet many would fall just short of that amount. Everything’s relative though of course and ‘the rich’ will feel entitled to their £8000 a year (circa) as much as Joan from Blackpool (random example) who has perhaps never worked a day in her life. One thing is for sure though, for any there to be chance of my generation gaining the state pension we are entitled to, something has to be done.

    • And God knows what age you will actually be by the time you get it…75 perhaps!!

    • Trevor Harrington 27th April 2017 at 4:41 pm

      Dear Amy,

      If you feel less than “included” in what you probably call the “rich list”, may I respectfully suggest …. that you get off your backside and do something about it.

      That is what I did 36 years ago, by building a new career for myself in financial services, creating my own businesses, putting my immediate family second, working 12 to 16 hours per day for six and a half days per week, and on several occasions putting the family financial wealth entirely on the line. I also paid very considerably more than the average in tax and national insurance, as well as large amounts of corporation tax in the businesses which I created.

      I am age 62 and my wife of 37 years (which in itself continues to surprise me – that she is still there), is aged 60. We have just had 7 years state pension removed from my wife and two years from me, as well as a massive reduction in the expected state pension payment itself by virtue of the fact that we have lost our SERPS benefits.

      The net result is that we have lost well over £200,000 in state pension expectation, assuming we live to normal life expectancy …. which I probably won’t because of the stress of my previous working life which has undoubtedly damaged my health.

      If you want to whinge at something more realistically attributable to the concept of fair play in state pensions, may I suggest that you read my other post above … with a little more care.

      warmest regards

      Trevor

  10. Setting aside the rights and wrongs of such a proposition and just considering the mechanics raises questions. A large proportion of the population will have to be assessed, in order to establish in each tax year which 5% fall in/out of the “rich” bracket. That’ll be an appreciable administrative cost. And what exactly will the savings be? All the currently qualifying “rich” will be paying 40/45% tax on the pension – what rate if any, will the recipients pay? If spread among the whole remaining 95% any addition will be minimal – allocating to the poorest would make a more appreciable difference. Depending of course, having set up another process to establish who those folk are, if there’s anything at all left after further administrative costs.

  11. The OECD seem to be missing a pertinent point in that they seem to treat the state pension as “a gift” from the Government. It is not-people have paid in over the years with the expectation of getting something back in return upon retirement regardless of how well or badly they have done during their working life-it is their entitlement.. I accept that now there is in reality no such thing as “National Insurance” as all the money goes into the same pot , and is in reality an extra income tax , however I doubt that any flavour of Government is prepared to admit this.

  12. Even a die hard socialist I cannot even begin to get behind this. Expecting someone to pay in a lifetime of NI and then see nothing for it is at the very best unfair and ill thought out.

  13. I presume that also means they will be refunding a fair proportion of the lifetime NI contributions they will have paid to receive the sate pension they are suddenly no longer entitled to. How can anyone be encouraged to work hard and take risks in life if they just keep taking more from them to give to others that ‘perhaps’ didn’t work as hard

  14. Suppose that every day, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this…
    The first four men (the poorest) would pay nothing. The fifth would pay £1. The sixth would pay £3. The seventh would pay £7. The eighth would pay £12. The ninth would pay £18. The tenth man (the richest) would pay £59.
    So, that’s what they decided to do.
    The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by £20”. Drinks for the ten men would now cost just £80.
    The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? How could they divide the £20 windfall so that everyone would get his fair share?
    They realized that £20 divided by six is £3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer.
    So, the bar owner suggested that it would be fair to reduce each man’s bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
    And so the fifth man, like the first four, now paid nothing (100% saving). The sixth now paid £2 instead of £3 (33% saving). The seventh now paid £5 instead of £7 (28% saving). The eighth now paid £9 instead of £12 (25% saving). The ninth now paid £14 instead of £18 (22% saving). The tenth now paid £49 instead of £59 (16% saving).
    Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.
    “I only got a pound out of the £20 saving,” declared the sixth man. He pointed to the tenth man,“but he got £10!”
    “Yeah, that’s right,” exclaimed the fifth man. “I only saved a pound too. It’s unfair that he got ten times more benefit than me!” “That’s true!” shouted the seventh man. “Why should he get £10 back, when I got only £2? The wealthy get all the breaks!”
    “Wait a minute,” yelled the first four men in unison, “we didn’t get anything at all. This new tax system exploits the poor!”
    The nine men surrounded the tenth and beat him up.
    The next night the tenth man didn’t show up for drinks so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
    And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.
    David R. Kamerschen, Ph.D. — Professor of Economics.

  15. @John Beattie, spot on. I love it

  16. In (just under) a couple of years time we’ll have extricated ourselves from the EU so we won’t have to take any notice of these socialist bozos. Even at this stage in the process, I hope the UK government doesn’t, whilst the prospects of a Labour government any time soon are thankfully remote.

  17. I had to giggle at John’s analogy above – thanks for sharing!

    It’s only a matter of time before the Government introduces means-tested State Pensions or outright removal of it for the rich. But before then, there are still low hanging fruits to grab and that’s why we keep seeing tweaks to tax rules on pensions.

    Personally I’m not convinced that the Government allocates resources and “cost savings” from budget cuts efficiently, as most have a short outlook and are only held accountable for their term in office – hence spending is biased towards short term results at the expense of long-term goals.

  18. Pearson said: “Faced with these pressures, are you going to ask people of working age to pay more, or people to work longer before they can claim their pension?”

    Yes – that’s absolutely what they should do! When the miracle of modern medicine means people get to live 10 years more on average than their grandparents, something has to give.

    This guy is the sort of idiotic dipstick that made people vote for Brexit!

  19. I have an idea to solve all of this.
    Elect Jeremy Corbyn -> Select a level of income suitable for all such as £25k. All those who earn more than this have it taken away and distributed among all those who earn less to top up this new universal income to £25k.-> everyone will have the same as each other, everyone will be paying tax so more money for our glorious leader to spend on building us all the same house – all expenses will be the same and therefore we will all have the same in retirement and will not have to worry that we’ve run out of other people’s money to spend. Nutty bread for all.

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