To think when the state pension is removed, the social contract is broken?

[JulyJulyNovember]

https://www.bbc.co.uk/news/articles/c8e2yp1gg37o

It seems likely that in due course, the universal state pension will be withdrawn. At this point, I don’t see how there will be any incentive for young people to build wealth here.

I don’t think poor pensioners should be homeless, but I don’t think they should be provided for in large, unsuitable council houses or in nursing homes where places cost thousands a week. We are moving to a more individualistic world.

There is a real divide in people's health and ability through their 60s, 70s and into their early 80s.

For those in manual work I would say the current retirement age is too old but 60 would probably be fairer. For those in comfort desk jobs is about right to a little too young and in these roles people would be fit and able to do them into their 70s, should they chose.

The role out of the automatic enrolment scheme over the last decade should mean that a greater proportion of people will be approaching retirement with a private pension even if it is modest.

I'm approaching 40 and I imagine we will end up with a combination of a universal pension scheme and a pension benefit when I'm reaching retirement age.
55-67 lower threshold on existing out of work/disability benefits for those unable to work in their profession and with no sensible alternative employment
67-75 means and health tested retirement benefits with automatic enrolment schemes anticipated to cover this period for most people and the state picking up any one it doesn't
75+ universal pension basic pension with means tested add ons.

If you only look at pension ages focused on the last 25 years it does look like it is rapidly going up but if you look over the last 75 years you can see the change in pension age is less about it being increased quickly now and more about it being kept too low through the 80s and 90s when life expectancy and there was more a shift from industrial jobs market. I could possibly see the state pension aged being pushed to 70 maybe 75 but I think there will always be something from early 70s.

But the main issue between the generations is that we have an aging population with falling birth rates.
The contract can't be held up based on these numbers.

I’m a millennial (33) and for my retirement planning I am assuming I won’t get a state pension and if I do it’s a bonus.

Currently got c£220k in my private pensions so hopefully I can retire around 62/63.

As intelligent, informed women could we please get beyond the ‘worst state pensions in Europe’ nonsense.

Virtually every other European country to us uses a totally different system. Here we have a state pension and an occupational pension. We pay NICs into a state pension. This is nowhere near enough for the money we get out so the state top up is big, but we also get a workplace pension. The employee, employer and the state (in tax forgone) all pay into this and a workplace pension provision in retirement is the outcome.

In most of Europe there is no separate workplace pensions. You and your employer pay the pension to the state, and so when you retire your workplace pension and state equivalent is paid to you by the state.

So when people moan about state pensions being higher overseas they are omitting the fact that these pensions are the equivalent of our state AND workplace pensions added together.

If we look at the money the UK government puts towards pension provision, it is the EU average.

Gen Z aren't new in thinking the state pension won't exist by the time they get to retirement age. I'm Gen X and I think the same for my generation. (My mother's generation got screwed when the equivalent of the UK's auto-enrolment scheme came in, as did the requirement to buy health insurance or pay more tax.)

I don't really know what you mean by breaking the social contract. We're not a homogenous society and attitudes are so vastly different amongst generations that I think there's only a very basic one in place now, held together by fear. Most people abide by laws protecting each other from physical violence because they're afraid of the consequences of not doing so. The general view isn't the same with white collar crime. You can pick any number of threads on here to see the different views on manners and personal responsibility that are now held. The UK doesn't have the same sort of trust in Government and public bodies that you find in some Northern European countries, and COVID broke the little trust the general public had in the Government, so I don't think there's really a social contract from that point of view.

I don't know when there was an incentive for people to build wealth here. For billionaires to hide their wealth, yes; but for people to make it and keep it here? No.

Next pensions myth. The triple lock.

in the early 2000s there were a lot of pensioners living in poverty. State pensions were too low. Gordon Brown introduced the triple lock to speed up the increase in state pensions to increase - gradually but quicker than wages - the state pension. It was only ever meant to be for a few years, it is not designed to be permanent because it’s designed to take up - year on year - a higher percentage of the UK budget. It needs to be stoped at some point as the UK budget will be entirely spent on pensions.

Unfortunately for us our politicians are far too gutless to ever stop the triple lock, and so pensioners will get richer and richer and public services will get worse and worse. One more example of the young being shafted.

Difficult to sell in working for other people to that extent. I agree with the op on the social contract in place.

The problem is not enough people making a net contribution to the system to support the ever increasing number of people who have retired AND those who do not want to work.
When employers don't want to employ people full time or on permanent contracts we will continue to be in this position. The recent changes have really damaged the economic outlook for millions.

I had a massive career gap raising our kids but thankfully DH is very savvy with money (unlike me). He's paid at least 1/4 of his wage into a pension fund since we had our 1st, and we also own our home and business premises so both can be sold and we'll buy a small flat leaving us plenty of funds for travel, lifestyle and care if needed. I've cursed him at times as we went for years without any holidays etc but it was entirely the right thing to do in hindsight. I'm 55 and don't think there will be a state pension in 12 years time, the country will be bankrupt if it keeps handing out welfare like smarties like it is.

I get my state pension- from age 66, if I were a year older it would have been 67.
I had 30 years of contributions and topped up by buying extra years.
Like many women my age there was no available child care when my kids were small, so we worked part time or cash in hand or because money was tight took up the “married woman’s stamp” which did not count towards a pension. After all, we were told, your husband’s pension will cover you. Few married women earned enough to pay into private pensions even if they were allowed to. Older women, those in their 80’s +, are even less likely to get occupational or private pensions and of those that did work many were forced to stop when they married or had children.

So what do you think those with small or no private pensions should do? Should we starve? Be put into the modern equivalent of the work house? I see “assisted dying “ has been mentioned- should we just volunteer to sotmc because we are too expensive?
What do you all suggest?

The social contract was if you paid in you got out. Now if you have enough money to pay in (I.e. a job) you’re deemed not to need benefits so get nothing out. Those that pay nothing in get benefits out. In that way then yes, the social contract is broken.

I'm 37 and I've always saved into pensions with the assumption that the state pension won't exist when I'm old. It's better to be proactive - and if there is still some sort of pension, well that's a little bonus. But it won't be what it was.

This could end up with a situation in which someone has saved for a private pension ending up not much better off than someone that has never worked or not saved for a private pension. If it looks as though that is going to happen, I might as well not bother with a private pension and spend the money while I'm young.

I don’t think it will happen. We need to incentivise working and this would do the opposite. The Labour message just now is who can we tax to give away in benefits to others, and it’s damaging them badly.

My MIL is the same , never worked once she was married so her ‘contribution’ was her late husband working . He died when he was early 80s and she is now 93 having paid minimal amounts in herself .

This in a nutshell.

Pot of gold? At £240 per week? The state pension is awful, it couldn't be further from a pot of gold! Anyone who is relying solely on a state pension even now is going to be living in poverty.

The thing is that for people with large private pensions, they are quite possibly paying income tax equivalent to or more than the value of their state pension.

Even my mum who gets the whole state pension plus some part of my late dad's plus his £3000 pa private pension has to pay tax. Every time the pension goes up so does her tax.

We're constantly told that pensions make up by far the largest part of the welfare bill but are there figures available for how much total tax those same pensioners are paying back?

That’s pretty much life in a lot of cases now anyway isn’t it? The message used to be you need to make sure you work in order to get your NI contributions in so you get your state pension. So what happens if you don’t? Oh you just get pension credit instead which tops you up to the same amount as a pension. So a pensioner who worked their whole life in a low wage job (so no private or workplace pension) gets exactly the same as a pensioner who never worked. So why did they bother?

I’ve worked my whole life since 16. Only had 2 years off for university in my 20s. I’m self employed so I have zero employee benefits and no work place pension. I have a very small private pension. It will likely be worth about £300 a month when I get to pension age. And that’s if I can continue to contribute to it as I am. I rarely take holidays as I don’t get paid for them. I can’t take sick days unless I’m absolutely bed ridden. I managed to buy a small house so my plan was to downsize that in my 60s and that would help fund retirement. But now apparently there won’t be a state pension and my house will probably be worth pittance. So what’s the point? What am I doing all this for? Honestly I’m so close to just giving up saving and enjoying myself. Both my parents died before state pension age and all but 1 grandparent died before 70. So quite frankly I think I’m just going to enjoy the next 20 years and if I don’t have a pot to piss in when I’m 70+ them so be it. I won’t be the only one by far.

It's actually falling ( below replacement) birth rates that make pensions unsustainable.

When the current system was designed, birth rates were high, and people didn't live as long, so there were multiple working age people for each retired person.

Birth rates fell and people started living longer. This means that there are far fewer working people for each retiree.

As the birth rate continues to fall, this will get worse. It's predicted to get close to one working person for each retiree.

Of course, if we are spending all the welfare money on pensions, this makes it even harder for people to afford kids, so the birth rate drops lower.

This clearly isn't sustainable.

All of this falling birth rate would be relevant if it was assumed that all young people work however we have a million NEETs with no good reason not to be working or training.

'Pot of gold'?
Are you really that deluded?

@angelos02 a significant reason is the lack of entry level jobs, because these are being taken by graduates because there aren't graduate jobs!

Their point is the state pension is low in comparison to state pensions in Europe.

Private pensions are a separate matter.

It all feels so hopeless.

I think it will end up being means tested. It is in Australia - everyone has a pension pot (superannuation) which is paid from your employer. This is included in your total asset net worth. Once this asset value (outside of your primary house) drops below a certain level, you can also claim the equivalent of the state pension in order to survive.

It means that the wealthy never end up claiming government pension money, and seems a much fairer system overall.