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It seems likely that in due course, the universal state pension will be withdrawn.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.

We will probably go full circle and have workhouses again!!!

Problem is people will want today’s old people killed off. But remind them their own children may well also be “put down” at 70 they wouldn’t want that at all!

but with the retirement age being pushed back then surley that is the first break ?

My solution for pensions is as follows.

Starting April 2027, every newborn is given a years tax-free allowance ie £12570 and is placed inside a SIPP 100% in equities. The trade-off is that there will be no state pension for that person. The tax-free allowance will rise year on year by inflation.

You would be able to change providers if you so wish but obviously, the money would not be available until state retirement age ie 67. I would keep that set forever. When the time comes, you would only be able to buy an annuity.

If you never put a single penny into that pension, 5% growth (low for the stock market) over 67 years will net you just under £354,000. Buying an annuity with that would give a lump sum of £87,500 and annual payment for life of £19,600

10% growth over 67 years (about average) will net you just under £9,800,000. Buying an annuity with that would give a lump sum of £2,450,000 and annual payment for life of £549,000.

If you add just £50 a month for those 67 years, the figures are phenomenal. You would have a pot of £14,600,000. An annuity with that would give a lump sum of £3,650,000 and an annual for life payment of £818,000.

I would add a proviso that you have to pay back whatever the seed money is the year you retire out of your tax-free lump sum.

State pension costs would fall every year until, after 67 years, they are self-funding and cost the country nothing.

I'm sure there are flaws in my plan but it seems simple enough to me.

Public sector pensions are not that generous, it's a long standing myth.

I don’t think the state pension will disappear completely but I do think that I will not be receiving it until I am in my mid 70s and some sort of means testing will be brought in.

I do think the triple lock will go soon and can see it going in favour of more money being spent on defence within the next few years. I can see there being more and more tensions between the generations in the future and an overwhelming sense of the younger generations getting a poor deal.

As someone who works in the adult social care sector I can see that our ageing population will bankrupt councils. My area alone is expecting an 80% increase in over 85s alone in the next 20 years. The pressure that is going to cause on local services and the NHS is going to mean an ever increasing amount of funding and cuts to other sectors. However, will the younger generations be happy with the direction of this funding if they do not believe they will receive the same level of care or any pension when it comes to their time.

They really are though. The teachers pension scheme for instance, you pay in a max of 9.9%, your employer pays in 28.68%. Do you want to guess how many employers pay that much in? And what do you get out? 1/57th of your average salary for every year worked. So say you worked 30 years at an average salary of 40k, you’d get £21k a year every year in retirement. Then state pension on top. To buy that sort of annuity from a DC pension you’d have to have a pot of about £600k. The average DC pension pot in retirement is about £100k.

To confirm, you think the government should give every newborn £12,570 to invest, and in return they pay back £12,570 when they turn 67 and do not get a state pension?

Where does the government get this initial money from? It would be around £7.5bn per year.

In 67 years, inflation would erode the value of the £12,570 paid back to practically nothing.

"State pension costs would fall every year until, after 67 years, they are self-funding and cost the country nothing."

No, the pension cost would stay the same for 67 years, and only then it would the ongoing payments start to decrease. And it is never going to cost nothing due to all the £12,570s being handed out all the time.

People in other parts of Europe are paying higher taxes! They also are moaning about nearly all the same things btw including elder care, housing those not in employment etc. there is no utopia elsewhere, but you do get what you pay for

They are generous pensions. Lots of people don't seem to understand that e.g. that having a guaranteed defined benefit pension of 20k at 65 is the equivalent of being handed over half a million in cash.

(They are often not generous wages for the 40 years of work prior to retirement though... I am not saying that they are not hard earned)

I still think it is not right that expats can carry on putting national insurance in and claim a full UK pension. They should be stopped when they move abroad. At least if you live in the UK your pension is spent in the UK.

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.

Surely neither of your examples are actually anything to do with the State Pension though?

I thought this loophole was closed a few years ago?

I don't think that state pension should start later, but there is a case for it being a little lower than it is presently - and the triple-lock should be removed.

Mine is 68, and has always been 68. It hasn't been 60 for many many years.

Yes they are and no it's not.

Definitely remove the triple lock.

The pension credit is unfair someone who has worked 40 plus years gets state pension then someone who has hardly worked gets topped via pension credit.
They can end up better off than someone who has worked for decades as that is a gateway to other benefits…

As I said, the seed money would rise with inflation, so upon retirement, you would pay back whatever the seed money for the newborns.

Of course, it would need some upfront funding but each new pensioner today costs about £120,000, if they live for 10 years after retirement.

The money could come from the Foreign Aid budget.

As I said, after 67 years, the government would not be funding the seed money due to the proviso I added that the seed money would be taken from the tax-free lump sum on retirement.

Yes, the plan would be a long-term investment. I know they are dirty words but can you see the UK being solvent in 67 years? By that time we will be paying the pensions of the ones we imported today.

It kicks the can down the road for a few years. Adults living with parents because they cant live independently won't be having kids, so who will pay for or care for the next generation?

If my 30yo can't move out, she cant have kids. Not without me making her homeless and burdening the council with her housing needs and she will then just be unemployed. She won't suddenly be more employable as a 35yo mum with kids and caring responsibilities and no work experience. Who will hire her?

I think its a valid point and the extra question is "without a pension to encourage them to leave, how much effort would an employer have needed to take to force them out?"

The effects of age creeps up, from healthy sixty-somethings who just want to talk about themselves all the time because they are losing that social understanding, through to what you've pointed out about not following conversations, then sight declines...lots of things that will need a reasonable adjustment from the employer before politely asking them to retire on medical grounds or a stressful sacking after a lengthy performance procedure. Plus any challenges to the employer for the eventual sacking. Stress, time and cost all round.

I take your point about indexing the seed money repayments.

The Foreign Aid budget for 2027 is £9.2bn, so taking out £7.5bn is going to be noticed.

What about people who emigrate here as children, or leave as young adults?

Things won't be improved if AI continues to reduce job opportunities too. It is a very worrying picture.

To be blunt, I am far more interested in this country remaining viable. Sending money abroad when we are teetering on the edge of bankruptcy is madness.

For those that leave as young adults, the money will still be compounding, so it will still be released to them upon reaching 67.

Those who arrive here should know what the score is and make their own provisions.

It's a matter of taking personal responsibility.

If it were possible to reduce the Foreign Aid budget by that much for something politically popular, I am sure it would have already happened by now. Look at how the government are currently struggling with how to find an extra £5bn for the defence budget, and even that is probably not enough. Why not just take it from Foreign Aid? What can be more important than our defence?

The young leavers are getting a great deal, they are getting the full UK pension from negligible contribution. It is almost an incentive to emigrate.