Student Tuition Fee Cuts vs Private Pension Fund Cuts.

[Isitmebut]

Both main political parties propose pension changes, announced or rumoured, on top of pretty draconian changes over the past 20-years or so, but we need to ask ourselves based on ‘the facts of life’, are these changes short sighted, ‘robbing Peter to stuff Paul’ et all, at a later date??

Lets have a brief/general summary of both over the past few decades;

Tuition Fees were first introduced in 1998 (£1,000) after the 1996 Dearing Report, in 2004 this was increased to £3,000 and by 2009 with the universities crying out for secure funding, Labour commissioned the Browne Review to do this. This Browne Review was published after the general election in 2010 (at the worst of our annual budget deficit), and contained proposals to remove the (then) current cap on tuition fees, and a new £9,000 loan cap was put in place.

Job done, universities happy, more poor students were to go to university and if they don’t earn enough money to pay it off, after 30-years of rising salary levels, the debt is cancelled.

Pension Funds in 1997 private pensions in money purchase or final salary schemes in companies etc were the best funded in Europe, before the 1998 withdrawal of a tax benefit on stock dividends, that with later falls in interest rates decimated the Private Pensions returns, killed most company Final Salary pension schemes - and generally making pension fund saving less attractive, helping to fuel the property Buy To Let boom as many pension savers protected themselves from future government .

When the coalition/Osborne made in 2012 a policy that in 2014 a pension pot would be taxed over £1.25 million lifetime limit (from Labour’s £1.50 million), there was an outcry on how UNFAIR this was versus those on Final Salary pension schemes i.e. MP’s and quangocrats.

Dec 2012; ”Hands Off Our Pensions: 'Pensions apartheid' as final salary members get £27,500 more”
www.telegraph.co.uk/finance/personalfinance/pensions/9761289/Hands-Off-Our-Pensions-Pensions-apartheid-as-final-salary-members-get-27500-more.html

”Workers with gold-plated schemes can get £62,500 without attracting a one-off tax bill – those with ordinary pensions can get a maximum of just £35,000.”

Before people guffaw at that £1.25 million limit sum, in 2012 if someone with a non taxed Final Salary scheme in the public sector was due for a £62,500 annual income, they would need £1.25 million fund to cover it. But in the taxed private sector, to achieve that same £62,500 retirement income, they would need a fund of £2.3 million.

And whether we HALF or quarter that figure now, or try to guess what pension we will need to be comfortable in decades to come, that was very unfair to the majority of taxpayers who do NOT have Final Salary schemes.

But now, Labour/Miliband want to cut Tuition Fees and reduce the Pension Fund lifetime limit to £1 million, making it more unfair to those WITHOUT Final salary pensions, rather than those lucky enough to KNOW what they'll get, to take their fair share of that burden.

The problem is that not enough people are currently saving for their pensions, it penalises all those close to and decades away from retirement (including the students) especially those saving a lot, hence my ‘rob Peter’ analogy.

So far from just penalising the pensioners, these constant ‘cash cow’ raids penalises nearly everybody else, at a time when we are all living longer, dementia is rising, we NOW worry about our Social Care costs – less taxes now would ensure more pensioners can pay for themselves, while the taxes on those higher pension incomes in the future, would HELP fund those relying on less and/or just State Pensions by increasing future tax receipts.

Isitmebut a policy to attract students now, means they will have to pay back their fees later if earning diddly squat, have to save more into a pension plan throughout their lives to get a mediocre private pension - AND worry about the affordability of the NHS, Social Care, State Pensions, when later paying even higher taxes on everything else - when socialist political parties finally decide to PAY DOWN the (then) £2 trillion of National Debt some time after 2020, rather than keep borrowing that increases it?

This is an easy problem to solve.

Allow public sector workers to only build up entitlement within defined benefit schemes in line with the median pay packet in the country. There after, they can contribute to a money purchase scheme (with the usual tax breaks- less of course the value of their dinfned benefit scheme)up to the lifetime limit - be that 1m or 1.25m. Then the taxpayer isn't being expected to underwrite massive risk.

With regards to students. Remove the caps on fees entirely. Let industry (and the NHS for example) foot the bill (and set the agenda) for the graduates they need.

Labour’s cuts pension tax relief above is ESTIMATED to cost pensioners £2.7 billion, assuming that citizens in future do not savings advice and save through different investment vehicles to provide income in their old age once they reach non relief levels e.g. a small Buy To Let property.

Today Labour are announcing that after 5-years of Miliband attacking Pensioner Universal Benefits, Labour (for now at least) will protect pensioner Free TV Licences and Bus Passes, but stop the Winter Fuel Payments to ‘wealthy’ pensioners, so WHY cut one and not the others?

Rachel Reeves says this morning it is responsible governance to cut £115 million a year from our current £90 billion a year budget deficit (annual government overspend). Hmmmm.

How much would it COST a year in extra public sector staff across the country to administer the Fuel Payment cut off, handling claw backs and pensioner appeals when they invariably get it wrong?

Could it be that a Labour government would gladly lose taxpayers money administering the one pensioner benefit cut, as they get to MEANS TEST every pensioner in this land, and indeed those living overseas?

A head start and for a party who for the past few years have propose ‘Death Taxes’ in policy think tanks to plug gaps in social expenditure and YET to outline all their new taxes from before the 2010 general election, when they promised to cut less and tax more, than the other major parties?

Taxing private pensions to oblivion is stupid and short sighted. Well paid people in the public sector like MPs will not be affected. It is unreasonable to expect the private sector to suffer more cuts to pensions.

I feel the way forward is to look at the taxing structure for exisiting pensioners. I would allow pensioners to keep all their benefits like free bus pass and winter fuel allowance, but have higher rates of tax kick in at a lower level for pensioners. Maybe we should look at different personal allowances for people with unearned income (ie. those with income from pensions, shares, landlords etc.)

ReallyTired .... re your "different personal allowances for people with unearned income (ie. those with income from pensions, shares, landlords etc.)"

That is rather Old Labour and hopefully not as severe as the 90 odd % tax on unearned income they passed to Thatcher in 1979, right?

Would that not discourage all personal savings and investment, not just for retirement and after time we’d end up an over populated investment free State like North Korea, with many of its citizens eating grubs to survive?

Did you ever see the 1970’s film Soylent Green with Charlton ‘Chuck’ Heston, where (spoiler alert) the big end shows that the 2022 government secretly provides food for the rest of society by recycling humans that die , called Soylent Green?

Pensioners facing a severe mugging that is only 7-years away, beware. lol

Isitmebut
There is a happy medium between old labour policies and expecting the working population to fund everything. Investments are vital for providing businesses with equity. We also need a private sector for property rental.

I feel that there is a problem when working family with an income of 25K is paying more tax than a single pensioner with a pension of 25K. Working people have higher costs than those who do not work. Young families are being pushed into poverty. They don't only have to feed themselves and put a roof over their head, but they often have travel costs with getting to work.

"Pensioners facing a severe mugging that is only 7-years away, beware. lol"

Every other sector of society has suffered with cuts and higher taxes. Why should pensioners be excempt when disabled people have suffered horribly.

In answer to your last question, maybe because the majority (and those 20-years away from retirement) did so pee poor under the last government, on lower saving interest rates/flat to lower equity prices within pension fund returns AFTER the Brown pension raid - and those on the State Pension versus inflation.

Where I'll agree with you in that government needs to address imbalances, especially the under 25 year olds who saw their unemployment rates ROCKET after 2004, so getting them back to work and taking them out of tax up to their first £10,500 of earning has been a start.

Over the next 5-years that would increase to over £12,000, and the further we get away from the worst recession in 80-years, as long as businesses are still confident and investing, not milked to business contraction, the rates of pay WILL increase as well, I've get to go through a recession where pay rates ROSE in one above inflation.

So all similar economic/recession 'stuff' us wrinklies went through over the past 40 odd years, also having to pay sky high interest rates (10 to 20%) on borrowing e.g. mortgages.

Yes 20% inflation, interest rates and wages playing catch up was better for us over time (inflating away our levels of debt) but it was a 'kin struggle at the time; we thought we'd done our time trying to bring up families with incompetent governments, we don't expect to have suffer because most political parties are calling the politics of envy 'new politics' and the way forward.

Oh and FYI when I was in my 20's, in 1979 the basic rate of income tax was either 32 or 33%, I can't remember if just came down.

The Higher income tax rate was over 60 odd %, contributing to a 'brain drain' of UK talent going abroad.

And some pop stars (yes I'm showing by age) with unearned income facing 90 odd % taxes, did the same.

So as bad as it is for the under 30's, it COULD currently be worse in taxes and unemployment levels and their best earning years are ahead of them. God willing.