If any government wishes to alter the system for future claimants then they will have to phase it in over very years. It would be grossly unfair to undo or disrupt financial planning that has probably been in place for many years.
No they won't, they would just run rough shod with no consideration at all.
Take the current situation with the date a woman's state pension is paid. It was 60 but with little notice and no phasing it became 66. My wife had dome all her pension planning based on that and suddenly with no time to make sufficient extra provision she was told she would have to work an extra 6 years despite already working full time since she left college in 1975.
But realistically the government would not rob the expats of their rights since it would probably loose them many of the overseas votes they get. Women generally speaking do not matter to Boris and his mates as shown by his speeches over the years.
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It seems that nationalism and political persuasion are clouding the argument here. The simple question is; do British citizens, wether ex patriot or not, have an entitlement to the welfare benefits they contributed towards? The sensible view is yes. When we started paying income tax and NI contributions we entered an implicit agreement with HM government which entitled us to the benefits based upon those contributions. Clear as day. In my case since 1964 when I started work and right up until 2014 and retirement. If I choose to reside anywhere on the planet I don't see that as an impediment to claiming my entitlement. I have family in Canada and Australia so if I choose to live there it is my personal business. It does not reflect a lack of respect and devotion to my country and is an entirely removed situation from my inherent right to claim my entitlement. If any government wishes to alter the system for future claimants then they will have to phase it in over very years. It would be grossly unfair to undo or disrupt financial planning that has probably been in place for many years.
Cheers Concrete
The problem has been, for a LONG time now, that NI has been effectively used as general taxation, and nowhere matches the amount the average person uses (in monetary terms) as regards the NHS/care system and pension payments during their lifetime.
I've advocated for years now that there should be a proper separation of general taxation and essentially this sort of public medical and retirement insurance. Even many countries in Western Europe have separate compulsary health insurance even though they have a public health and care service.
That and why we should have been raising the pensionable age (especially for women to match that of men, perhaps even higher as they live longer and suffer less from ailments in old age) decades ago and already be at 70 now.
A far greater degree of transparency might gee everyone up to realise the true cost of it all, how much is wasted (across the board) and especially what measures we could personally take to reduce our dependence on care and health services later in life, i.e. a more healthy lifestyle.
I think that whilst the ex-pats' state benefits should continue, the aforementioned realities should be factored in from now on for new people retiring aborad or moving there part way through their working life. At some point (as the number of retirees is going up and the number of working age is essentially flatlining or reducing), we need to be realistic to say that those working at that point should not and cannot pay for the retirees - this taking from futire generations has gone on for too long now already.
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The problem has been, for a LONG time now, that NI has been effectively used as general taxation, and nowhere matches the amount the average person uses (in monetary terms) as regards the NHS/care system and pension payments during their lifetime.
The money from NI goes, as you say, in same pot as Income Tax, VAT etc, etc. How would the numbers work if you hypothecated NI to health and welfare? Hypothecation does't change the total and NI may be far less than we spend on health/pensions etc.
The only difference it makes now is that contributions determine how you accrue State Pension and whether you get a limited title to non means tested Job Seekers Allowance or Employment and Support Allowance (state sick pay).
If the government does as it hinted in the election and raises the NI threshold closer to that for Income Tax entitlement of low paid to some benefits and their eventual pensions will be badly hit.
That and why we should have been raising the pensionable age (especially for women to match that of men, perhaps even higher as they live longer and suffer less from ailments in old age) decades ago and already be at 70 now.
Probably right but the reason women got it earlier was to allow married couples where, historically, the woman was usually younger than the man to get it at broadly same time.
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Many expats getting state pension will probably be getting a private pension from either the public or private sector, Some will also be getting income from savings and investments. The total income will be taxable here in the UK just like the rest of us, so most will still be paying in to the system still!
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Many expats getting state pension will probably be getting a private pension from either the public or private sector, Some will also be getting income from savings and investments. The total income will be taxable here in the UK just like the rest of us, so most will still be paying in to the system still!
On the contrary, as we are permanent residents in France, all our income from pensions and investments has to be taxed in France. Despite what you hear about taxation in France, we actually pay less tax overall here than we would in the UK.
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Many expats getting state pension will probably be getting a private pension from either the public or private sector, Some will also be getting income from savings and investments. The total income will be taxable here in the UK just like the rest of us, so most will still be paying in to the system still!
Correct. I pay the same amount of tax on my UK income in the UK as a UK resident would, so the UK isn't losing out. I also pay additional tax on my UK income in Austria, plus Austrian income tax on my Austrian income, so we're not getting away with anything ;-)
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The problem has been, for a LONG time now, that NI has been effectively used as general taxation, and nowhere matches the amount the average person uses (in monetary terms) as regards the NHS/care system and pension payments during their lifetime.
The money from NI goes, as you say, in same pot as Income Tax, VAT etc, etc. How would the numbers work if you hypothecated NI to health and welfare? Hypothecation does't change the total and NI may be far less than we spend on health/pensions etc.
The only difference it makes now is that contributions determine how you accrue State Pension and whether you get a limited title to non means tested Job Seekers Allowance or Employment and Support Allowance (state sick pay).
If the government does as it hinted in the election and raises the NI threshold closer to that for Income Tax entitlement of low paid to some benefits and their eventual pensions will be badly hit.
I think you've illustrated my main point for me - the problem currently is that the existing system (for several decades now) has been ill-equipped to deal with modern living, demands on the exchequer and (just as important) to be transparent to the population.
In effect, there is absolutely zero difference to each of us paying in income tax or NI, because when you pay one (aside from a very tiny percentage who pay NI when not working but not drawing any 'working age' benefits), you pay the other and always at the same rate based on your earnings.
I think that the current system of NI in particular encourages people to lead less healthy lives, to not provide (or to a very low level) for their retirement (many younger people have no idea how low the state pension is compared to their current outgoings) or to encourage saving more generally. they foolishly believe that the state will pick up the tab, whatever the cost.
As I said, we have a OAP generation vastly grwoing in boith numbers and amount of time living in retirement, effectively paid for by a stagnatnt or dwingding number of workers. Increasing the population by migration is not the answer, nor is (to some extent) by increasing the brith rate to boomer levels (though increasing it to the 2.1 replacement level is worthwhile).
I think we should look abroad to what they do as regards funding for healthcare/personal care (including when keeping a public system for most), but also reducing pressures on that system generally as I indicated before. The same goes for working age benefits, which I believe are still way too generous in both scope and level, and do not encourage a healthy, productive and civil society.
Many people in their 50s, 60s and even 70s have been aware of the impending major problems I've highlighted, especially the gap between past NI funding and current demands by pensioners for spending and that the pensionable age not being raised early enough and significantly enough.
Whilst there are many poor pensioners, there are a great deal more in that age group and those between 50 and 67 that are significant more well off than any other generation and yet who will enjoy more benefits for about twice as long as the genmeration before, because they had better economic opportunities and will live longer and healthier as a result.
I think some give and take is the key, especially as (I suspect, but admitedly have no data at my fingertips to back it up) the vast majority of those either living aborad or especially retiring abroad are quite well off to start with. Still, I suspect there's no magic bullet in all this, and perhaps a Royal Commission is needed for these issues (as they are all related) to bring them all out in the open and hopefully go a long way to resolving them.
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In effect, there is absolutely zero difference to each of us paying in income tax or NI, because when you pay one (aside from a very tiny percentage who pay NI when not working but not drawing any 'working age' benefits), you pay the other and always at the same rate based on your earnings.
There's quite a large gap between the start point for NI and that for Income Tax. There will be a lot of second earners doing fewer than 28 hours a week at National Living Wage who pay a few pounds NI but no tax. No 'working age benefit (ie Tax Credits or Universal Credit) as pay of first earner is too much.
A couple both on £12,500 would pay some NI but no IT and even if they were paying £750 rent for a one bed in S Hertfordshire would not get Universal Credit either.
Just figures for illustration.
I'm not challenging anything you've said.
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Indeed - the system has got so complex and so opaque that I think we need to seriously think about starting from scratch, especially as the demographics of the population have changed so much in the last 75 years.
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<< Whilst there are many poor pensioners, there are a great deal more in that age group and those between 50 and 67 that are significant more well off than any other generation and yet who will enjoy more benefits for about twice as long as the generation before, because they had better economic opportunities and will live longer and healthier as a result. >>
Another contributory factor is the Early Retirement habit adopted by many large companies in the 1980s and 90s. I was offered that option in 1991 - and I have to admit that although it was not pleasant at the time, with hindsight it was a good move - and I have now been a pensioner longer than an employee. I freelanced until I reached 60 and have been unremunerated ever since. I'm not on a big pension but it's more than enough for SWMBO and me.
No doubt it made sense to the accountants of the time, but it still doesn't feel 'right'. At least the pensionable age has been harmonised for women and is creeping up, as it has to.
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I cannot disagree with thunderbird about the way womens right to entitlement of a state pension has been handled. As for riding rough shod over us, well I think all governments would do that if we let them. It would be inadvisable though to try it.
As for the Ni contributions. There never has been a NI 'fund'. Pensions have always been paid from current income from contributions, plus no doubt, extra funding from general taxation. However none of this affects the right of entitlement to a state pension if you qualify through the current criteria for contributions.
Cheers Concrete
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I cannot disagree with thunderbird about the way womens right to entitlement of a state pension has been handled. As for riding rough shod over us, well I think all governments would do that if we let them. It would be inadvisable though to try it.
As for the Ni contributions. There never has been a NI 'fund'. Pensions have always been paid from current income from contributions, plus no doubt, extra funding from general taxation. However none of this affects the right of entitlement to a state pension if you qualify through the current criteria for contributions.
Cheers Concrete
My first wife's uncle was a high-up at the Ministry of Pensions.
According to him, he had personally told Harold Wilson (the then Prime Minister) that the system of paying pensions out of today's tax income was in need of reform, as in the long term it was unsustainable.
This was about 56 years ago and we still have the same system.
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I cannot disagree with thunderbird about the way womens right to entitlement of a state pension has been handled. As for riding rough shod over us, well I think all governments would do that if we let them. It would be inadvisable though to try it.
As for the Ni contributions. There never has been a NI 'fund'. Pensions have always been paid from current income from contributions, plus no doubt, extra funding from general taxation. However none of this affects the right of entitlement to a state pension if you qualify through the current criteria for contributions.
Cheers Concrete
My first wife's uncle was a high-up at the Ministry of Pensions.
According to him, he had personally told Harold Wilson (the then Prime Minister) that the system of paying pensions out of today's tax income was in need of reform, as in the long term it was unsustainable.
This was about 56 years ago and we still have the same system.
Yep, my sentiments exactly. Most politicians on the government side of the aisle don't want to do what is really needed because they don't have both the know-how or the c****** to be able to properly make the case to the general public; the Opposition also are like this but cynically argue against change with lies and overly-simplistic arguments (that don't hold water to proper scrutiny) because it's an easy way to win votes. Even more of a shame that the MSM like to side with them because they are effectively the 'Opposition not in government'.
Slowly, but surely, the public are becoming wise to all this - just a shame that this didn't happen 50 years ago when it would've made a huge difference.
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So Wilson's first term then?
Both parties equally to blame. Both keep kicking can down road.
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According to him, he had personally told Harold Wilson (the then Prime Minister) that the system of paying pensions out of today's tax income was in need of reform, as in the long term it was unsustainable.
This was about 56 years ago and we still have the same system.
But how else are they to be paid? A government has no money per se. The only other ways to pay pensions are to borrow or print money. Borrowing just creates debt for our offspring (I'm a pensioner) and printing money decimates savings and causes inflation. Look what's happened to asset prices since the beneficiaries of 'quantitative easing' - a wonderful euphemism for printing money - started spending.
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According to him, he had personally told Harold Wilson (the then Prime Minister) that the system of paying pensions out of today's tax income was in need of reform, as in the long term it was unsustainable.
This was about 56 years ago and we still have the same system.
But how else are they to be paid? A government has no money per se. The only other ways to pay pensions are to borrow or print money. Borrowing just creates debt for our offspring (I'm a pensioner) and printing money decimates savings and causes inflation. Look what's happened to asset prices since the beneficiaries of 'quantitative easing' - a wonderful euphemism for printing money - started spending.
I think the point was that this week's benefits were paid using this week's tax/NI income, there was no plan to build a fund to cover future payments. This would, of course, mean 'living within our means' by spending less than our income (reference Dickens' Mr Micawber).
Clearly, a big increase in taxation would lower people's living standards, the unpopularity of this is why the can gets kicked down the road by every Government.
If income can't be increased, spending has to be carefully controlled.
Governments are notoriously wasteful, every public project (Severn Bridge, Dartford Crossing, HS2) always ends up years late and several times original estimated cost.
Governments are also keen to virtue signal, for example committing to billions of foreign aid to subsidise Indian Space programmes and sundry dictators fleets of Mercedes.
Consider too the millions spent on Calder Valley flood defences, four years and not complete, and some bright spark decides to take part of the wall down to repair it after forecasts of heavy rain.
The other day three men appeared at 7.30 am at a roadworks site. They stood about, chatting, when I asked if they were waiting for tarmac, they told me they couldn't start work until they had been given a health and safety briefing, and the man who did that didn't start work till 9 am.
The Chinese built a 1000 bed hospital in 8 days, locally a 50 metre stretch of road has been closed for resurfacing for - guess how long? - sixteen weeks.
My local councillor passed my enquiry about this to the council a week ago, the Highways Department still has not provided any explanation, no doubt struggling to think of one.
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I think the point was that this week's benefits were paid using this week's tax/NI income, there was no plan to build a fund to cover future payments. This would, of course, mean 'living within our means' by spending less than our income (reference Dickens' Mr Micawber).
The usual Private Sector Good/Public Sector Bad narrative there Andy.
I'll take your word on the Severn Bridge (which one?) and Dartford Crossing (which one?)
Private business is pretty good at messing up it's own projects - see any number of trains delivered to UK TOC's late and not performing. It's also private sector charged with delivering rail infrastructure upgrades and failing to deliver on time or at all.
Or how about Boeing and its Dreamliner, never mind the 737 MAX.
Handling pensions on a 'Pay as You Go' basis is not inherently bad; 75% working can support 25% on pension. The trouble is when you continue doing so in face of massive demographic change. Greater longevity means more pensions supported by a static or decreasing workforce. Friend on mine pointed out years ago that we should welcome all the Poles coming here to work; their taxes replaced those from children the baby boomers didn't have.
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I think the point was that this week's benefits were paid using this week's tax/NI income, there was no plan to build a fund to cover future payments. This would, of course, mean 'living within our means' by spending less than our income (reference Dickens' Mr Micawber).
The usual Private Sector Good/Public Sector Bad narrative there Andy.
Wasn't me, Brompt, but Gallileo you quoted. ((facepalm))
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Wasn't me, Brompt, but Gallileo you quoted. ((facepalm))
oops!!
Perhaps I should change my username to Pavlov.......
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Bromptonaut, I agree that private sector businesses can also be inefficient and wasteful, the difference from Government is that badly run private businesses can go bust, those responsible for cock-ups can be sacked and the employees may lose their jobs if they spend too much time thinking about work instead of actually doing some.
Government (National and Local) spends vast amount of time on committees, discussions, paying consultants large sums, all of which means delay and cost increase.
In University vacations I worked in a foundry, shovelling tons of sand, humping iron castings about in heat, smoke and dust, the foremen kept an eye on the workers and nobody stood around idly,as seems to be the norm now for those "working" on roads, gas pipelines etc.
(I then spent over 30 years in manufacturing engineering, in project management, with tight deadlines and cost limits, so I do understand what is involved.)
The leisurely rate of work is tolerated because many of these activities are done on a "cost plus" basis, hence the over runs which the taxpayer ultimately pays for.
This is why the roads are potholed, why Motorways have miles of speed limits and lane closures for months on end, is there any sense of urgency among contractors or workers?
Targets are fictional, incentives absent in many instances, at least this is how it seems.
Edited by galileo on 11/02/2020 at 21:37
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No government of any colour or persuasion has had the bottle to grasp this particular nettle. Here is a radical idea: depending on your thinking of course, what if the government scrapped foreign aid and put the money each year into a sovereign fund like Norway has and build up a ring fenced surplus which cannot be used for any purpose other than pensions? It would give a measure of confidence and security to many who may rely heavily on their state entitlement in future. Food for thought.
Cheers Concrete
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No government of any colour or persuasion has had the bottle to grasp this particular nettle. Here is a radical idea: depending on your thinking of course, what if the government scrapped foreign aid and put the money each year into a sovereign fund like Norway has and build up a ring fenced surplus which cannot be used for any purpose other than pensions? It would give a measure of confidence and security to many who may rely heavily on their state entitlement in future. Food for thought.
Cheers Concrete
If only we used our North Sea revenues as a wealth fund rather than a tool to reduce taxation!
The moment one starts starts such a fund, other parties will be planning to raid it next time that they are in power to reduce tax again!
They all do it with personal savings as well. Unless one can use an ISA etc then the modest interest earn't above £500 / £1000 is taxed.
There is even talk of reducing the higher rate allowance for pension saving that some currently get - and they use the phrase that its costing the Govt.
No it isn't. The Govt don't contribute the 40% tax!
It's just another £30billion tax raid whilst they sit pretty with their index linked final salary schemes.
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The simple answer zippy123 is when North Sea oil revenues can on stream the country was on it's backside. It had to be used for all sorts of purposes otherwise taxation would have been crippling. I understand why you are cynical regarding the intentions of future governments. Past governments of all hues have not covered themselves in glory when it comes to economy management, they are too busy fire fighting. I am sure some form of legislation could be enacted to ensure the hypothetical fund would be ring fenced. During all our problems in the recent past this country still manages to give away over 12 Billion to foreign aid groups. It seems they fund the most ridiculous programmes simply because they must disperse their budget. Surely a sovereign fund would be better use of that money. Just a thought. Cheers Concrete
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The simple answer zippy123 is when North Sea oil revenues can on stream the country was on it's backside. It had to be used for all sorts of purposes otherwise taxation would have been crippling.
There is of course an alternative perspective.
Albeit North Sea Oil started to flow in seventies it was at its peak post 1979. We all know who was PM then. She and her government chose to cut taxes, overwhelmingly benefiting the better off, rather than direct duties from oil to a Norway style wealth fund.
As you say, had such a fund been created it could have been ring fenced.
Foreign aid is an interesting subject but (a) we have obligations as one of biggest economies in the world and (b) a lot of it is tied to stuff that benefits UK business/economy.
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I agree Brompt. The money could have been put to better use with hindsight. You must remember though the state the country was in at the time. I even had petrol coupons issued, though ultimately unused, for our company vehicles should the need arise. That was in 1973, hardly the dark ages but very dark days for us at the time. I suppose the money went on a myriad of things where funding was needed too.
The foreign aid debate is an interesting one.I would put the first obligation of any government is to its own citizens. I am sure there is a case for many laudable schemes. Balancing the quid pro quo of aid to trade is a natural effect. However I am also sure that there are many schemes which will not stand up to scrutiny. If we pick the bones out the scheme there could be enormous potential for saving money and establishing a sovereign fund for a decade to allow a build up of reserves. Unlikely to happen of course but one can dream.
Cheers Concrete
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I agree Brompt. The money could have been put to better use with hindsight. You must remember though the state the country was in at the time. I even had petrol coupons issued, though ultimately unused, for our company vehicles should the need arise. That was in 1973, hardly the dark ages but very dark days for us at the time. I suppose the money went on a myriad of things where funding was needed too.
I was only in my teens in 1973/4 but so far as I remember the possibility of fuel rationing was because of tension in the Middle East rather than any domestic cause. Same thing happened in 1956 around Suez.
I remember a relative who still had the 1956 coupons discovering they were identical those he'd just received and speculating as to chance of being caught if he used the 1956 ones to extend his ration.
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Again Brompt right on the money. However those tensions caused oil production to be deliberately cut back which in turn caused the price to increased dramatically. Being a fossil fuel economy, as most others at the time, we were vulnerable, and still are to some degree to an increase in oil prices. All this just as the economy was at its lowest ebb. Even devaluation didn't do that much in the face of such terrible economic conditions and mismanagement. Dark days indeed, it seemed we were in a precarious situation for a long time. Luckily I was able to keep working and pay a mortgage etc etc but many friends suffered greatly. I hope we never see those days again. Cheers Concrete
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Surely a sovereign fund would be better use of that money. Just a thought. Cheers Concrete
There is clearly a need for foreign aid. There are lots of good schemes that help the really needy. There are also some strange schemes and payments to countries that have larger economies than ours or can afford to run space programs etc. without looking after their own.
In an ideal world a sovereign fund would be great, I can just imaging the papers though, ignoring the investments that do well and screaming blue murder about one that perhaps lost money - in order to get it scrapped at the next election.
And here's an example of why you can't trust the b******s...
https://www.ft.com/content/64cfbe5a-5d07-11e8-9334-2218e7146b04
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There is even talk of reducing the higher rate allowance for pension saving that some currently get - and they use the phrase that its costing the Govt.
If somebody earning £12,000 a year and therefore not paying any income tax somehow manages to save £250 for a pension there's no tax paid so no relief.
If somebody very comfortably off on £120,000 a year puts £20,000 of their income into a pension it's worth £30,000 + after tax relief.
How is that equitable?
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