The reality is that there is no pensions crisis, or at least not in the way we’re told.
There is a crisis of older people left in poverty, and millions of workers anxious over their future.
But there is not a crisis caused by growing hordes of the old leeching off “productive workers”.
The Pensions Commission bases dire predictions about “savings gaps” and “black holes” on a statistic called the “old age support ratio”.
This compares the number of people of working age with the number aged 65 and over.
It shows that there will be an increasing number of older people and a static number of workers — hence a crisis.
But this is utterly simplistic. It ignores, for example, the fact that nine million people of working age do not work.
Some are students, some are carers, some are ill. But about two million would take jobs if they were suitable.
A much more useful statistic is the “economic support ratio”, which relates the number of people working to the number not working.
Whereas the old age support ratio sees a fall of 42 percent between 2003 and 2045, the fall under the economic support ratio over the same period is only 13 percent. And over the same period workers will be producing far more.
Assuming a relatively modest productivity growth rate of 1.75 percent a year (well in line with past performance), the average British worker will produce about twice as much in 2045 as today.
If the change in the economic support ratio is 13 percent, this would more than offset by such an expansion.
Britain has more wealth in the form of pension funds than the rest of Europe put together. But it is in the hands of the rich or private schemes, not available to most workers.
More than half the population have no significant savings and cannot afford to save enough to support themselves properly in retirement. Government policy keeps it like that.
This year nearly £20 billion will be paid out in tax relief on pension contributions.
Some 55 percent of that, £11 billion, goes to the top 10 percent of taxpayers. If only half of this money went instead into the state system it would be enough to fund a rise in the basic pension to £110 a week now.
And the same people who benefit from the tax relief also get let off national insurance contributions.
At the moment a boss who grabs £1 million a year pays national insurance contributions at a rate of 1 percent on most of their money. The rate is 11 percent for earnings between £4,888 and £32,760, but just 1 percent after that.
So the million a year man pays about £3,100 on earnings up to the upper limit and just under £9,700 on earnings thereafter, making a total of £12,800.
If he paid national insurance at the same rate as the rest of us on all his cash, he would pay £110,000. Across all earners that would raise £10 billion.
Even raising the rate for the rich to half that of the rest of us would raise £4 billion.
Pensions minister Stephen Timms told parliament on Monday that there was “not a crisis today in pensioner incomes”.
In response, Joe Harris, general secretary of the National Pensioners Convention said, “It is clear that the government is trying to fool the public into thinking that everything in the pensioners’ garden is rosy.
“But one in five live below the official poverty line, and the vast majority of those are older women. Some 1.8 million pensioners do not receive the means-tested Pension Credit and are living on a basic state pension of £82 a week or less.
“When a government minister can claim that having at least 2.2 million older people living in poverty is a success story, they are clearly in denial. This government must act now to give every pensioner a state pension of £110 a week which is linked to earnings.”
The basic state pension is £82.05 a week. If the link with earnings had not been broken by the Tories, and maintained by Labour, it would be worth £36.38 a week more.
The average local government pension is £75 a week, and in the NHS it’s £100 — and this average includes managers so most workers get much less.
Currently nine out of ten men receive the full basic pension, but only five out of ten women.
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