Anthony Hilton makes some more excellent points in an article headed Nest is a tax on jobs in all but name..., but misses the killer blow here:
... the basic idea of Nest is to help the lower paid save for their old age so they don't have to depend on means-tested benefits from the state. But every pensions expert in the country says that the contribution rates of 3% from employer and employee plus a bit of tax relief will be totally inadequate to deliver a decent pension.
By far and away the largest means tested old age benefit is the Pensions Credit, which the current government, in an outbreak of commonsense, decided to scrap and roll in to a higher, flat rate Citizen's Pension of £140 a week (an idea merrily lifted from UKIP's manifesto, ah well). So if there were no means-tested old age benefits, this supposed argument in favour of a semi-compulsory pensions saving scheme (out of which most people will opt, and I suspect that people on lower incomes are far more likely to opt out because they can't cope with a 4% fall in income) completely falls away.
The other means-tested benefits which pensioners get are Council Tax benefit, which at a minimum income of £7,280 a year for each pensioner would be entirely unnecessary (if all else fails, they can move into a Band A or Band B property, on which the full Council Tax is less than £1,000 a year), and Housing Benefit, about which enough has been written recently.
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4 hours ago
11 comments:
Pensions (unless a State pension) are a right swiz.
Better to invest in BTLs or blow the lot and have nothing to be taken off you.
I prefer BLTs.
EK. Yes, and no.
If one does the sums, and one has, a 'pension' contribution of about 12% to 15% of gross pay for your working life will buy you a 'pension' of about 50% of your 'final salary'. It is important to ensure that the assets into which you invest this deferred pay are those likely to go some way to compensate you for inflation and that the costs of investing are kept as low as possible. Furthermore, as deferred pay, and bearing in mind that the current rules require the purchase of a special pensions annuity which is taxed on the gross payment - not just the interest component as for purchased life annuities, the underlying fund IMHO to 'fair' shoud not suffer income tax or CGT.
Given these numbers are well known it is a dead cert that employer NEST taxes will rise to say 12% pretty damn' quickly.
The numbers work whether you invest in 'pension' or simply create a fund of your own. All you have to do is to save and invest roughly that much and you will achieve economic at about age 65. 'Of course' the trick is to create and preserve wealth at a faster rate so that you can become financially independent as soon as possible.
If only we can combine this with banking and credit reform and sound money capitalism will deliver falling prices and more for less every day. In which case the required 'inflation' component in that 12 to 15% will reduce and you might only need to save and invest say 8% (I hve not done the numbers on that).
NEST is shite.
L, your figure of 12% looks 'about right'. As the article explains, in Australia this started off at 3% and a few years later is 11%, which by an amazing coincidence is roughtly what Employee's NI is currently.
MW NI is supposed to provide for pensions and healthcare, so it's probably not enough?
L, whatever gave you that idea? Total NI approx £100 billion. Old age pensions £70 billion, NHS £110 billion. Of course it's 'not enough', it's just another tax.
MW - Quite. I knew that - but, well, couldn't resist....
The problem with the low contributions via NEST is that many people would have paid into NEST and then been no better off for their efforts at retirement than if they had opted out and received Pension Credits. Realistically, it would have only made sense to save via a pension if you knew you'd were going to be significantly better off than via Pension Credits.
Now, NEST can sit on top of the basic £140pw giving people the chance to save without falling into the trap of having their savings effectively being taken off them at retirement.
I don't like the idea of a pension fund that's supposed to deal with the whole nation, the state are god awful enough at it already without some other set of scum wielding that much power!!
B, that was the subject matter of my next post.
a) they say we need a compulsory savings plan so that people don't have to be paid means-tested benefits, and
b) they have means-tested benefits to discourage people from saving.
Not only do these two ideas completely cancel each other out, if they go ahead with Citizen's Pension, then (b) falls by the wayside and (a) is no longer an argument!
SW, as you can see from this week's poll, so far nobody will contribute to it!
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