Britain is soon to become a nation of waspi people if the Government get their evil way as it has recently embarked on a review of the state pension age much earlier than the next one was due. The other half shows as much interest in the subject of retirement as a digestive biscuit floundering in a cup of tea which always surprises me seeing as how he’s inching closer to the big 6-0 day by day. Retirement should be at the forefront of his thoughts.
As I understand it, the current state pension age for everyone is 66 years of age but in April 2026 this goes up to 67 years of age. It was due to remain at 67/68 years of age until April 2044 but since the Government is flat broke then my guess is that is now highly unlikely. It’s simple – pensioners, like gold plated toilets, are just too expensive.
Now for all of us who are on the cusps of retirement then listen up as a state pension age review could be very bad news. Very bad indeed. Just ask the Waspi women whose retirement plans were left in financial tatters last time these goal posts were changed.
Let’s take my own situation as an example. I’m 62 so as the rules currently stand, I would be due to claim my state pension when I reach the age of 67 in 2030. Naturally, like millions of others, I have no intention of working through to the bitter end so an employment escape plan is already percolating.
Due to ingrained super scrimping habits and having paid into a couple of defined contribution pension schemes during my working life then if I really wanted to, I could probably take early retirement any time from my next birthday onwards as according to my calculations I have just enough put by to bridge a 4-year gap between giving up work and claiming a state pension.
However, if the Government suddenly introduces any changes to the state pension age earlier than the year 2030 then I may have to keep working or scrimp a bit longer if I want to take early retirement because the funding gap will have grown like a rampant petunia.
As if that wasn’t bad enough, now let’s think about life expectancy for women in the UK which statistically stands at around 83 years.
If I retired at 67 years of age then dropped dead at 83, I’d have enjoyed a state retirement period of around 16 years. BUT if life expectancy doesn’t increase and all successive Governments keep pushing out the pension age, my paid state retirement period will get shorter and shorter until like the dodo, it ceases to exist altogether.
State pensions are in danger of becoming the Christmas Club all workers pay into that never pays out.
Of even greater concern are other alternatives being bandied about in the media as suggestions to defuse the Government’s ticking pensions timebomb, suggestions such as means testing state pensions. Lord forbid that horror should ever come to pass before I retire!
Just imagine - you’ve spent a lifetime of toil, paid all your taxes plus saved a few pennies for the rainy retirement day, then WHAM! Here comes the candle to light you to bed then along comes a chopper to chop off your head. It’s bad enough that Fiscal Drag is dogging your senior steps like a rabid hyena but if pension means testing is introduced, you could be penalised AGAIN. Doing the responsible thing may leave one exposed to receiving either a low or no state pension at all. There’s no incentive for saving.
Should the state pension be means tested? On the one hand I can see how this might be an attractive solution for a cash-strapped Chancellor but on the other hand, I can’t see how this would be fair to millions of hard-working individuals who have already paid tax or NI on their earnings yet still managed to put a few pennies aside for their old age. Simply put, it would be nothing more than a Stealth Wealth Tax by any other name.
Perhaps a better way of encouraging everyone to fund their own retirement would be to set up a RISA – a dedicated Retirement ISA which would be funded by individual contributions plus a state contribution in the form of a reduction in either tax or NI for individuals signing a waiver to voluntarily opt out of state pensions rather like we did with SERPS several decades ago.
I appreciate the Government currently pay top ups into the LISA (Lifetime ISA) but not everyone is eligible to open these accounts. A RISA could be available to everyone from the moment they begin their working lives as a form of generating a tax-free income in retirement by forfeiting a state pension.
If the Government had any ounce of business sense, it could even link RISAs to stock market investments by making it a 50-50 account, half invested in cash and the other half in UK equities thus killing two birds with one stone.
Some people would be more than happy to opt out of state pensions altogether if they thought they would be paying less tax during their working lives and paying into a ring-fenced investment vehicle that funds their own old age and not everyone else’s as is the case with the current Ponzi-styled Government state pension scheme.
The biggest issue any Government will always face is not how to find the money to pay for pensions because a chunk of that will always come from workforce taxation but how to find the money to pay for the pensions of those who have never worked a day in their lives. A reduced birth rate or AI replacing the traditional workforce taxpayers isn’t going to help either.
Those with the broadest shoulders have *ucked off to Dubai, employed clever accountants to shift their wealth into special purpose vehicles to minimise tax or spent it all on coke and hookers. In contrast, my rather small and aging shoulders have reached the point where anything greater than a 5-year slog to retirement is now likely to bring about a complete spinal collapse. Flogging us all to death is NOT the answer to the great state pension dilemma!
Pay it or don't pay it is what I say but if you choose not to pay it then don't expect us all to keep paying for it! I await the results of the state pension age review with bated breath. Let’s hope that like all these things, it takes longer than 5 years before any decisions are reached.
No comments:
Post a Comment