Our State Pension is the Cause of Many of Our Problems
Since the inception of the state pension we have all been part of a government managed Ponzi scheme.
Instead of saving our pension contributions, we use the money paid today to service the pension payments of the currently retired.
While this may have seemed like an easy solution many decades ago, it relies on a few inconvenient truths. Firstly, as people live longer the volume of retired people grows. This in turn means that to service the growing pensions bill we need to have more people paying National Insurance.
Since the 1960’s our birthrate has struggled to keep pace and with a deficit of active workers, our solution has been to encourage immigration to fill the gap.
All well and good in principle, but it doesn’t work.
We have reached the tipping point where our welfare bill has only gone in one direction since the 1980’s, upwards.
We haven’t and don’t build the infrastructure to cater for a rapidly growing population. Since 2000 we have a population increase of around 12 million people.
We have councils that have to divert cash away from services into what they perceive as more urgent needs. As a result we get bins emptied less frequently, potholes multiplying, less police, less GPs, less drain cleaning, less of everything, but bigger bills.
As our population has grown, our welfare budget has grown too.
What if we did things differently?
If we put the pensions portion of our National Insurance into a personal investment fund then it would grow across our working lives.
Instead of our government struggling to pay our meagre £180 a week state pension, our pensioners would have a proper fund for their retirement.
Additionally, this fund would go a long way to funding social care we may need as we age. It would solve many of our national problems.
We would no longer need an ever growing population, to service what is in essence a government commitment that one day will become untenable.
State pensions need to be fixed. The day will come when they become an unpayable financial millstone around our necks.
The only question and admittedly it is a huge question is, how do we get from the current Ponzi scheme to a proper, sustainable investment model?
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We have recently maxed out the Governments borrowing. Moving from Ponzi to investment state pension will require a large chunk of cash to gridge the gap.
If we move todays 16 year olds to an investment model then the government will lose that cash to meet current pension requirements, but at some point we need to start using these funds in a smarter way.
If we don’t, we are heading for a cliff edge and it may be closer than we think.
I am not an economics expert I admit that, but, I can see the problem, we need to invite suggestions about how we move to a sustainable state pension model as cost effectively as we can.
Fixing how we fund state pensions would be a sensible long term investment for the UK and fundamentally change the quality of life for millions in future years.
I’m not pretending it’s going to be easy or cheap to fix our pension crisis, but until we do we are just continuing to make our finances less and less viable.
We have 31 million workers in the UK. We have around 10 million pensioners. If each received £180 per week then it costs us £1.8 Billion per week or £93.6 billion per year to meet our current state pension obligations.
This equates to around £58 per tax payer per week. Invested from the age of 16 to 66 would result in a pot approaching £300,000. With index linked monthly payments such a pot would greatly improve the retirement prospects for millions of people.
Our illustrious leaders didn’t bat an eyelid at wasting £37 billion on test and trace that never worked. I can’t help but think that there must be a constructive way of funding the switch to a sustainable, future proof retirement fund.