Should We Abolish the State Pension?

[Old Stephania]

This is a thread to discuss the pros and cons as well as the feasibility of abolishing the State Pension. I live in the United Kingdom so the issue is presented in the context of the British implementation, but hopefully I will explain it in a way that people from other countries can understand and engage in discussion.

What is the state pension?
In the simplest terms possible for those unfamiliar with the concept, the State Pension in the United Kingdom is a universal welfare benefit granted to citizens upon their retirement. By universal we refer to the fact that this benefit is not means tested and that anyone who pays into the scheme is entitled to it, even if they are well off enough not to need it. In most cases someone's State Pension is funded by National Insurance, a form of payroll tax taken from your wages and paid by your employer, but some people pay it themselves.

That sounds like a good thing, why abolish it?
Welfare benefits have been one area of spending targeted by the government in order to reduce the budget deficit. Attempts have been made to cut Working Tax Credit, Child Tax Credit, and the Personal Independence Payment but those attempts failed in the face of overwhelming public opposition, the reasoning being that those cuts unfairly target the poor and disabled.
One welfare benefit not targeted for cuts is the State Pension despite it constituting almost half of welfare spending, in fact the State Pension is currently subject to a "triple lock" meaning that spending on this benefit rises every year by the highest of price inflation, earnings growth, or 2.5%. Unfortunately, due to demographics shifting toward an ageing population, the sustainability of the State Pension is in doubt and the government actually increased the pension age this year.

Do you hate old people? Why do you want to stop their pension?
It would be drastic to simply halt the State Pension, what could be done is a gradual phasing out over the course of a decade or more. Each year the amount paid out by the State Pension could be reduced for new claimants, pensioners who fall under the government requirements for a minimum income would not simply be left out in the cold but could be moved to an existing safety net such as Employment and Support Allowance that pays almost the same amount at higher rates (and could potentially pay more with savings from this proposal).

I have paid into my State Pension, you can't just turn around and say I can't have any of it.
I would expect no less myself, people who have paid into their state pension should be entitled to what they are owed when they retire. They should get something even if the State Pension is phased out entirely before they retire, but their total State Pension would be worth less than it is now and they would be encouraged to invest in a private pension.

What about people who simply never had the opportunity or income to invest in a private pension?
The existing safety net of means tested benefits for people on low incomes or people with disabilities should apply to anyone over retirement age. One of the purposes behind this proposal is to save money being spent on universal benefits that pay out to people who don't really need them, means tested benefits should always be there for people who cannot afford to get by.

How am I supposed to afford a private pension? I don't get paid enough for that.
As I said earlier the State Pension is funded by National Insurance, as the State Pension is phased out it would provide a prime opportunity to cut the rate of National Insurance for employers and self employed people, as a consequence it would be saving your boss a lot of money and hopefully your wages would substantially increase. I conceded there is no guarantee, but there would be great pressure on employers to pass on some of their savings and those that don't would face competition when hiring.

Let's say we get rid of the State Pension, how much would that save and what could we use the money for?
The budget for the State Pension is currently just over £74 billion and due to the triple lock will only increase each year, the savings would not be immediate if we phased it out but it is a huge amount of money. When it comes to reinvesting it, the first thing that comes to mind is that £22 billion black hole in the NHS.

What are you some kind of Tory, libertarian, or anarchist?
I don't follow any political ideology and I have voted for a different party in almost every election. This is just something I thought about recently and is not a policy idea I am particularly committed to, I am just trying to find out what other people think. Hopefully I have pre-empted enough questions here and included enough of my own opinion, there are probably many things I haven't thought of but that just means there's more to discuss.

Regards,
Old Stephania.

[Ashmoria]

so you would want the young to immediately stop paying into the state pension system and only those near retirement to continue paying it so that they can be fully vested in the system that is going to support them in their old age?

would you leave everyone else to save for retirement or not as they chose?

[Old Stephania]

so you would want the young to immediately stop paying into the state pension system and only those near retirement to continue paying it so that they can be fully vested in the system that is going to support them in their old age?

would you leave everyone else to save for retirement or not as they chose?

Basically yes, the rate would stagger down as the phasing out process happens so there would be a point where people of a certain age would never pay in to the State Pension, young people going into the workforce now would benefit from a lower rate of National Insurance instead. As for the question of people choosing whether or not to save for retirement, ultimately that would be up to them.

[Ashmoria]

so you would want the young to immediately stop paying into the state pension system and only those near retirement to continue paying it so that they can be fully vested in the system that is going to support them in their old age?

would you leave everyone else to save for retirement or not as they chose?

Basically yes, the rate would stagger down as the phasing out process happens so there would be a point where people of a certain age would never pay in to the State Pension, young people going into the workforce now would benefit from a lower rate of National Insurance instead. As for the question of people choosing whether or not to save for retirement, ultimately that would be up to them.

isn't it better to have the guaranteed payment for pensioners than to have to pay out all that welfare later one? people today have a hard enough time paying their bills from month to month, I cant see them suddenly getting the discipline and stability to save for a secure retirement.

[Old Stephania]

Basically yes, the rate would stagger down as the phasing out process happens so there would be a point where people of a certain age would never pay in to the State Pension, young people going into the workforce now would benefit from a lower rate of National Insurance instead. As for the question of people choosing whether or not to save for retirement, ultimately that would be up to them.

isn't it better to have the guaranteed payment for pensioners than to have to pay out all that welfare later one? people today have a hard enough time paying their bills from month to month, I cant see them suddenly getting the discipline and stability to save for a secure retirement.

My issue is that currently the State Pension pays out to every citizen who has paid into the system for 10 years or more, even the very richest in society who probably have a massive private pension of their own and clearly do not need it. The current budget for the State Pension is almost half of the government's welfare budget (over £74 billion) and while I don't have hard figures on hand I can only assume it would be cheaper if we only covered low income retired people who require benefits to get by.

At a time when the government is trying to cut benefits for the poorest and most vulnerable, and our NHS is crumbling, it seems to me like this is a fairer option that would have the knock-on effect of simplifying the tax system a bit and possibly increasing wages too. I understand your concern that people might not have the discipline or the stability to save for retirement, but if they at least try and fail there will still be a safety net in place as there is now.

[Internationalist Bastard]

I mean personally my plan was always to be dead or a have someone younger helping me out (glares at in laws)
But I think that it's nice to give the retired a gurranteed standard of living

[Geilinor]

isn't it better to have the guaranteed payment for pensioners than to have to pay out all that welfare later one? people today have a hard enough time paying their bills from month to month, I cant see them suddenly getting the discipline and stability to save for a secure retirement.

My issue is that currently the State Pension pays out to every citizen who has paid into the system for 10 years or more, even the very richest in society who probably have a massive private pension of their own and clearly do not need it. The current budget for the State Pension is almost half of the government's welfare budget (over £74 billion) and while I don't have hard figures on hand I can only assume it would be cheaper if we only covered low income retired people who require benefits to get by.

At a time when the government is trying to cut benefits for the poorest and most vulnerable, and our NHS is crumbling, it seems to me like this is a fairer option that would have the knock-on effect of simplifying the tax system a bit and possibly increasing wages too. I understand your concern that people might not have the discipline or the stability to save for retirement, but if they at least try and fail there will still be a safety net in place as there is now.

Means testing it could be a good idea in that case but cutting pensions to protect other welfare programs seems to be counterproductive.

[Costa Fierro]

Means testing it could be a good idea in that case but cutting pensions to protect other welfare programs seems to be counterproductive.

I wouldn't say means testing but certainly I would look at a pension cut-off for the income of individuals. If someone is earning say, £500,000 a year then the government could say "well we think you're earning enough so you're not entitled to a pension".

It's an arbitrary figure, so don't read too much into it.

[Galloism]

Means testing it could be a good idea in that case but cutting pensions to protect other welfare programs seems to be counterproductive.

I wouldn't say means testing but certainly I would look at a pension cut-off for the income of individuals. If someone is earning say, £500,000 a year then the government could say "well we think you're earning enough so you're not entitled to a pension".

It's an arbitrary figure, so don't read too much into it.

If you were going to go with something like that, you'd want to pick a figure, set it to adjust for inflation, and then step it down by a percentage.

IE: If you make more than 100k, your pension is reduced by 5% of the excess until it hits zero, adjusted for inflation every year.

[Old Stephania]

My issue is that currently the State Pension pays out to every citizen who has paid into the system for 10 years or more, even the very richest in society who probably have a massive private pension of their own and clearly do not need it. The current budget for the State Pension is almost half of the government's welfare budget (over £74 billion) and while I don't have hard figures on hand I can only assume it would be cheaper if we only covered low income retired people who require benefits to get by.

At a time when the government is trying to cut benefits for the poorest and most vulnerable, and our NHS is crumbling, it seems to me like this is a fairer option that would have the knock-on effect of simplifying the tax system a bit and possibly increasing wages too. I understand your concern that people might not have the discipline or the stability to save for retirement, but if they at least try and fail there will still be a safety net in place as there is now.

Means testing it could be a good idea in that case but cutting pensions to protect other welfare programs seems to be counterproductive.

If the budget deficit must come down it just seems interesting to me that the most expensive welfare benefit seems immune to consideration, even "triple locked" in legislation so that it must get bigger annually. I have my speculations as to why; 1. It's a benefit that is paid out to everyone from the bottom to the top, so cutting it is always going to be unpopular. 2. It is simply less of a political risk to go after small groups that don't even vote for you like the very poor or the disabled. 3. The government has a vested interest in keeping the State Pension as it has been known to dip into that pot to pay off short term expenses.

Means testing it could be a good idea in that case but cutting pensions to protect other welfare programs seems to be counterproductive.

I wouldn't say means testing but certainly I would look at a pension cut-off for the income of individuals. If someone is earning say, £500,000 a year then the government could say "well we think you're earning enough so you're not entitled to a pension".

It's an arbitrary figure, so don't read too much into it.

One problem with that proposal is that you're going to draw the ire of people who have already paid into the system and expect to make a return, not only that but we're talking about the very class of people who are almost certain to vote for the Conservative Party so they would never make such a decision. A future government might, though.

[Waldriech]

Pensions are one of the few progressive policies I agree with. It breaks my heart seeing retiring age people flipping burgers at McDonalds, when I know during the good old days they most likely had a well paying job.

[Scarlet Tides]

Private Pensions?

[Old Stephania]

Private Pensions?

Could you elaborate on your point instead of simply posting an emoticon?

Private pensions are already popular in the UK despite a public option, according to a study performed by Prudential one in seven people retire without one.

[The Nihilistic view]

No, but the triple lock has to go.

[The Nihilistic view]

Oh yeah, and means test the bastard.

[The first Galactic Republic]

You didn't truly clarify why you didn't hate old people. You just talked about how it would work.

So the question still stands.

[Communist Xomaniax]

How long until it turns out that a private pension costs more and achieves less, like healthcare here in the US?

Furthermore, if you're so concerned with aging populations and sustainability, why not just kick off anyone making $1,000,000 a year, and provide economic incentives to families who have at least the replacement rate amount of children?

[Vallermoore]

Why should the old, many of who fought in WW2 on the Allied side, have their pensions taken away? All of us are likely to get old in the future.

[Stormaen]

I sincerely doubt there'll be a state pension when (if) I'm old enough to receive one. I also doubt there'll be a retirement age when I'm in that age range. I sincerely, sincerely believe we're destined to reach a point where official national policy will be "work till you die". My current retirement age (according to HMRC) is my 68th birthday. My dad died at 68. If I live as long as him, I can expect to be retired for 5 months and kick it. I could die sooner, I could die later; it's just an example of why I think it's worthless paying into a system I will ultimately not benefit from.

The problem is that there are more taking a pension (or soon will be as baby boomers retire) than are paying in. That puts an enormous burden on people who can generally expect that their state pensions will not match up to the level they're currently at. There are private pension schemes and annuities but you get out far less than you ever pay in.

National insurance is the poor man's tax anyway you can earn pittance and you'll still pay NI on your income. The vast majority of social welfare costs are paid out of general taxation and the NI scheme hasn't paid for itself since... Has it ever paid for itself? They ought to merge NI into standard tax rates. But middle England doesn't like the idea of tax rises (even though it wouldn't technically be a tax rise). Or... Alternatively, make it voluntary. Don't want to pay it? No problem! But have private health insurance and private pension schemes. It would certainly reduce the burden on state pensions for the future. A lot would be fucked over, no doubt, but hey, it was there choice.

End of early morning, pre-second tea ramblings.

[The disunited states]

How long until it turns out that a private pension costs more and achieves less, like healthcare here in the US?

Furthermore, if you're so concerned with aging populations and sustainability, why not just kick off anyone making $1,000,000 a year, and provide economic incentives to families who have at least the replacement rate amount of children?

Or even better; import young Syrian workers to shift the demographics around.

[Communist Xomaniax]

How long until it turns out that a private pension costs more and achieves less, like healthcare here in the US?

Furthermore, if you're so concerned with aging populations and sustainability, why not just kick off anyone making $1,000,000 a year, and provide economic incentives to families who have at least the replacement rate amount of children?

Or even better; import young Syrian workers to shift the demographics around.

I'm not sure how importing people who don't want to work, and overwhelmingly commit crime and form insular societies in ghettos, would actually help.

[Stormaen]

Why should the old, many of who fought in WW2 on the Allied side, have their pensions taken away? All of us are likely to get old in the future.

The OP didn't suggest or advocate taking away existing pensions. They were talking about phasing them out for each subsequent generation until you reach a point where nobody pays into a state pension pot and nobody receives a state pension.

Also, servicemen and women, including those who fought in the Second World War, receive a separate pension from the armed forces as their former employer. It's a separate scheme to the state pension.

[The Nihilistic view]

I sincerely doubt there'll be a state pension when (if) I'm old enough to receive one. I also doubt there'll be a retirement age when I'm in that age range. I sincerely, sincerely believe we're destined to reach a point where official national policy will be "work till you die". My current retirement age (according to HMRC) is my 68th birthday. My dad died at 68. If I live as long as him, I can expect to be retired for 5 months and kick it. I could die sooner, I could die later; it's just an example of why I think it's worthless paying into a system I will ultimately not benefit from.

The problem is that there are more taking a pension (or soon will be as baby boomers retire) than are paying in. That puts an enormous burden on people who can generally expect that their state pensions will not match up to the level they're currently at. There are private pension schemes and annuities but you get out far less than you ever pay in.

National insurance is the poor man's tax anyway you can earn pittance and you'll still pay NI on your income. The vast majority of social welfare costs are paid out of general taxation and the NI scheme hasn't paid for itself since... Has it ever paid for itself? They ought to merge NI into standard tax rates. But middle England doesn't like the idea of tax rises (even though it wouldn't technically be a tax rise). Or... Alternatively, make it voluntary. Don't want to pay it? No problem! But have private health insurance and private pension schemes. It would certainly reduce the burden on state pensions for the future. A lot would be fucked over, no doubt, but hey, it was there choice.

End of early morning, pre-second tea ramblings.

Are you fucking kidding me?

NI contributions are around 20% of money raised by the government when included in the overall tax figures and usually covers 100% of the things it is supposed to pay for. In fact the fund the money goes into usually loans money to the government and the government then pays intrest back to the fund. And has done for a number of years. The last time the government needed to put money into the fund from other taxation was about 20 years ago.

[AiliailiA]

Why should the old, many of who fought in WW2 on the Allied side,

You might want to check your maths there ...

have their pensions taken away? All of us are likely to get old in the future.

"Likely to" but not certain to. There's about a 12% chance of dying by age 65 and getting no pension at all.

[Imperializt Russia]

Realistically, you'd have at minimum sixty years of pension payments going out if you decided "nope, no more state pension". Then everyone below the cut-off, no longer gaining a pension, would be astoundingly pissed off and the change would surely be reversed in the next parliament, five years into the policy.

The state pension is, conceptually, fucked. When it was introduced, it was intended to supplement the lives of people who simply could not work anymore. It was rare for people to reach the pension age. It's why it worked.
It's not the 1950s anymore. People are living much, much longer, yet the pension age hasn't substantially changed. Now we're stuck with an absurdly expensive system that is not what it was originally intended to do that drains the public purse and results in politicians pandering to elderly voters because unlike everyone else they go out and vote, rather than to any other part of the electorate.