Demographic Time Bomb ?

Yes they are: but it does not follow that they have to work for longer. We could decide that they should have a far longer time to enjoy retirement, if we so wish. That rests on a great many things, but if we take the political decision that this is what we would like to see then we can probably do it. There is nothing intrinsiclly desireable about work: that is why we get paid for it I see no "of course" about it


It is certainly true that poor people do not live as long as wealthy people. The figures are actually shocking

http://news.bbc.co.uk/1/hi/health/4494051.stm

and they give the lie to the claim that income inequality is not a "zero sum game": if you believe that the correlation between increased inequality in income and increased inequality in health is causal (as I do) then it is a zero sum game in the starkest possible way.

Payroll tax is not a term which we use here, but I presume that you mean anything whch is deducted from wages at source? If that is what you do mean then you are correct that pension contributions from the employee are a "payroll tax": but it is equally possible to characterise them as "deferred wages" or as "insurance". Once gain the language you choose to adopt affects the perception of what you describe. "Payrolll tax" is a "boo" phrase in the current climate: "Insurance" is more of a "hurrah" word. So how we choose to call this is already making a political statement



Well, as you will appreciate, I do not favour VAT solutions. You are correct in saying that pension funds are like insurance schemes, and I think this supports my point above. However you are not correct in saying that there is no such thing as a pension fund, I don't think. Can you say more about what you see as the defining feature of a pension fund, as contrastd with an insurance scheme? The difference I see is this: an insurance scheme need not hold assets sufficient to meet claims from everyone in it: that is the essence of the inurance enterprise: risk is spread, and actuaries spend a great deal of time and effort in calculating that risk. It depends on the idea that most of the people who pay in will never experience the misfortune they are insuring against: it is a risk, not a certainty. That is not the case with a pension scheme. While not everyone who pays in will live long enough to draw the benefit they have helped pay for, that assumption cannot be built in to the way the scheme is constituted. Not ethically, anyway.

Pension schemes are not all the same. State pensions in this country are not funded at all: they are "pay as you go". That was an intense debate when the provision was first instituted and that was the decision taken: one can disagree with it for good reason: but there it is. To the extent that is true it is reasonable to call the contributions made a "tax": and I presume that is the justification for adopting that term. In this country there are two separate deductions from pay: national insurance and pension contribution. National insurance is so called because the idea is that this is what pays for current pensions and the employee will benefit in his turn. It does not cover all of the social insurance payments, nor anything like it: they are funded from general taxation (or perhaps one could say "topped up" from it). The misnaming of the contribution is unfortunate, but understandable given th difficulty of instituting a comprehensive welfare state at the outset. But to me it is now time to have a grown up debate about what we wish to see and to do that we have to start being clearer about what actually happens. For example, the characterisation of those national insurance contributions as insurance means that there is a ceiling on them: that would not be true if we recognised them as a tax. So in reality it is misleading to call it a "payroll tax": it isn't.


You are also correct in saying that other kinds of pension scheme are not sufficiently overseen: but that is a consequence of the political outlook which characterises "regulation " as a bad thing, and seeks to reduce or abolish it in every sphere which relates to business and finance. Since I think that the history of civilisation is the history of regulation the solutions I see are very different from your own, I suspect. Suffice to say that they were better overseen in the past: the legal provisions relating to the rules for pension schemes were altered post 1980: and the result is inadequate control. This matters because most such schemes are run by employers. The pension fund managers are supposed to be independent but they are not: not completely and not always. This article is sympathetic to the idea that regulation has increased; and following the Maxwell scandal that is true in one sense: but the failure to properly regulate solvency is the part of the failure which is genuinely significant, together with the rules about contribution holidays: because if the conditions for those "holidays" are met the contributions are not made: but there is no provision I am aware of to replace the lost assets if the projections turn out to be wrong. As the article notes there has been a move from internal control of pension management and that might well be seen to be a good thing: but it also means that trades unions are less well represented if we compare the best schemes before and after the shift: and it also means that more of the assets go to pay the fees of the independent fund management companies. I question whether that is a good thing. As noted in the article a lot of the independent advice came from investment bankers: and we all know how great is their "expertise" and professionalism.

The ceiling on pension fund surpluses was instituted for what must have seemed good reasons at the time:the aim was to prevent retention of the assets at the cost of lower pensions for the beneficiaries. In practice it led to the "contribution holidays" for employers already discussed. A ceiling on surplus was not, by itself, enough to achieve the desired outcome. I think it is misconceived in any case; but if it is worth doing it needed to be accompanied by rules which ensured that the surplus was reduced by means if increased benefits to pensioners: not to shareholders in the companies who enjoyed the increased below the line profit which arose from the "holiday". Or the "holiday" could have been restricted to employees: though there are questions of fairness in that as well since the beneficiaries would not be the existing pensioners who depend on the payments.

www.apinfo.co.uk/pfa/articles/Retrospective.htm


I am not sure what you mean here: I am taking it that you refer to the return to fixed equity investment strategies. I can only see that as a good thing. The move towards riskier investment strategies arose from the problem of inflation, allegedly: but that has not been a problem for a very long time and so it cannot be used as a justification for any such decision. Inflation comes and goes: returns rise and fall. But for most ordinary people what they want from a pension is security in old age: and their weighing of the balance between maximising income v certainty of income is unlikely to accord perfectly with that of pensions advisers caught up in a business climate which seeks to maximise profit.



I am not sure what you are arguing here: but if you are saying that the problems and benefits of running pensions schemes were known when the idea was first adopted then you are correct.


Once again your language is loaded, though you may not realise that: and the loading may not exist in your culture in the same way as it does in mine. "Poll tax" is a "boo" word in spades in this country because of the infamous "community charge" levied under the Thatcher government and unversally called the "poll tax".

But even if the term does not carry the same baggage in your country it is misleading, at best, to call pension contributions by that name, for the simple reason that not everyone is in work: and those who are not don't pay them and don't get the benefits: and also because some of those in work do not have occupational pensions schemes and do not earn enough to pay NI. It is nothing at all like a poll tax, actually.


As you rightly surmise I am wholly opposed to VAT: I am in favour of EU membership, but the insistence on this form of taxation is one of the areas where I regret the consequences of membership. Without meaning any disrespect, the idea that VAT is fairer is arrant nonsense, in my opinion. But that does depend on what you think taxation is for, and what you believe "fair" means.

I see no reason in principle why the poor should pay tax on all of their income while the rich do not. But the fact is that the poor spend all their money and the rich do not. The part of income which is not spent is not taxed on a VAT system. It is true that the rich consume more, and to that extent their income is taxed and they pay more money out in tax than the poor do: but they pay that tax at the same rate and as a proportion of income that is far far less. Obviously one can mitigate those inequities in a VAT scheme: and we do. VAT is not levied on food or on children's clothes, for example. That means that a greater proportion of the income of the poor is not taxed, as compared with the income of the rich, it is argued. But the rich get exactly the same tax "concession" as the poor, on those items. It happens that they also get tax "concessions" on private pension contributions and school fees and other items which are not subject to VAT either. Amazingly the poor do not take up those concessions, however. One can also choose to levy a "luxury" tax and this was done in this country before the introdcution of VAT under what I think was called "purchase tax" at the time. I do not think it is done now, and I cannot think that is an accident . the exemptions mentioned above, and seldom included in the argument you are making, confirms me in this view.

VAT is a viciously regressive tax. It impacts on the poor far more than it does on the rich and that truth is actually confirmed by the exemptions conceded on essential items. It suits those who wish to argue in favour of regressive taxation to direct attention to the pragmatic outcomes claimed (rich folk pay more) and away from the underlying morality. You have not done that: you have included the conception of "fairness" in what, to me, is a rather "looking glass" description which can only be sustained if you ignore a large part of reality. this was also the case with the IFS analysis which made much the same argument: but even if one accepts all the rest of their position one cannot blink the fact that the VAT burderns the poorest more than everyone else: as they agreed.

http://www.taxresearch.org.uk/Blog/2011/01...-is-regressive/




There are too many unexamined assumptions in that statement for me to even begin to unpick it. Perhaps that is for another thread.