Submitted by Anon on 22 March, 2005 - 12:57
- Public pensions in Britain take only 4.5% of national income, much less than most countries in Europe. In Germany the figure is 11.5%, in Italy, 12.6% (as of 2000).
- Britain’s basic state pension has always been low by international standards. At its peak in the late 1970s it was equivalent to 20% of average male wages. Since the Thatcher government started indexing the basic state pension to prices rather than average wages, its relative value has dropped to 14% of average male wages, and it will be down to 10% by 2030. Since National Insurance contributions increase in line with wages, this means that the Government is pocketing a large and increasing surplus of contributions income over pension pay-outs.
- The British pension system relies heavily on occupational and private pensions for the better-off, and means-tested benefits for the worse-off. But in 2000–1, only 47 per cent of employees were enrolled in an occupational and 12 per cent had a personal pension plan.
- Some occupational and personal pension schemes pay out very little, and pensioners can lose a large proportion of what they do pay out in loss of means-tested benefits. And many pensioners do not claim means-tested benefits which they are entitled to.
- Inequality among pensioners is large and growing. Between 1979 and 1995, the top 20% of pensioners saw an increase of 71% in their income, while the bottom 20% saw an increase of only 29%.
- Britain’s public-sector pension schemes are better than the rule in the private sector, but not at all generous by European standards. The Government’s current attack on public-sector pensions is a move to destroy the last remaining big block of halfway-decent pension provision, after the state pension and private-sector pension schemes have already been battered.
- The New Labour government has introduced two new policies on pensions. It has brought in a new means-tested benefit called Pension Credit, which gives some pensioners a bit more than they used to get on Income Support. However, many pensioners do not claim it. The government has also made it compulsory for employers to offer employees a private (“stakeholder”) pension scheme. Only 1.6 million people have taken this up. For most lower-paid workers, it makes more financial sense to pay off their credit cards or mortgages than put money into a “stakeholder” scheme, and anyway they may well lose much of the value of the scheme when they retire through losing means-tested benefits.
- About a third of your “pot” in a private pension scheme will be siphoned off, over the years, in charges, fees, and so on. Publicly-run schemes have much lower overhead costs.
- By 1996 pension funds held 27.8% of all shares in Britain. Insurance funds (which are often pension money used to buy an annuity) held 21.9%. The total wealth of British pension funds is about £1000 billion.