To worry about the adequacy of pensions is an obsession of the pension community which will get together in Liverpool in a few days. They will concern themselves in taxing ordinary people 12% of what they get paid to fund private pensions. Tax is how many people think of what they pay under auto-enrolment and it’s currently 8% of a band of earnings very similar to the band we pay national insurance on.
So while we are happy for this pension tax to fund private pensions (or pots), we are not happy to see these workplace savings plan threatened by this National Care
Nut what we miss when we complain that private pensions are not adequately funded is that adequacy is not just a matter of private pensions but a matter for the state pension and of the health service that we enjoy.
Our Prime Minister says
I want to build a National Care Service. A high-quality service that starts in the home, where everyone contributes and everyone is covered.
I don’t feel bad about paying a tax into private pensions if I know I’m getting value for my money and I don’t mind paying taxes for a State Pension rising not quite so fast. No one’s done a VFM check on the State Pension but when John Shuttlecock compared the efficiency of the State Pensions to Private Pensions 30 years ago he made it clear that the state pension (and SERPS) were better value than DC and indeed DB funded pensions, I doubt much has changed.
We simply don’t see the tax that we pay being proportionally allocated to state pension , to long term care and to tax relief in second pensions.
Right now, we all know what Andy Burnham points out, that the adequacy problem is most acute in healthcare and in particular in long term social care. Long term social care is most widely needed amongst those who’ve reached their “old age” – those like Roy, Andy Burnham’s Dad.
We need to think of healthcare, the state and private pensions as part of one financial package for those needing a retirement wage that covers everything , but especially housing and food and the cost of coping with the deuteriation of health that comes withe growing old.
We think that our little bit of this holistic package is all that matter but that is not what the Pensions Commission and the Social Care Commission are concerned with. The are taking a holistic view which like a Venn diagram has a section called “finance” that is common to both pensions and social care.
I hope that this message is getting back to Trustees and providers of pensions. I hope we recognise the pressure that the increasing taxes that are needed to pay for healthcare and social care will partially come out of the increases in AE minima we were promised. It is not we wanted but it’s what we need to accept as we get taught what retirement planning is about – for the nation’s population.