Simple maths for a common-sense approach

Terence O'Halloran

In 1997 when Labour got in, Gordon Brown and his cohort had a plan and that plan was quite simply to undermine capitalism. Now, with this administration’s help, they have just about done it. It is all about emotion versus fact and they have fallen for the greatest emotional blackmail, card-trick illusion, whatever you want to call it – and Labour set them up.

What was the note from the departing Treasury minister? “There is no money left.”

Nest will only make things worse along with the alteration of state pension benefits.

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Consider National Insurance contributions pre-2008, which comprised 44 years’ contributions for a full pension. Labour set the trap through “means testing” – anathema for an insured scheme.

Then came 30 years of contributions – unnecessary as mothers gained up to 19 contribution years ‘free’ to look after their children under the existing regime.

The government has no money in reserve – Labour spent the £38bn notional surplus in the NI fund, yet they are taking 30 years’ contributions instead of 44 years’, or a lifetime earning years, and they plan to pay a full flat-rate pension to more people – are they intent upon diverting benefits from Serps (S2P) contributors? Steven Webb and the Government’s maths just does not add up. And the Institute for Fiscal Studies report agrees with that analysis.

Steve Webb must return to the Barbara Castle model: a working lifetime contribution with five ‘free’ years to cover non-work periods, 19 years maximum ‘free’ years for parents looking after their children, and Nest introduced only on a 1 per cent:1 per cent offset against S2P (Serps as was) to keep contributions affordable.

It is common sense. It is also mathematically and actuarially correct and reflects Lord Beveridge and his aspirations. An insurance scheme is what NI is and that is how it should stay; contribution- and benefit-based using insurance principles. In short it is an entitlement and contributors can only get out commensurate with what is paid in. Simples.

Terence P O’Halloran

Chartered Financial Planner