UK - Pensioner incomes 'outstrip those of working families'

[Archie Gemmill Goal]

Just an aside to note that that isn't UK-wide. In Scotland all personal care is free, to everyone 65 and over, funded by the government.

It shouldn't be (IMO), but that's the way it is.

Why do you feel it shouldn't be? No different from other health treatment in that respect is it?

 

[MikeG]

.........Means testing can be done based on your net worth, your income, or a combination of the two........

This is going to throw up some interesting anomalies. Farmers, for instance, can notionally be worth many millions of pounds if they own their own land, yet have annual income far lower than the minimum wage.

 

[Worm]

It can be the case, but a lot of personal care is not really health-based, and there are plenty of people who can afford to pay for it, but don't have to. Of course that's true of health services as well, but they have a much longer history of being free.

The Free Personal Care budget is pretty big - getting on for half a billion by my estimate, and that's likely an underestimate of what gets spent due to how things are recorded.

Similar issue with prescriptions, which are also free in Scotland.

 

[Newtons Bit]

Something similar is happening in the USA. 18-29 year olds have ~20% lower incomes than people 20 years ago did in the same entry level positions and ~-$30k assets (yes, that's negative, and it's due to student loans). Meanwhile the vast majority of income increases are going to baby boomers.

 

[Archie Gemmill Goal]

It can be the case, but a lot of personal care is not really health-based, and there are plenty of people who can afford to pay for it, but don't have to. Of course that's true of health services as well, but they have a much longer history of being free.

The Free Personal Care budget is pretty big - getting on for half a billion by my estimate, and that's likely an underestimate of what gets spent due to how things are recorded.

Similar issue with prescriptions, which are also free in Scotland.

What personal care is not health based? As far as I know it only provides for basic looking after yourself services. It's probably also a good preventative measure in catching things that might cost more if left unattended.

As you say some people can afford it but you can use that argument for any public service.

I'd hate to think of someone who can't wash themselves or dress themselves deciding to suffer to save a few bob (or maybe more importantly relatives or family deciding they can't afford to pay for it)

Perhaps more of an argument for prescriptions - especially non-essential ones.

A lot of the increase in cost of the care budget seems to be increased costs of providing the care rather than more of it - I'd be interested to see what the reasons for that are and whether anything can be done to make it more efficient though I suppose there is a limit to that given the nature of what is being provided.

 

[Archie Gemmill Goal]

On the broader topic I work on the assumption that I will be left to fend for myself in retirement and have done for some time. Luckily(!) being Scottish there's a decent chance I won't ever make it to my sixties to find out.

 

[Worm]

Don't get me wrong, there is definitely a large part of Personal care that is pretty much health care delivered outside of the NHS, but it also includes things like food prep for instance. Anecdotally, a lot of non-personal care will get recorded as personal care because those who know the system know that it will then be free.

Increase in cost (almost doubled in 10 years) is down to a lot of things, not least an aging population, also increasing expectations, people increasing wanting and expecting to stay at home for a lot longer rather than entering a care home, increased regulation of the care sector and general awareness of what is available.

It's an incredibly complex system, but overall I'm not sure that we can continue to fund all personal care for everyone in the country without some serious discussion about how to pay for it.

 

[The Don]

This is going to throw up some interesting anomalies. Farmers, for instance, can notionally be worth many millions of pounds if they own their own land, yet have annual income far lower than the minimum wage.

Yes, asset rich and cash poor, which is why I'm also in favour of inheritance taxes - though a decently smart farmer will have the farm wrapped up in a business for that.

My feeling is that if they have little cash coming in then they deserve the pension and in any case we're talking hundreds or at most a few thousand in that situation.

 

[The Don]

It's an incredibly complex system, but overall I'm not sure that we can continue to fund all personal care for everyone in the country without some serious discussion about how to pay for it.

Yep IMO people like my father, pretty decent income, own their own home outright, a couple of hundred grand in the bank should pay for their care rather than forcing the burden onto working people with far less than they.

Instead we have people moaning about not being able to pass their million pound homes onto their late middle aged middle-class children

 

[MikeG]

Yes, asset rich and cash poor, which is why I'm also in favour of inheritance taxes........

For the life of me I can't see how hitting estates with inheritance tax solves the issues of asset-rich/ income poor households.

 

[lionking]

By the time they retire $1m may not be that much - indeed it could be argued that it's not that much right now.

With annuity rates so low you need a shockingly large fund to deliver a decent retirement income. I'm aiming at £50k a year (which will be worth £30-£35k when it comes time for me to retire), index linked, as a very comfortable retirement, but that will need close to £1.5m to deliver.

I was talking about the equivalent amount adjusted for inflation etc.

$1m should be sufficient today given that superannuation funds have returnef an average of around 7% historically. My fund earned over 5% last year, and I have a "balanced" portfolio, which is reasonably conservative. My kids also have partners, so with around $2m between them, they will be laughing.

 

[Darat]

...snip...

It's an incredibly complex system, but overall I'm not sure that we can continue to fund all personal care for everyone in the country without some serious discussion about how to pay for it.

Given our low tax rates we could decide to raise taxes? I know such a radical idea but hey it might just work.... And stop giving so much to those grumpy old gits!

 

[The Don]

For the life of me I can't see how hitting estates with inheritance tax solves the issues of asset-rich/ income poor households.

It doesn't fully but it does mean that those people who are asset rich and cash poor do contribute to the exchequer eventually. The alternative would be some kind of system where you annual tax bill is dependent on some combination of income and asset valuation. Basing a tax on an asset valuation is IMO problematic for a couple of reasons:

One, it's based on a spot valuation. As those adverts keep saying "the value of assets can go down as well as up" so in some years people may have significant changes in their tax payments based on the date on which the payment was made (and presumably if they have suffered a loss in the year they will be due a rebate). The process of continually valuing assets seems to me to be unduly onerous for everyone.

Secondly, if your assets are truly illiquid then the only way to pay the tax would be to dispose of some every year. In the case of your putative farmer, that means selling off a few acres every year to pay the tax bill which will have an impact on the viablity of that farm.

IMO inheritance tax is not a perfect system (and Darat has gone a long way to convincing me that an inheritance tax of 100% with no tax free allowance could indeed be the fairest method of all) but it allows for a one off taxation on transfer, a point at which the asset(s) have been valued.

 

[MikeG]

It doesn't fully but it does mean that those people who are asset rich and cash poor do contribute to the exchequer eventually. The alternative would be some kind of system where you annual tax bill is dependent on some combination of income and asset valuation.........

Pretty much exactly what happens at the moment with income tax and council tax.

Unlike some here, including Darat, I don't see any problem whatever with people leaving their assets to their children.

 

[The Don]

Unlike some here, including Darat, I don't see any problem whatever with people leaving their assets to their children.

I don't have a dog in this fight, having no children and not being in "need" of an inheritance, but the ability to pass assets from generation to generation seems to be yet another way to constrain economic and social mobility.

It's by no means the biggest constraint, and inheriting wealth is by no means a guarantee to future prosperity but in the U.S. those born into the top quintile are most likely to remain in there, likewise for those born into the lowest quintile.

Given how badly the other key influencers seem to work against the poorest, education, healthcare, paucity of opportunity and that they seem to be getting worse in the US (and the UK) then it doesn't look good for future mobility.

 

[The Don]

Pretty much exactly what happens at the moment with income tax and council tax.

It's a bit like it except that in the case of council tax it's the occupier who pays the tax, not the asset owner (we pay no council tax on the flat we rent out) and that there are broad valuation bands which means that, for example, we pay the same council tax on our 4-bedroom house worth around £500k (close to £4k annually) as someone living in a several million pound mansion.

 

[Worm]

I'm pretty torn about this one, and I can see that it's pretty hypocritical.

While the circumstances sucked, I was fortunate enough to inherit a share of the joint estate from my dad and stepmum who died within 18 months of each other. The estate came in just under the inheritance tax limit, and while they were by no means wealthy, they had worked hard all their lives and saved - primarily by paying off their mortgage, so I inherited enough to pay off most of the mortgage on our house.

Would a chunk of that been better off with the state? Possibly.

 

[MikeG]

I don't have a dog in this fight, having no children and not being in "need" of an inheritance, but the ability to pass assets from generation to generation seems to be yet another way to constrain economic and social mobility.

It's by no means the biggest constraint, and inheriting wealth is by no means a guarantee to future prosperity but in the U.S. those born into the top quintile are most likely to remain in there, likewise for those born into the lowest quintile.

Given how badly the other key influencers seem to work against the poorest, education, healthcare, paucity of opportunity and that they seem to be getting worse in the US (and the UK) then it doesn't look good for future mobility.

I simply don't accept the logic. Just because some people do well financially doesn't prevent others from doing well. One family passing wealth down generations has no effect on a poorer family's prospects. You don't make the poor richer by making the more-rich poorer.

 

[3point14]

I simply don't accept the logic. Just because some people do well financially doesn't prevent others from doing well. One family passing wealth down generations has no effect on a poorer family's prospects. You don't make the poor richer by making the more-rich poorer.

I don't know if I agree with that or not, I would point out that you can educate the poor and provide many social services to enable social mobility with the tax revenue gained.

I don't know if it's a good idea.



From the above, and other threads, apparently a million pounds is a good retirement pot.

The average wage, according to a quick google, is approx £26,500. Given that one can save for a pension without being taxed and that £6,500 is well below the tax allowance, the conscientious saver has, on average, £6,500/year to live on if they are to save reasonably for their retirement...

 

[Darat]

I simply don't accept the logic. Just because some people do well financially doesn't prevent others from doing well. One family passing wealth down generations has no effect on a poorer family's prospects. You don't make the poor richer by making the more-rich poorer.

Social mobility figures shows your contention is wrong, the best predictor of your future wealth is the wealth of your parents. With the increase in property values this is probably going to hinder social mobility even further. As a society inheritance restricts social mobility and entrenches already existing wealth divisions.

Of course some individuals will be lucky and some will be unlucky but as a society it holds true.