UK - Pensioner incomes 'outstrip those of working families'

[MikeG]

......... We live in a country where levels of economic and social mobility are at recent lows.

I've already agreed with this, and said how important it is that it be addressed.

Time and again it's been demonstrated that the ability to transfer wealth to the next generation is a significant inhibitor in economic and social mobility.........

No, I'm not seeing this. No-one has produced evidence of it in this thread. I think this is a fundamental falsehood, and part of the mindset of pulling people down from above as a way of attempting to boost the life chances of those below. You've denied this is your method, but then repeatedly suggested death duties as the solution. People who have decent assets to pass on do better than those that don't, so your solution is to try to handicap those with substantial assets........whereas my preferred solution is to get as many people as possible into the position of having substantial assets to pass on to their kids.

Why haven't you addressed the substantive arguments made about the trivial amounts of money ever raised by this tax historically?

 

[Dave Rogers]

Try shoplifting instead - highly tax efficient

Especially when nobody can work out how much you stole.

Dave

 

[The Don]

No, I'm not seeing this. No-one has produced evidence of it in this thread. I think this is a fundamental falsehood, and part of the mindset of pulling people down from above as a way of attempting to boost the life chances of those below. You've denied this is your method, but then repeatedly suggested death duties as the solution. People who have decent assets to pass on do better than those that don't, so your solution is to try to handicap those with substantial assets........whereas my preferred solution is to get as many people as possible into the position of having substantial assets to pass on to their kids.

I know you don't see it, and possibly you never will....

At the moment in our "immobile" times the effect of allowing the passing on of assets empirically results in increasing that immobility. Those who have the best start in life (by being borm into wealthy families) end up having those assets, those who don't.

Even if *everybody* had assets to pass on, the top n% will have more assets which will mean that they will be more likely to remain in the top n%.

Those countries which have the the highest levels of economic and social mobility (and those times where the UK has had the least low levels) have had highly progressive tax regimes and inheritance taxes to constrain the ability for wealth and privilege to be concentrated over generations.

Why haven't you addressed the substantive arguments made about the trivial amounts of money ever raised by this tax historically?

It's not just a matter of the total receipt (though due to intensive lobbying it's about half of what it was as a % of GDP as recently as 25 years ago) but also the effect it has on preventing the concentration of wealth in the top fraction of a %.

 

[The Don]

You can make the same argument against competition. What's the benefit of competition in business anyway, all it does it take away resources that could be used better and spends them on unnecessary things, like advertising, market research and whatnot. Wouldn't it make more economic sense if there was only one firm that could produce or sell any type of product? It would substantially reduce waste and enable more resources to be spent on better things.

I'm sorry, that argument makes no sense to me.

Why does it make sense to pay out state pensions regardless of need when it doesn't make sense to pay out "in work" benefits regardless of need ?

That's the core of the argument from my perspective, and the idea that lots of people would choose not to save for retirement and as a result live in penury off the state pension instead of saving for retirement and having the opportunity to live in relative comfort instead seems bizarre

Not least when there are steps that are in place/could be put in place to address it.

 

[McHrozni]

I'm sorry, that argument makes no sense to me.

Why does it make sense to pay out state pensions regardless of need when it doesn't make sense to pay out "in work" benefits regardless of need ?

That's the core of the argument from my perspective, and the idea that lots of people would choose not to save for retirement and as a result live in penury off the state pension instead of saving for retirement and having the opportunity to live in relative comfort instead seems bizarre

Not least when there are steps that are in place/could be put in place to address it.

How do you address it? By making payments to a private pension mandatory?
That's hardly any different from having a national pension fund, financed through (special) taxes, that pays out dividends to pensioners. It's a valid approach, but it's hardly different from what most countries have.

McHrozni

 

[MikeG]

........At the moment in our "immobile" times the effect of allowing the passing on of assets empirically results in increasing that immobility...........

You keep saying this. You have offered no support for this case whatever in the entire 3 pages, other than to keep on repeating it. I don't believe it to be cause and effect, but if you provide evidence, I'll reconsider.

And further, you are now miles away from the tax take being the driving force for good, and returning to the removal of the asset being the force for good. Which is it?

 

[The Don]

How do you address it? By making payments to a private pension mandatory?

That's what has already happened in Australia, although in this case the decision is taken away from the employee - the employer makes the mandatory payments.

In the UK, the situation is a little muddier but the following link provides a summary:

https://www.gov.uk/employers-workplace-pensions-rules

That's hardly any different from having a national pension fund, financed through (special) taxes, that pays out dividends to pensioners. It's a valid approach, but it's hardly different from what most countries have.

McHrozni

There are a lot of differences between this and what's currently the case in the UK. We don't have a national pension fund. It may notionally exist but current pensioners are not paid from the income from the investment of earlier contributions - but from current taxation.

Even if there was such a fund, there would be no individual choice where the investments are made. For better or worse, the Australian system allows employees to make their own investment decisions. The situation is decidedly mixed in the UK but company schemes I have been a member of have allowed a degree of choice regarding how my contributions are invested.

 

[The Don]

You keep saying this. You have offered no support for this case whatever in the entire 3 pages, other than to keep on repeating it. I don't believe it to be cause and effect, but if you provide evidence, I'll reconsider.

Here's a frothy Economist article on the subject:

http://www.economist.com/blogs/buttonwood/2014/03/inequality

And further, you are now miles away from the tax take being the driving force for good, and returning to the removal of the asset being the force for good. Which is it?

Both.

 

[MikeG]

Here's a frothy Economist article on the subject:

http://www.economist.com/blogs/buttonwood/2014/03/inequality.........

Nowhere in that article does it make the case that removing inherited capital from people would increase social mobility. Once again, this is argument by assertion.

 

[The Don]

Nowhere in that article does it make the case that removing inherited capital from people would increase social mobility. Once again, this is argument by assertion.

No it merely highlights how inheritance reduces social mobility.

The demonstration that curtailing inheritance increases social mobility comes from those developed countries where social mobility is highest and during those times when in the UK inheritance is curtailed.

 

[Greebo]

Not hugely surprising this. I think when my dad retired he actually ended up earning more from his pension that he did in his final job - hardly raking it in but they are fairly comfortable for their lifestyle anyway.

Add in huge house price rises, etc and the current batch of pensioners have mostly had it fairly good. Politically they have it sussed of course and no government of any colour is going to go after pensioners incomes. They have good PR in that respect - I suspect a lot of that is a hangover from the 'they fought in the war for you' generation.

Of course the average pensioner thinks nothing of crapping on everyone else to get what they want - see Brexit for evidence of that.

Same position for my 89yo mum. She's housebound - two replacement hips last one 5 years ago - so needs me to get cash from the ATM for her from time to time. The amount in her current account (she has savings account too) is always more than my wages.

 

[MikeG]

No it merely highlights how inheritance reduces social mobility.

It doesn't even do that. It mainly discusses how inherited wealth accumulates at a different rate from savings from income. It doesn't support your argument here at all.

The demonstration that curtailing inheritance increases social mobility comes from those developed countries where social mobility is highest and during those times when in the UK inheritance is curtailed.

Assertion without evidence.

Look, The Don, I rather like you, and enjoy interacting with you. I consider this argument too stupid to fall out with you over, so I'll trot off and leave you to it. Don't bother looking for the evidence for any of those unevidenced assertions, because I shan't be returning to this thread.

 

[3point14]

It would seem impossible to arrive at any agreement that the same family collecting wealth down the ages concentrates wealth...

 

[The Don]

Assertion without evidence.

Look, The Don, I rather like you, and enjoy interacting with you. I consider this argument too stupid to fall out with you over, so I'll trot off and leave you to it. Don't bother looking for the evidence for any of those unevidenced assertions, because I shan't be returning to this thread.

I guess that's me told then

Anyway, given that MikeG won't be back I'll try to provide information for other interested parties....

http://voxeu.org/article/how-inheritances-influence-wealth-inequality

This means that if tax revenues are redistributed to the less wealthy, the total effect of inheritance taxation works as to make the wealth distribution more equal.

 

[Archie Gemmill Goal]

I guess that's me told then

"You might be able to support what you say and I can't but I'm still right and to prove it I'm not going to argue with you anymore. "

 

[McHrozni]

There are a lot of differences between this and what's currently the case in the UK. We don't have a national pension fund. It may notionally exist but current pensioners are not paid from the income from the investment of earlier contributions - but from current taxation.

Even if there was such a fund, there would be no individual choice where the investments are made. For better or worse, the Australian system allows employees to make their own investment decisions. The situation is decidedly mixed in the UK but company schemes I have been a member of have allowed a degree of choice regarding how my contributions are invested.

Is this difference of giving a choice of where to invest the mandatory pension scheme key in making a system stable and effective?

McHrozni

 

[Darat]

Why are you talking about private schools? I'm not. Further, the point you seek to make (that private school pupils have a better chance than others of producing top judges, journalists or military officers......and the latter is self-explanatory if you consider how many state schools run cadets) is irrelevant when we're talking about social mobility. Social mobility is the ability of poorer kids to get into higher paying jobs, and that depends on qualifications, and that depends to a large degree on child and parental motivation.

If that was the case we would not have such a high proportion of people educated in private schools in top jobs. We also have the issue that "interns" are usually from wealthy families (poor people can't support their child for a few years of not earning money) so those top jobs are out of reach. Every way you slice it the wealthy have entrenched advantages compared to the poor. This all adds together to explain why social mobility in the UK is so low.

 

[Darat]

Oh yes it does. A well supported child in a poor school will still out-achieve its peers at that school. But that misses the point of what I was saying. All else being equal, as it generally is these days (ie schools aren't often dreadful), what I said applies.

And the wealthy can provide much more support for their child simply because they are wealthy. For example the kid falls behind in maths - get a private tutor for a term or two. Or spend an afternoon at the weekend tutoring the kid themselves. The poor parent can't do that because they have a job in retail and that means they work the weekends and don't have the money to pay a private tutor. There are studies after studies that show why wealth and poverty perpetuates across generations.

Are you really arguing that social mobility in the UK isn't low?

 

[Darat]

Evidence ?

Doesn't matter how well supported a child is if they are as thick as pig ****.

Unless arrangements can be made to get over that - perhaps the kid "needs" a bit more time to do an exam - well surprise surprise a much higher percentage of kids from wealthy families get more time to do the standard exams...

It boils down to the fact that wealth begets wealth and poverty begets poverty because of the difference of opportunity those states provide.

 

[Darat]

I completely agree, and I would love to see it improve. However, I don't see how removing assets from those who do well is going to help those who don't have such a good start in life. I honestly don't. No one has attempted to make the connection so far, as though the benefits of death duty is some self-evident truth that only needs stating to be proven. Hauling down those above you is no way to a meritocratic society.

As a personal comment - I've never defined myself by wealth, that someone is more wealthy than me doesn't mean they are above me! Part of our problem in the UK is still the often unspoken assumption that wealth (as a surrogate often for class) reflects on the character of the person. Working for a Danish company really brought home how deeply embedded that attitude is in the UK.

That aside, in your terms we are not talking about bringing anyone down, we are talking about building people up.