The state pension rip off

There is the obvious question, is the state pension a good value for money?

First we need to know what the historical facts are.

For the past 60 years, we need to now RPI or inflation, historical wages, and the level of the FTSE.

Other information is available here. CPI and RPI, Average Wages

A reasonable yield, or average dividend for the FTSE is 3%.

We also have the median wage for the UK of 26K. From the tax calculator here, we can get the NI paid by or on behalf of the employee. It is 2,253 plus 2,612 or 18.71%.

Tax Calculator

So now we can work out what median wages are for a person retiring on median wage last year, back to when they were 18. We then take their NI, invest it in the FTSE, add on the 3% of yield. Next year, we do the same, and the FTSE can go up and down.

At the end, we have a fund. We then take that fund and invest in the most expensive (lowest income) annuity going. Joint life and RPI. Anutity rates here.

End result is that a median wage earner would have got 18,587 a year, rising with inflation, until both died. Instead they got a touch over 5,000 a year.

That's some rip off.

Calculations for the details.

Yet another rip off by the government, of what can't be described, as anyone rich.

More rip offs.

Merve the Swerve is up on the TV again pleading like a little kid for yet another go at controlling inflation

"Please please, let me have another go, I'll get it right next time"

So how much of a rip off has he presided over?


Well this graph starts off with the inflation target at 2.5% RPI, in May 1997. In December 2003, the target was changed to 2.0% using CPI. It looks at just how well the Bank of England tracks prices over time, rather than its year on year inflation figure. If the Bank of England does its job, then the line will be around zero.

It's not. Its over 7% above where it should be if it had done its job.

Rochdale, revisited | The Spectator

Rochdale, revisited | The Spectator: "The answer is what I call the British Economic Dysfunction: that our growing economy sucks in people from overseas, rather than reducing dole queues. Unreformed welfare pays people not to work: and I blame the system, not those who follow its perverse incentives. Nor do I blame hardworking immigrants for filling these vacancies."

Pretty much spot on. Pulling in immigrants that pay less tax than the government spends, 11,000 pounds a year, is economic madness. If you pull in low paid immigrants, it just means that those on welfare stay on welfare.

That welfare adds up. 13K a year tax free in lots of cases, for what, 20, 30, 40 years rising with inflation? Half a million isn't unreasonable an estimate. That's a good sized lottery win.

Non Sequitur Comic Strip, September 02, 2010 on GoComics.com

Non Sequitur Comic Strip, September 02, 2010 on GoComics.com

Spot on. Sign up with Lord Blagger, and jump the queue at the Lobbyist entrance.

Expenses – Lords of the Blog

Expenses – Lords of the Blog: "There is of course no formal pay, no holiday or sick pay and no pension so don’t give up your day job if you are coming into the House of Lords!"

Clive Soley advises Lords to sign in, collect expenses and work at another job.

You pay for it.

NHS spunks �7.5k on porn room • The Register

NHS spunks �7.5k on porn room • The Register: "Liverpool Women's NHS Foundation Trust has incurred the wrath of the Sun by spunking �7,500 on a 'special room' kitted out to help chaps deliver vital supplies of man oysters.

The trust's fertility centre shared the cost of 'computer equipment worth �4,625, flat screen TVs costing �2,225 - plus �500 of blue movies' with private outfit North West Fertility."

That's where you cash is going. It's slipping through fingers, and not yours.

Google Reader (287)

Google Reader (287): "The first sleaze row of the new government deepened today when a millionaire Tory donor, who successfully lobbied for the cancellation of a government loan to a promising engineering company, admitted he had wanted to invest in it himself.

Labour accused Andrew Cook – the Tories' largest donor in Yorkshire, who subsidised David Cameron's flights in opposition to the tune of �54,000 – of a conflict of interest after he wrote to the Conservative business minister Mark Prisk in May to warn that an �80m state loan to Sheffield Forgemasters might be illegal under EU law."

Time to get politicians and civil servants out of the decision making process.

You can't bribe all the electorate all of the time.