Ritchie repeats an old error (Surprise!)

In other words, and allowing for inevitable rounding in all estimates of this sort and the fact that these ratios are bound to change a little from year to year, every single pension payment made in 2007/08, totalling £117.6 billion in all (if lump sums are ignored) was made at eventual direct cost to the UK government, even if not paid directly by it. The private sector did not, in effect, bear any of the burden in that year of paying pensions to members of private sector pension funds. Those private pensions were, in effect, paid entirely out of the state subsidies that the pension industry or those making pension contributions (whether as employer or as employee) received, directly or indirectly.

He is, of course, comparing the tax relief given this year to people saving for their pensions with the pensions paid out in this year.

Which is a truly cretinous thing to do.

Pensions, as you will have noticed, take up to 40 years to mature. And they can then last for 20-30 years more.

So, the amount being paid out in pensions this year is a reflection not of the tax relief accorded to pensions savings this year, but of the tax reliefs that have been given to pensions savings over the past 70 years or so.

Good luck making that calculation by the way. For what you would need to do is add up the value of all such reliefs and consider that to be a capital sum.

Then you regard the current payments as being the income from that capital sum. Probably best viewed as an annuity (ie, it eats its capital). And there\’s a problem as well in that you\’d have to differentiate between pensions which have matured, are paying out, and those that have not yet.

And one very important point indeed. You would not adjust for inflation. For trying to beat inflation is one of the purposes of saving in bonds, shares, property, rather than just sticking the cash under the mattress.

If the current income is more than about 5% (roughly current annuity rates) of the tax relief (recall, not inflation adjusted) granted in the past, and do recall we can only be talking about those pensions which have already matured (ie, the tax relief given to those pensions which have already matured), then it atually looks like quite a good deal.

Ritchie says private pensions paid out £41 billion in a year. Meaning that for this to be a bad deal there must have been £800 billion of cumulative tax reliefs over the years (not inflation adjusted!) to those pensions which are currently in payment.

Which, given that total private pension plan assets are around £1,200 billion (old number, I know) seems most unlikely.

In other words, this is Ritchiebollocks.

3 comments on “Ritchie repeats an old error (Surprise!)

  1. Ritchie is, in effect, a shrieking chimp who has no intelligence or education. He is, in effect, a parasite on the taxpayer who is, in effect, being made to pay for this monkey scat that is, in effect, being daubed on the Internet.

  2. Whether his numbers are correct is surely irrelevant. Since when did the fact that the state graciously decides not to steal some of your money a cost to them?
    Income tax only 20%? That’s 80% of money being earned that is being lost by the state.
    He really is a buttock* isn’t he?

    * Not even competent enough to be a complete arse.

  3. Its funny, if the state is covering 100% of what pensions pay out, WTF am I paying in 9% of my income? Where is that going in Richie’s calculations.

    The man’s a buffoon.

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