What happens when the Curajus State is an idiot?

Of course, this does not just apply to GPs. The latest reduction in the Lifetime Allowance – the amount the Inland Revenue allows you to have in your pension scheme before triggering an extra tax – will affect thousands of long-serving staff across the public sector. Surgeons, senior police chiefs, firefighters and head teachers are similarly impacted. According to independent financial advisers, there are top people in their fifties across the country who may retire early to avoid this extra charge – which can be up to 55 per cent.

Answers to the Sage of Ely please.

33 comments on “What happens when the Curajus State is an idiot?

  1. Tim

    It’s unlikely he’ll give a toss – his response to the ‘social care crisis’ was to basically remove all saving allowances and reduce pension allowances so the state could receive more – he has no conception whatsoever if second order consequences and no ability to think beyond his own very narrow framework of what ‘right’ should be. He remains comfortably the most stupid ‘mainstream’ commentator extant in cyberspace today (though I admit Owen Jones does run him close)

  2. The pension rules reinforce the backward bending supply curve of labour.

    Aside from less generous (public sector) pay- not sure that this can be fixed.

    Although it’s not like pensions aren’t going to have to be majorly reformed at some point or another- may as well fix this whilst we are at it.

  3. The Government: “It is vital that we all save for retirement!”
    The People: (Diligently save for retirement)
    The Government: “Nice pension you’ve got here. Alright lads, grab what you can.”

  4. I often wonder whether ISAs will be abolished at some point, or whether a limit will be retrospectively introduced for the maximum amount that can sit tax-exempt in one. I’ve never believed that pension rules will stay static until I retire.

    All makes planning for the future a game of second-guessing.

    (I think abolishing ISAs altogether might be too unpopular, unless the country is going through a major anti-tax-avoidance mood, though governments sometimes do unpopular things… But saying eg “only the first million in the account is tax exempt” is the kind of thing that would politically be fairly harmless.)

  5. who may retire early

    Or they may not. Just like all those celebrities who were going to move to Canada when Trump was elected.

    When push comes to shove, a lot of them will decide that a cushy well-respected job with a post tax income of £55k (or whatever) is more fun than sitting at home all day with a post-tax income of £0. This applies especially to men, who I’ve noticed don’t cope well with retiring from the career that defined them.

  6. Van Patten

    Oh he will give a toss, ‘cos his wife (ex?) is a GP n’all.

    What he won’t do is offer any comment on it, any comment at all. Because discretion is the better part of the Courageous State.

  7. No public sector wage should be higher than £40000 and no public sector pension higher than £25000.

  8. Any public sector worker using the words ‘servant’ ‘served’ etc to describe what they do as if it’s voluntary or underpaid should lose their personal allowance. This also includes the Army ( conscripts excepted ).
    Imv, of course.

  9. “The Government: “It is vital that we all save for retirement!”
    The People: (Diligently save for retirement)”

    Thats not exactly the problem though is it? How many private sector workers are running up against the pension fund cap? Not many, because saving £1.25m out of your taxed income is not something ‘normal’ people will manage. Its only those who work in the State sector and have the taxpayer ‘saving’ for them that manage it from relatively normal jobs. As such I see this a feature not a bug.

  10. @Bongo

    Yep, agreed. Anyone calling themselves a “public servant” should lose any right or authority to tell the public what to do.

  11. Thats not exactly the problem though is it? How many private sector workers are running up against the pension fund cap? Not many, because saving £1.25m out of your taxed income is not something ‘normal’ people will manage. Its only those who work in the State sector and have the taxpayer ‘saving’ for them that manage it from relatively normal jobs. As such I see this a feature not a bug.

    The problem with ‘allowances’ is that they tend to be reduced, or allowed to reduce through inflation. It won’t be long before a £1m pension pot will sound grand but won’t exactly have you living like Elton John, especially with annuity rates dead in the water.

  12. Rob – it is for high earners. When earning a fraction of that it doesn’t matter what level the government set that at.

  13. Interesting idea from Mr Ecks there: leave the nation’s defences under the command of those who cannot command a salary of more than €40k.

  14. Not just defence Ironman.

    Running our schools. And fire brigades. And hospitals. And building our bridges.

    And negotiating Brexit. Let’s leave that to some plonker just out of university shall we.

  15. Let’s leave that to some plonker just out of university shall we.

    No, you might get somebody capable, if inexperienced, if you do that.

    We need to carefully select people who, at their mid-forties, cannot command more than that salary in any other arena and put them in charge of the country.

  16. ” It won’t be long before a £1m pension pot will sound grand but won’t exactly have you living like Elton John, especially with annuity rates dead in the water.”

    To save £1m you’d have to save, or get investment returns of £25k pa for 40 years. How likely is that for even someone who commands a salary of say £100k by age 50? This salary cap is not affecting many people with an actual cash pension fund of £1m+, its affecting people who have nominal investment funds of that amount because their pensions are final salary ones, not defined contributions. Its a calculated fund, not a cash one, and one that is guaranteed by the taxpayer.

    As such I have zero sympathy for all these public sector fat cats who are suddenly finding the State to be capricious. Maybe it might open their eyes a bit.

  17. Andrew M

    who may retire early

    Or they may not. Just like all those celebrities who were going to move to Canada when Trump was elected.

    My anecdotal observation is that they are doing precisely that (or about to). Including family & friends, and others that they know. There may very likely need to be be some quite serious importing of talent in the next 5 years or more to avoid a complete meltdown. They should already be pinning the “visa free” adverts down under…

    When push comes to shove, a lot of them will decide that a cushy well-respected job with a post tax income of £55k (or whatever) is more fun than sitting at home all day with a post-tax income of £0. This applies especially to men, who I’ve noticed don’t cope well with retiring from the career that defined them.

    Golf, various contributions (including those related to their career) to the community that retain their “status”, etc.

    Thoroughly preferable to the increasing stresses from ever increasing regulation / continued politically botched fuck-ups to the system they willingly bought into 30 or more years ago.

  18. Mr Ecks

    No public sector wage should be higher than £40000 and no public sector pension higher than £25000.

    The NHS waiting lists just went Venezuelan!

    Sure, you can easily apply that to all sorts of non-essential admin jobs in the public sector, but not to those that need to be bright enough to do medicine (and similar).

    Unless, as part of that process, you just privatised the “entire” NHS?

  19. When the consequences for failure are so low for senior state servants, and they have no competition in the services they are supposed to be managing, pulling a figure out of your arse for what they should be paid is as good as comparing with the private sector.

    It winds me up no end to hear council chiefs justifying high wages for senior staff by saying things like ‘On a revenue basis the council is comparable to running a large company’.

    Public services can be well run or badly run. Private businesses can be well run or badly run. Mis-manage a council, health trust, police force, etc and you could walk away with early retirement and re-employment at another public service. Mis-manage a private business and it’s your employment, and that of everyone under you, that is at risk. The two are only comparable to the extent that you can say they are very different.

  20. PF-Doctors aren’t “employees”–ask their professional association about that.

    As for Ironman’s point about those “commanding” a £40000 wage and being “in charge” of the military. Well can’t say I’m overly impressed with the highly over-paid arseholes that are already on the job. And again the army has existed for centuries. Public sector is not how I would describe it. It might be better if their wage was supplemented by plunder after successful battles/campaigns etc but since there haven’t been too many of those recently.

    Meanwhile £40000 max wage would both help to bring about and be an appropriate illustration of how small and unimportant the public sector should be. That it has grown to its present size and power is –to a degree–a reflection of the politically motivated power and money ( to pay high wages to the scum at the top) that it has been given.

  21. “saving £1.25m out of your taxed income is not something ‘normal’ people will manage”: you miss the point – pension saving comes out of untaxed income.

    We know two GPs who’ve retired because of the pension Lifetime Allowance. And that’s in spite of the fact that the LTA is already biased in favour of those who hold Defined Benefit pensions, because they are valued at only 20 x annual pension.

    You’d almost think that the ’20 x’ multiplier was chosen by chaps who themselves have DB pensions.

  22. Ecks

    Sure, if employment is the criteria, yep, no problem. Of course, that will simply create many more “B2B” relationships (“off payroll”)

    Ie, whilst I’m with you on the sentiment, it just means that the public sector can’t then “employ” any commercially useful IT, finance, etc, and may not be what you are trying to achieve?

    Ultimately, any reduction of the public sector needs politicians who are prepared to to be radical. It would be good if our democracy was up to inspiring such a political class.

  23. PF-A gravy train does not inspire the frugal or abstemious.

    Cut their power in order to cut the money or cut the money in order to cut their power.

    Or both preferably.

  24. dearieme

    No, pensions are or always previously have been out of TAXED income. Being deferred income, pensions get taxed when they’re finally drawn. They are taxed though.

  25. …a lot of them will decide that a cushy well-respected job with a post tax income of £55k (or whatever) is more fun than sitting at home all day with a post-tax income of £0.

    Except that the group we are talking about are those who will be drawing a pension, so their ‘sitting at home all day’ income will not be zero.

  26. The way round the civil service pay problem is to have a maximum budget for salaries, including pensions etc. Let departments decide to have a few clever, efficient and well paid people or lots of poorly paid drones.

  27. “No public sector wage should be higher than £40000 and no public sector pension higher than £25000.”

    Until the late 80s, public sector professionals accepted lower pay than they could get in the private sector in exchange for job security, excellent pensions, more leave, flexi-time etc. Since then, they have have demanded and got pay parity on the often spurious ground that this necessary to recruit and retain essential staff. Unfortunately, they’ve managed to keep the perks, too.

  28. So just to get this straight. Say I have 1m in a pension fund and I have it invested in 15 year gilts, I will get a ‘pension’ of around 15k a year. But if I have a defined benefit pension (now almost exclusive to the public sector) of 15k then that only represents a theoretical pension pot of 300k? (using their multiple of 20x). Thus to be over the current threshold as a public sector ‘servant’ would require a DB pension of just over 60k, something the private sector equivalent would need a pot of 4m to achieve. This of course is another reason why the state sector loves QE, they are all borrowers, none of them are savers.

  29. @MarkT.

    Yep, something along those lines. Don’t forget the civil servant also gets a £45k tax free lump sum. And the pension is index linked. And had spousal benefits.

    DB pensions are currently quite simply financially ruinous for employers. Unless the employer can borrow, print or tax the funds it needs. Unfunded DB schemes staggeringly more so.

  30. Since then, they have have demanded and got pay parity on the often spurious ground that this necessary to recruit and retain essential staff.

    Well, the place I’m currently “temping” at has huge problems attracting competent IT staff because it simply can’t pay anything like the market rate.

    It’s hideously overburdened with incompetent middle managers, though (who are on better rates than the empty technical posts attract.)

  31. To buy £1 of pension similar to public sector ones (retirement at 60, 50% to surviving spouse, inflation linked) will cost around £40, not £20 (at current rates).

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