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More Spud on pensions

The obvious evidence from this chart is that the vast majority of pension wealth is owned by those in the top 10% of the income strata, with most if the rest spread over the next couple of deciles. The evidence is unambiguous: most of this subsidy is going to the wealthy.

No. The chart shows that the subsidy goes to those wealthy, not those high income. Of course, they may also be the high income, but it is not unambiguous. For wealth and income are not the same thing.

And who are the wealthy? From Spud’s own source:

Median wealth was highest for households whose head was aged 55 years to under State Pension age (£553,400); the wealth of this group was 25 times higher than those aged 16 to 24 years.

Oh, lifetime effects then. Folk about to retire have the greatest pensions wealth. Surprise! They’re also the folk likely to have paid off the mortgage. Surprise!

If you’re going to try and look at the wealth distribution you’ve got to take lifetime effects into consideration. Spud doesn’t. Oh Well.

In fact, based on the ONS wealth data it is likely that 46% of all pension tax reliefs go to the top 10% income group.

Nope. Because wealth and income are not the same thing.

6 thoughts on “More Spud on pensions”

  1. Surely the really wealthy don’t bother with pensions? I mean if you have hundreds of millions in assets you don’t need to mess around with pensions funds that are limited to a £1m pot anyway. Its the middle classes who are piling into pensions, not the 1%-ers.

  2. @Jim

    Not least because those earning more than around £300k a year would be limited to getting tax relief on £4,000 a year on contributions to pensions by the tapering of pensions tax relief. That’s a change brought in by the Tories. In 2009-10 you could have contributed £245,000 and got tax relief under Labour.


    As Tim often points out, very “normal” middle-class people are often a lot closer than they realise to the top 10% or top 1% – or at least either will be or were, at the time they are maxing out their income. Similarly, with peak at a different age and entry to a different 10%/1% club, in terms of assets/savings.

    For UK taxpayers the 2019-2020 data has:
    * median pre-tax income of £26k
    * £39k gets you into top quartile
    * £44k is top 20%
    * £58k is top 10%
    * £81k is top 5%
    * £102k is top 3%
    * £125k is top 2%
    * £180k is top 1%

    Since that’s just for taxpayers, and non-taxpayers will almost all be on lower incomes, you could be pretty far outside the top 10% of taxpayers but still squeeze into the top 10% of the population as a whole. £50k is still very good money for most people, and £100k (“the smallest large amount of money for an idiot”) is minted.

    If you’re a billionaire then pensions would be pretty much an irrelevance but you can clearly peak in the top 1 or 2% in pretty mundane middle-class jobs (headteacher, doctor, sales) without being anywhere near the “megarich” and in those kind of roles, pensions still matter.

  4. @Anon: But those figures don’t take into account taxes and benefits do they? The person on £100k is losing one third of it in taxes and takes home £66k. The person working 2 days a week on minimum wage (ie pays no taxes) could very well be getting a lot of Universal Credit. Its quite possible with the right number of kids and suitable ‘disability’ diagnoses to be pulling in £20-30k per person per year in benefits of one type or another. So working out what income bracket you are in before taxes and benefits is pointless. The ones earning a decent wage look like they are way above those on the low incomes, when in reality after the State has appropriated a large chunk of their income and given it to someone else the two are far closer together. Indeed it will undoubtedly be the case that there will be people whose post tax take home pay is less than the post benefits income of someone nominally on a far lower taxable income. So you data mentioned at best useless, and at worse misdirection.

  5. @Jim

    But the fact redistribution flattens this income distribution out – as you are correctly pointing out – just makes your original post even more wrong!

    To whatever extent “The 1%” meaningfully exist, and as Timmy points out their identify changes depending on whether you measure income or wealth, and a lot more than 1 in 100 people slip into that category at some point in their lives, they are mostly just particularly successful middle-class professionals, whose income after tax (when compared to other people’s income after benefits) is nice but not orders of magnitude better.

    So lumping “1%ers” in with billionaires – for whom pensions really are an irrelevance – and claiming they won’t be interested in pensions is a category error. The 1%ers include people like doctors, salespeople, middle managers in large organisations or heads of small organisations – precisely the kind of people who are big pensions savers but who can hit against the government limits. If you want to talk about people for whom pensions really don’t touch the sides, you don’t need to adopt left-wing talking points by talking about the “1%ers”, you’re really talking about the 0.01%ers.

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