Sunday, 12 September 2010

A New Contract with our 3rd Age

The Proposal:

To make the retirement idea new and fresh for centuries to come

This policy can be tied in with equality legislation and anti ageism statutes.

To remove the enforced retirement age and enable older workers to retire in a manner they chose; working hours they want and providing for their own livehoods.
A tapering exercise based on age starting in 2015, would see results produced quickly, accompanied by a fall in state expenditure on pensions and an increase in economic activity by workers over 65.

The idea is to persuade stakeholders to see working for much longer, as something of benefit to all.
To begin with, the state needs to pull back in the provision of pensions by tapering and instead concentrate on the provision of allowances and tax-free proposals that would entice and facilitate such radical shift in the role of the state.

This figure needs to break the link between payment into the state system and entitlement.
The working allowance must be lower than the current retirement pension and even non-working allowance must be below the current level pension level.
A presumption of no added hardship is IMPERATIVE.

It is no longer a pension, but an age related allowance based on work for those working over the age of 65 or a non-working allowance if you chose not to work.
In order to do so, I propose moving the universality principle off state pensions and onto income tax and local taxation exemption (direct taxes).
Once a person reaches their 65th birthday, they become exempt of local taxation and if working, exempt of income tax.
Anyone choosing to retire fully and not work, would receive the local taxation exemption plus a slightly higher rate allowance, but have no other tax exemptions.
Retirees due to disability, health or care reason would receive all the entitlements and support from the state.
The key here is that workers would still pay NI, effectively contributing into the system but would be exempt of direct taxes, meaning that they would be able to maintain a decent standard of living.
The workers in conjunction with employers would decide on number of hours, days of week, pay etc; pretty much as now really.

Employers must have no extra charges or costs imposed on them. Any due occupational pension would be paid as if the employee was retired. No further participation in the pension plan is advised.
There must be no net benefit or disadvantage in employing someone on the basis of their youth or age.

As older workers remain or re-enter the workforce, skills, which would have been lost, are passed to a new generation. This process would facilitate the breaking down of intergenerational barriers and provide role models for younger people.

Older workers would mostly prefer or need to work partime and current experience suggests they would take some the lower paid jobs, which at the moment go to EU migrants or settled migrants. The impact on the overall jobs supply/demand is expected to be fairly neutral; however, a fall in migrants’ numbers is expected as less work becomes available.

As the tax-free income is accrued, a substantial % would be going into savings and a modest boost to spending is also expected. The propensity to save of elderly people is fairly constant and high; this would help the banking sector in their recapitalisation.
More money would be available for borrowing by firms and more importantly, the state, without recourse to foreign sovereign funds. This would help to internalise our national debt and reduce debt repayments going abroad.

A system, however YOU choose to define it, where the state stays out of your retirement as much as possible, but is there in its fullness, should you really need it.
A Liberal system where the state enables but does not provide for.
Real Social Liberalism.

The result of this proposal, in varying amounts, will be to:

- Lower the state pension burden.
- Diminish the active role of the state in this sector.
- Enable workers to work until they chose to retire and the type of retirement they want.
- Enable older workers to choose how many hours would suit them to work.
- Provide a maximum senior allowance (do not call it a pension!!!).Those unable to work due to ill health would receive the full state support due to them as of present.
- Provide local taxation exemption to all over the age of 65.
- Take pensioners out of taxation but not NI if they are working.
- Increase savings ratio and therefore assist in the recapitalisation of banks.
- Increase availability of UK funds, therefore internalising % of debt, rather than owing foreign nations.
- Working retirees would still be contributing to society via NI and via expenditure (the grey pound).
- Provide a more varied base of workers in the workforce. (Ratio of younger to older).
- Provide role models in the work force.
- Increase intergenerational cohesion.
- Increase participation in society, of a usually difficult to engage segment.

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