You can't trust the State on pensions

It’s entirely true that capitalism can be more than a little voracious. Not everyone in the system fully lies up to their word for example. But for real and true confiscation of what is yours, accompanied by naked self interest, it’s not possible to beat the State itself.

The usual method being to promise much, tax on the much that will arrive, then fail to deliver. Nowhere is this more obvious than with pensions:

RAF war hero Harry Penny was shot down over Holland in 1943, successfully evaded capture for 10 weeks, and was awarded a military OBE. But, much later in life, he ended up engaged in a battle with the British government – over his paltry state pension. And he died knowing that he hadn’t succeeded in winning that particular skirmish.

Penny served his country with honour, but how did the UK government repay him? By freezing his basic state pension at the 1987 level of just £38.80 a week. He was effectively “punished” for emigrating to Australia, a Commonwealth country. Yet, if he had retired to Germany, the country we were at war with, and which he had bombed, he would have received up to £115.95 a week.

The specifics here are:

It occurs in more than 100 countries worldwide, including Australia, Canada, South Africa and New Zealand.

If you move to one of these places, your UK pension will be permanently frozen at the date you retire, or when you arrived, no matter how rich or poor you are, what job you did, or how much national insurance you’ve paid. But if you move to an EU country, the US, or one of a seemingly random list of places, including Macedonia and Samoa, your state pension increases in line with inflation.

The justification is:

However, ministers of all colours have steadfastly refused to remedy this injustice. The government’s line is basically: yes, it’s far from ideal, but it would cost too much to sort out. Ministers have estimated that to fully uprate everyone’s frozen pensions to current levels would cost more than £500m a year.

So there we have it. There’s nothing but naked self interest there. The past politicians, they taxed and splurged the money, buying votes in the process – actually, the purpose of it. Today’s politicians aren’t willing to tax to cover those promises – they’d lose votes. The result? People who paid all their lives into pensions and then get stiffed.

Because public choice economics. Politicians will do what is good for politicians, nothing else.

The State is not your friend, you know that, don’t you?