{"id":262518,"date":"2026-01-25T01:27:09","date_gmt":"2026-01-25T01:27:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/262518\/"},"modified":"2026-01-25T01:27:09","modified_gmt":"2026-01-25T01:27:09","slug":"the-notion-that-the-state-pension-is-gold-plated-is-laughable","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/262518\/","title":{"rendered":"The notion that the state pension is \u2018gold-plated\u2019 is laughable"},"content":{"rendered":"

Do wealthy wrinklies like me deserve a state pension protected from inflation by the triple lock? What about free travel on public transport? Was the chancellor, Rachel Reeves, right to abandon plans to scrap winter fuel payments when younger people suffer the highest taxes<\/a> since the aftermath of the Second World War?<\/p>\n

Before trying to answer any of these complex questions, I had better admit that a false prediction about the state pension proved to be one of the most profitable mistakes I ever made. Even 40 years ago it was obvious that governments were struggling to pay for promises issued by earlier politicians. So the youthful me wrongly assumed there would be no state pension by the time I retired.<\/p>\n

Did I despair about how unfair life was or call for cuts to age-related benefits to punish folk who retired before me, as some young people do today? No.<\/p>\n

Instead I opted out of the State Earnings Related Pension Scheme and used the national insurance contributions I was refunded as a result to invest in the stock market. That long-term savings plan eventually bought me a small, 63-year-old wooden boat, which I have enjoyed sailing for the past 18 years. Who says pensions have to be boring?<\/p>\n

To be fair, the scheme was only a top-up for company and personal pensions, plus other regular investments, beginning with a \u00a320-a-month contribution in the early Nineties. So it is good to see that Britain\u2019s biggest online platforms still accept investments from as little as \u00a350 a month today.<\/p>\n

My original motivation was the simple belief that it is better to have a pot of money with my name on it than an ill-defined share in an unfunded scheme. Knowing a little history helped. For example, I knew that Nye Bevan \u2014 one of the founders of the welfare state \u2014 had said: \u201cThe great secret about the national insurance fund is that there ain\u2019t no fund.\u201d<\/p>\n

\u2022 Why an exodus of young workers is the greatest threat to pensions<\/a><\/p>\n

National insurance contributions and other taxes deducted from workers\u2019 earnings this week pay for next week\u2019s state pensions. If you tried this in the private sector, it would be illegal.<\/p>\n

To be precise, it would be a Ponzi scheme, named after a fraudster who used new investors\u2019 money to pay fictional \u201creturns\u201d to older investors. But when I began writing about this state-sponsored Ponzi scheme 30 years ago, I was accused of being sensational and causing unnecessary alarm.<\/p>\n

Now here\u2019s the funny thing. The unfunded basis for state pensions is regarded as being so unimportant that these massive liabilities are not even included in regular reports on government deficits, or the difference between income and spending.<\/p>\n

Yes, really. The most recent Office for National Statistics (ONS) guesstimate I can find put state pension liabilities at \u00a34.8 trillion but this calculation is based on 2018 data.<\/p>\n

No wonder more people are beginning to ask whether this is sustainable. Now rising tension between today\u2019s taxpayers and pensioners is causing some to call for an end to the triple lock whereby state pensions increase each April in line with whichever is the greatest of inflation, earnings growth or 2.5 per cent.<\/p>\n

So the first point to make about the controversial triple lock is that it is also somewhat hypothetical. The last element would only matter if inflation fell below 2.5 per cent.<\/p>\n

To put that in perspective, on Wednesday the ONS said the Consumer Prices Index (CPI), the measure of inflation used in the triple lock, was 3.4 per cent in the year to December. Meanwhile, a more traditional measure, the Retail Prices Index (RPI), was 4.2 per cent.<\/p>\n

The government\u2019s preference for the typically lower CPI measure will only surprise the kind of people who would be amazed to learn of the Pope\u2019s religious affiliations or the sanitary arrangements of bears in the woods. By contrast, the bond market \u2014 where the government borrows from international institutions \u2014 prefers payments to be based on RPI.<\/p>\n

But it\u2019s easier to bamboozle old people than the bond market. Bear in mind Britain still has one of the meanest state pensions in Europe<\/a>, typically paying out less than a quarter of average earnings \u2014 or 22 per cent, to be precise.<\/p>\n

\u2022 Where the state pension is worth \u00a3400k: see how your town compares<\/a><\/p>\n

By contrast, the Italian state pension provides 76 per cent of average earnings, according to the fund management giant Fidelity. In France it is 58 per cent and in Germany it is 44 per cent.<\/p>\n

So much for the media fantasy of Britain\u2019s pampered pensioners. But criticism of the triple lock<\/a>, age-related free travel and the winter fuel allowance is often based on the envious observation that some old people are better off than some young people.<\/p>\n

Think about it. Is it really surprising that someone like me who has worked for 40 years might be wealthier than someone who has never worked at all or just begun to do so?<\/p>\n

Perhaps I should add, for the benefit of the hard of thinking, that many pensioners \u2014 probably most of us \u2014 will have paid taxes on those earnings for several decades. So it\u2019s nice to get something back from the state after paying so much in.<\/p>\n

Speaking as someone who paid a half-year\u2019s tax bill last week that exceeded anything I ever earned in a full year before I reached the age of 30, it was noticeable that the state pension I received amounted to less than half the tax I had to pay. Talk about giving with one hand and grabbing with the other.<\/p>\n

\u2022 1.3m pensioners and savers issued with surprise tax bill<\/a><\/p>\n

So the notion that British pensioners outside the public sector enjoy gold-plated state pensions is laughable. Much less funny is the fact that many people never live long enough to get any of their taxes back, as I also know from painful personal experience.<\/p>\n

Even the now controversial winter fuel payment<\/a> is subject to tax, in that anyone who earns more than \u00a335,000 a year has to give all the fuel payment back. Cheers, Rachel!<\/p>\n

On the relatively trivial question about age-related free public transport, does anyone really want more squinting wrinklies behind the wheel, struggling to tell if their specs are smudged? Or is that a cyclist ahead?<\/p>\n

More positively, let me suggest a strategy that might help today\u2019s highly taxed young people more than any amount of barking at the moon or blaming older generations. Follow the most financially rewarding mistake I ever made, forget any hope of state pensions and do it yourself by investing for your own old age.<\/p>\n

\u2022 Visit Times Money for personal finance news, guides and expert columnists<\/a><\/p>\n

Sorry to disappoint anyone still hoping that somebody else will do the heavy lifting for them. But DIY self-reliance, saving and investment massively reduce the risk of disappointment decades hence, when you might be too frail to do anything about it.<\/p>\n

Every young person has a very important advantage over every old person. That\u2019s time. Make the most of it by sending money to yourself in the future, which is all that investing for retirement means.<\/p>\n

It might not be what you want to hear today but it worked for me and millions of others. Either way, it beats relying on politicians\u2019 promises to pay for your retirement.<\/p>\n","protected":false},"excerpt":{"rendered":"Do wealthy wrinklies like me deserve a state pension protected from inflation by the triple lock? What about…\n","protected":false},"author":2,"featured_media":262519,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[72,176,61,60,174,175],"class_list":{"0":"post-262518","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-ie","11":"tag-ireland","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/262518","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=262518"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/262518\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/262519"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=262518"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=262518"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=262518"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}