The British are considering a 140-pound weekly per person, flat-rate pension available at age 66 to almost all residents of the UK -- you wouldn't even have to be a citizen. It would replace a much more complicated retirement system that required 30 years of contributions and very unpopular means testing.
If you convert 140 pounds to equivalent dollars, it means that a single person would get $227 per week and a married couple would get twice that. Annually, that translates into $11,804 per person or $23,608 for a couple. By comparison, this amount is a little less than the average monthly Social Security payment, which is $1,179.50 per month or $14,154 annually. But it is more than the average payment for a worker plus the average payment for a spouse, which is $582. Together they total $21,144 annually.
In the proposed British system, there is no question how much money each person will get -- everybody would get the same thing no matter how much they had earned during their working lives. The government estimates that this change would cut administrative costs by 75 percent, but otherwise it would be cost neutral because women who took time out of the workforce to raise children would earn more, as would wage earners. Other savings would come from the elimination of a complex system of additional payments for people who didn't qualify for full pensions under the old system because they didn't work long enough.
Comments appended to an article in the London Daily Mail reflected anger from people who said they had paid more into the system and should get more out of it. But a poll accompanying the story said that 79 percent of readers approved of the proposal.
The proposed British system makes no pretense of being an insurance system like Social Security does. It is socially equitable, but it doesn't reward work and achievement. It is simply an entitlement that prevents the elderly from indigence. Do you think this the direction in which the U.S. should head? Does it make retirement planning sense to you?