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Should we emulate the British?

By Jennie L. Phipps · Bankrate.com
Sunday, May 22, 2011
Posted: 7 am ET

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?

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2 Comments
Johannes Miltonus Anglus
July 01, 2011 at 7:28 pm

OMG who would want to emulate the British, when they (we) have got EVERYTHING wrong since 29 May 1660? (No need to remind you what happened then).

Emulate the Canadians instead. They're wankers too, but not as bad as the Brits, and lightyears ahead of the Yanks. Especially on pensions.

PS. 140 pounds will NOT be worth $227 by the time this message is posted, and BOTH currencies are in free fall. Yet another reason to look to the true North strong and free.

Jack
May 23, 2011 at 1:18 pm

No, bad idea.

A) Citizenship is key since we apparently can't seem to protect our borders and/or figure out a way to tax the non-citizens properly.
B) Our country is MUCH larger and it would be very hard to actuarily calculate immigration and booms. (We have failed at this many times already.)
C) SS is NOT insurance, it is social insurance.

We need to encourage/incentivize/assist people to help their elderly family members. That is the main reason the US fails when it comes to the elderly not the peanuts that SS/medicare provides.