Search
Close this search box.

Pension system is on brink of funding crisis

Pension system is on brink of funding crisis

The state pension system is on the verge of a funding crisis. The National Insurance Fund has been draining rapidly since the financial recession – shrinking from £53 billion in 2008-09 to £29.1 billion in 2012-13.

The Government Actuary’s Department (GAD) recently forecast that the National Insurance Fund (the Fund) will be exhausted by 2035-36, but could run out much sooner.
In a new report NICs: The End Should Be Nigh published on Monday 13 October by the Centre for Policy Studies, author Michael Johnson reveals that Fund exhaustion could occur as soon as next year. Johnson warns: “Given that exhaustion is inevitable, the next generation should be advised that their State Pension will be, at best, derisory.  Indeed, it would be prudent to plan around not receiving anything at all.”
 
Furthermore the report argues that the system of National Insurance Contributions is not transparent, is not progressive and burdens companies with its complexity. In response to the looming funding crisis and defective National Insurance scheme, Johnson urges the Government to undertake the following policy reforms:

The National Insurance system should be scrapped.

Employee NICs and Income Tax on earnings should be replaced with a single Earnings Tax, ideally set at 32 percent, 42 percent and 47 percent, based upon today’s Personal Allowance and three marginal Income Tax bands. HMRC should model the net effect of no longer collecting employer NICs receipts, offset by higher Corporation Tax, dividend tax, Earnings Tax and VAT receipts.  Any projected shortfall should be made up by additional consumer taxes. The Chancellor should use the Autumn Statement to signal his intention to end NICs and introduce an Earnings Tax.

Read more

Latest News

Read More

Rise in recruitment fraud must urgently be checked

28 March 2024

Newsletter

Receive the latest HR news and strategic content

Please note, as per the GDPR Legislation, we need to ensure you are ‘Opted In’ to receive updates from ‘theHRDIRECTOR’. We will NEVER sell, rent, share or give away your data to third parties. We only use it to send information about our products and updates within the HR space To see our Privacy Policy – click here

Latest HR Jobs

University of Warwick – WMGSalary: £23,144 to £25,138 per annum

The Open University – People ServicesSalary: £57,696 to £64,914 + up to £8,000 per annum MRP supplement*

Cardiff UniversitySalary: Competitive

University of Oxford – Oxford Department of International DevelopmentSalary: £28,759 to £33,966 (Grade 5)

Read the latest digital issue of theHRDIRECTOR for FREE

Read the latest digital issue of theHRDIRECTOR for FREE