Of course, many Ponzi schemes are able to carry on for many years—the scam run by Charlie himself continued quite successfully for a time, as did Bernie Madoff's. The trouble is that these frauds always collapse eventually (otherwise no one would bother prosecuting the fraudsters): eventually, there are simply too many old subscribers and too few new ones.
In the UK, the NICs Ponzi scheme is creaking partly because the birth rate has been rather below the replacement rate for a few decades now: put simply, there are too many old subscribers and too few new ones.
Further, with medical costs and life expectancies soaring (this latter unaccompanied by longer pay-in times) the old subscribers are demanding ever greater pay-outs.
With more and more of those who should be new subscribers actually being beneficiaries of the scheme—I refer, of course, to the large numbers of working age people in receipt of benefits—the whole edifice has become unsustainable.
In other words, whilst National Insurance is supposed to cover unemployment benefit, your health treatment and your pension, there simply isn't enough money in the kitty. Although actually, as I said, there never was a kitty, just the income from new subscribers.
This is why the government has, for some years now, been mooting a number of ideas that would reduce the required payouts. These "solutions" generally fall into two categories: those that will save money and those that will rake money in.
Obviously, the idea that one should deny treatment to those whose lifestyles the government doesn't like falls into the money-saving category, whilst those schemes that will force people pay yet more for their old age care or for their pension fall into the money-grabbing category.
Obviously, all of the above examples mean that the government has made promises that it cannot keep; and, whilst the venal bastards who rule us insist that we abide by the "social contract", they are merrily refusing to keep their side of the bargain.
And I am afraid, despite all of the thousands of words that I have written about this subject, that your humble Devil took his eye off the ball because I had not realised that at least one of these schemes has now been made law. Yes, indeed—starting from next year, we are all going to have to start paying into a compulsory pension scheme.
(Well, I say "all"—but, of course, it only applies to those who have jobs. People who have never worked in their lives can continue merrily to pay fuck all.)
The Pensions Regulator has just issued a reminder (PDF) that all employers will have to provide a pension arrangement to all employees, beginning in October of 2012 on a widening basis until 2016. This requirement calls for a minimum total contribution to an approved pension scheme of 8% of salary, of which at least 3% must be contributed by the employer and the rest by the employee. Employers may choose to introduce a more generous scheme if they wish but the 8%/3% is the minimum requirement.
Alright, so I exaggerated slightly in the headline: the employee will only pay a minimum of 5% into this "approved" pension scheme. However, anyone who thinks that the 3% employers' contribution (plus the costs of administering the scheme, of course) will not adversely affect wages is a total idiot.
Of course, the whole thing seems so sensible—yes, we do need to save for our retirement and, yes, too few people save anywhere near enough (especially when they are younger). And yet...
This is, effectively, the government admitting that it is unable to meet its pension obligations despite already taking 11% from the employee and 12.8% from the employer—money that is supposed to cover these obligations.
Plus, the government is also adding 1% to each set of contributions for 2011–2012: that is, you will pay 12% of your salary and your employer 13.8%.
Let's try to put some figures on this, shall we?
In 2010, the median wage for a full-time employee was £499 per week = £25,948 per annum.
In 2010, the total tax taken (directly) on that median wage of £25,948 was...
£3,894.60 Income Tax + £2,225.08 Employee NICs + £2,589.18 Employer NICs = £8,708.86 (NICs total = 4,814.26)
Now, let's try and work out the cost with the new figures (I don't have a fancy website to do the figures for me, so I'll try to show my workings)...
Income Tax: (£25,948 - £7,475 PTA) × 0.2 = £3,694.60
Employees NICS: (£25,948 - (52 × £110)) × 0.12 = £2,427.36
Employers NICs: (£25,948 - (52 × £110)) × 0.138 = £2,791.46
Total tax take on median wage of £25,948 = £8,913.42 (of which NICs = £5,218.82)
[Trying to match up the NICs figures to the ones given on the ListenToTaxman site, I would say that the above are a little high—but I have no idea why. I followed HMRC's advice for the above.]Fixed. Thanks to Adam Schlumberger in the comments.
Now, this seems like a substantial proportion of anyone's wages: and, please remember, that NICs is supposed to pay for healthcare, unemployment benefit and a liveable state pension.
+++ UPDATE +++
Although the end figure for 2011–2012 is only £200 higher than that for 2010–2011, it's worth noting how the distribution has changed between Income Tax and NICs. Whilst Income Tax has dropped by £200, NICs has increased by £400—and that split roughly 1:1 between employee and employer.
This has allowed Nick Clegg, for instance, to put out a good press story about raising the Personal Tax Allowance whilst, in fact, the £200 is clawed back in National Insurance. In the meantime, the employer is saddled with a further £200 rise but, in terms of sheer numbers of votes (if you know what I mean) there aren't as many employers as there are employees, eh?
+++ UPDATE +++
And yet successive governments have pissed our money up the wall with such abandon that they now feel the need to force us all to pay another 8% of our salaries into a private pension scheme. Why? Because the government knows that, in a few years, it will not be able to afford to provide a state pension at all.
The government is going to keep our money, of course: there will be no rebate because it cannot deliver the service that it promised. No, the solution is simply to force us all to pay more. And more. And more.
How lucky we all are.
In practice, the impact will fall mostly on the lower paid since larger companies already have pension arrangements that meet minimum requirements. The greatest impact will be on the smallest companies like local traders where salaries are lower or on companies using a fluctuating workforce like restaurant chains where, again, the salaries are lower.
For employees of such companies, this pension requirement will mean an immediate cut in take-home pay of 5% if the employer chooses the minimum 3% contribution for itself. To be sure, the employee doesn’t “lose” that money; it’s just not available until retirement.
Oh joy. The Adam Smith Institute carries on its assessment...
We’ve already warned here of the dangers from government meddling in NEST, a cheap’n’cheerful pension scheme being set up by the government for those companies who can’t be bothered to set up their own. The 8%/3% rule will also be vulnerable to political manipulation by successive Chancellors, just like NI has been.
Yes, of course it will. And, of course, as soon as a big pension fund goes bust, then the government will insist that—in fact—it would be far safer if we all just paid that extra money to the state. You know, for safekeeping.
Britain, like all modern economies, must significantly increase retirement savings so, on the surface, a mandatory regime may seem justified. However, compulsion seldom delivers the desired result. After all, wasn’t the original National Insurance scheme supposed to deliver a proper pension?
Yes. Yes, it was. And what happened? That's right: the government pinched the money and spent it on shiny baubles—or, more likely, bribing its client state in time-honoured fashion.
Once again, politicians have proved that the only interests that they serve is their own; although, of course, they do also serve to prove the point that governments do everything very badly—if not actively fraudulently—and, as such, they should do as little as possible.
Leave aside Gordon Brown's profligacy! This country is suffering the effects of many, many decades of financial mismanagement, utter incompetence and outright fraud.
And, as usual, it is the productive members of society who have to pick up the slack and work even harder so that they can pay through the nose—so that benefits (that the productive themselves are not entitled to) can be doled out to the indolent, the corrupt and the rent-seeking.
Across the entirety of Western civilisation, social democracy is bankrupt—financially and morally. This cannot go on.
It is time to look to the past to find the answers for the future.