What Went Wrong with the UK Pension System

The UK is currently facing its worst pension crisis in decades with millions living in relative poverty. So in this video, we'll explain the history of pension policy in the UK, what's gone wrong recently and what can be done to address the problem.

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[TLDRnews]

CORRECTION: At 0:55, we imply that the state pension age in the UK is 65, when it actually went up to 66 in 2020.

Some commenters have also questioned our use of "net replacement rate" as a metric of pensioner wealth. For context, net pension replacement rate is defined as net pension entitlement relative to net pre-retirement earnings. To be fair, in certain respects this isn't the bet way of comparing pensions internationally, because countries with lower wages will generally have higher "replacement rates", but equally you wouldn't just want to use an absolute measure, because that would overstate the prosperity of pensioners in countries with higher wages, even if they were relatively poor within those countries.

Anyway, we hope you nonetheless enjoyed the video!

[SantiagoWyatt-]

I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.

[kboci]

Each time I watch a TLDR video about the UK I am wondering what the hell I am still doing in this country.

[flygetcapeflygetcape]

It's funny how no politicians' million pound pension pots are bever effected.

[PheonixAsh]

When I was in school my maths teacher warned us not to rely on getting a state pension as it was not mathematically viable. 40 year old me is happy I had a great teacher and am not replying on receiving one in order to retire.

[Dublinby]

what went wrong with the UK should be your next video

[fakename]

It all comes back to a lack of affordable housing.

A lack of affordable housing = couples putting off having kids = smaller number of workers for a larger number of pensioners

[sommersalt]

I have two pensions. I would much rather have had a Roth 401k throughout my working lifetime. 500/month invested from 25 - 65 at 9% is 2.3mil. I hate my job but can't leave because of I won't get my state pension. What do you think about doing a 70/30 stocks bond ratio?

[mandrakejake]

One thing you didn't mention is how private pensions can be sold off and devalued, reducing the pot you paid into. It's another scam

[DarylSolis]

Did you know that in the UK, only 11% of pensioners collect their full pension. The rest goes back to the gov once they die. And you see declining health and well being in this country with our deteriorating healthcare system ...let that sink in, and realise what is really going on here.

[kenhilton]

This is a disgraceful misrepresentation. The destruction of UK pensions was caused by Gordon Brown removing dividend tax credits for pension funds in the late 1990s, lowering UK pension scheme revenues by £5billion per annum leading to the virtual wipe out of final salary pensions. Prior to that Thatcher’s policies had left most pension funds. with significant surpluses

[thearpox]

"X perfect of pensioners are below the poverty line!"
And how many NON-pensions are below the poverty line?!
If everyone is poor, and the pensioners are also poor, you don't have a problem with the pensions system. You just have a problem.

[Masonic]

Could it have something to do with the government giving full pensions to people who didn't contribute anything to the system?

[Ianmundo]

I’m from the UK and moved to Iceland 🇮🇸 14 years ago, not sure why Iceland appears so low in the stats in this video. There are mandatory pensions plus private pension savings. In the years I have worked here my Icelandic pension is ~£2000 per month, which is already better than the full UK State pension, and is on track to afford me a comfortable retirement.

[ash]

Save for your old age, because they’ll try their hardest to make sure you never see your state pension.

[b.nichols]

Perhaps the State pension is so low is because so much government money is going to pay extremely generous civil service salaries and pensions.

[cathygarlick]

State pension is currently from 66 not from 65

[peterholt]

You missed 2 massive events. In 1978 there was a 2% rise in NI to fund the State Earnings Related Pension Scheme (SERPS). This meant that everyone working 40 years would get 50% of their final salary each year on top of the static state pension. If you wished, you could divert this additional NI contribution to a company final salary pension scheme (a DBS) and potentially get 66% of your final salary. If your company didn't run such a scheme you could divert this 2% and additional contributions from you and/or your company into a pension pot (a DCS or SIPP). Nobody who has worked from 1978 onwards should get only the basic state pension. As mentioned below, Gordon Brown introduced Dividend tax which massively curtailed the growth of pension pots. It was Gordon who is responsible for pension poverty. The 2016 legislation meant that anyone with a pension pot did not have to convert it into an annuity, which was the only option for most pension pots. You suggest that the 2016 legislation introduced the 25% tax free lump sum, but that was always possible when converting a pension pot to an annuity. Not only possible, but most common. I think you need to restudy the last 50 years.

[stshar]

The personal tax allowance being frozen is going to bring pensioners into the tax paying bracket. So how is this going to help pensioners.

[stuartregan]

Hows about we start reforming public pensions . 2.6 Trillion liabilities . Civil servents retiring early with million pound pension pots but telling the scaffolders & bricklayers they need to work to 67 & up because there is no money . Money for them though . Absolutely disgusting.