Is The Welfare System Broken?

Is The Welfare System Broken?



hello and welcome again some money tips this is Charles Kelley bringing your money tips that we save and invest accumulate and ultimately enjoy more money so I want to talk today about the welfare system that is the state system that provides pensions health care and all the rest of it I don't ask you is the welfare system broke or broken and if so what are you going to do to fund your retirement and your old age now let me take it back a bit to my story you know I grew up in London when you know in a part of London called Camden when it wasn't so trendy it was quite poor area actually and it was an area where a lot of migrants went to when they arrived in the UK as my parents did and you know there are lots of bed sits and houses where you you know split into room so they were cheaper there was cheap accommodation around and there was jobs around and a lot of people come over from places like Ireland where my family came over on the boat Holyhead you know an arduous journey and you know there was in Ireland the time was very poor country there was little opportunity you know widespread poverty and I went to school with first generation migrants from places like Cyprus inkay you know and can do a lot of Cypriots Greek Cypriots India East Africa Caribbean parts of Africa lots of different countries and later on I saw an a wave of immigration coming in from places like Uganda where remember Idi Amin kicking out all the Indian Asians from from the countries and they're taking all the money you know so they kicked them all out and the country went downhill and they were you know come over to the UK at that time and also a lot of immigration from the Philippines and the 70s 80s and 90s going into nursing healthcare and that sort of thing so you know I've seen a lot of this come over and I grew up in in immigrant communities so I've seen you know for my own experience how those people lived and worked and got on and I noticed a couple of things and I noticed that they tended to buy their own homes they bought their own properties rather than relying on council housing which was quite prevalent in those days you could fairly easily get a council flats in in the 70s anyway so they tended to buy their own house perhaps because you know I remember my mother going and talking to the council we know we can't give you houses because that's for the for the for the English people that have been here not not for you just come over here and you know I'm sort of accepted that and said well okay you know I'll accept that so you know perhaps because of that or perhaps they didn't know the system they tended to sabai that their own their own property you know and so that's one thing I noticed from my own experience my own and it's an observation and like some of my own family did they rented out a part of their house we rented out a room took in a lodger to help make ends meet or or pay their mortgage you know and sometimes they found that the rent would often cover their mortgage and enable them to save a bit of money and then maybe buy another house ah that sounds familiar now it was inconvenient for them of course they couldn't have their own space and had to put up with a bit of uncomfortable inconveniences but you know it wasn't that bad and it didn't help them to get on a bit right so just I've come back to that little while so so that's you know that's that's how I've noticed things now they also had a tendency to start their own business again based on my own observations perhaps because they couldn't find a job that utilized their own education or skills from their own country this has been it always been a big problem for migrants they've come over here with a degree and the system here says no we don't accept your degree your degree that you've studied for four years is actually only equivalent to a HNC higher national certificate or a diploma what are you talking about and how do you know and I think many of the the educational establishments and the that the jobs for the professions have been a bit of a closed shop and still is in many ways you know they don't accept qualifications from certain countries without making them jump through hoops and you know but another subject but yeah perhaps because of that they decided to start their own their own business practically start funding them oh you opened a corner shop when if you're Indian you're open you were opened a corner shop you know that helped them get on because they could earn more money than people in a job and you know so I also noticed they worked harder than most people they seem to be always working they had to three jobs many people I know personally had three jobs they didn't just work on one job at a weekend job an evening job a part-time job they were always working and and saving money perhaps rather than spending it they weren't people who went out to the pub so much they they they tell you to work go home be with the family and put a bit of money aside and then buy a property or whatever they did with their money you know so that contrasted at the time now I'm not saying everybody but at the time that conjures comes contrasted with the the mentality of the people that you know I grew up with in London that had this mentality of that the government would look after us and that was based on what was called the this the the welfare state the cradle-to-grave welfare state that was brought in after the war they were told by the governor we were told by the government that they would be looked after from the time they were born the cradle and so they were buried the grave cradle to grave everything was gonna be free your healthcare education University with grants you know elderly care if you if you can't look after yourself and elder will put you in a account to a run nursing home and people would pay taxes and national insurance contributions which was posters provide for their pension in old age right so they will set the safety net the unemployment benefit system and the sickness benefit system which meant they were paid if they're unemployed or couldn't work now this is still here today but it was that that mentality that you know the council will do something about it the government will do something about it and you know I lived in a council flat when I was young and people felt you know that everything had to be repaired by the council you know it's not my job as the council or you know the council was sort that rubbish out that's lying there and that was the the general mentality that the government accounts or somebody else would look after somebody else would take care of it someone else was responsible for that for that problem they didn't take so much personal responsibility and even during my when I started working during my early years in financial services people would often come to me and say things like well you know I'd say to them look you know you you're not saving enough for your retirement you know when you retire you're not gonna have enough to live on what are we worried about it you know the government will look after me if I don't have enough pension savings or they'd say the state will look after my wife and children if I die without insurance people said this to me the state will look after them in many ways they were correct you know the state does look after you and it does provide people without pensions some sort of benefit in in retirement and you know that is true but you know what cost you know you're not going to live the life that you want to now the mature times a newspaper called the mature Times recently quoted a report of it I've got they got the article here by the mature of time they recently quoted a report by Canada Life which said that almost two in five pensioners or 38% of claimants actually receive less than 150 pounds a week and that works at about three hundred sixty five thousand people and you know I mean can you live on a hundred and fifty pounds a week now you can probably survive on it but can you really live comfortably on what the state pension provides or what benefits you'd get from the state pension visit you know but that's that's the reality of it and this is why we hear of pensioners freezing to death in the winter and this is true and I know someone in in the funeral business who said his best time is after a cold winter so it is a fact freezing to death in winter having to make the choice between food or heat right this is a fact now most people again will blame the government you hear people on TV but the government shouldn't this is a stand or and all this other stuff yeah okay the governor has a part to play but the fact is we all have the opportunity to work and save during our lifetime right we we have a span of maybe 40 years of work in and at which time you know we should have saved some money so that you can live for another twenty or thirty years is that is that making sense I mean it makes sense to me because you know most people think that we retiring at sixty sixty-five and it's quite feasible that you can live into your 80s so you need some money there don't you yet there'll be a state pension but that's a very minimal amount that you need you still need more on top of whatever the state pension will provide furthermore the amount that people pay most people paying their taxes hardly covers what the government needs to spend and keep everybody safe healthy you know the NHS right educated schools these are huge budgets and keep people keep the public you know that the electorate happy during their their lifetime you know let alone have enough to provide them with incomes for another twenty or possibly thirty years in retirement so in other words the tax is that most people pay especially if you're on a low income it doesn't cover it all you know if you gave all the tax back that you'd paid you know it probably wouldn't be enough to live on for it for a good few years in retirement and people don't seem to get that you know low paid people no don't pay any tax they pay very little tax on you know a minimum wage income you don't pay much that you still pay national insurance but you don't pay much tax and if you've got a couple of kids at school well all that tax is spending isn't it that that's gone that money what it's no good saying well I've worked all my life and now I haven't got a pension so the government has to give me that money no it doesn't really work like that yeah there's a safety net there and there's a minimal pension provided but though you don't get this idea that your taxes are really you know providing everything and you've overpaid somehow into the system and didn't get it back because actually it doesn't it doesn't really work that you know governments have to borrow to keep everything going done that they have to borrow every year just to pay everything let's face it because the taxes they've got coming in is not paying enough to cover all the interest on the debts and and and all the rest of it and all the government expenditure so that's my opinion the welfare state system and that system at the moment is broken and unsustainable and this is why really successive governments had to change the rules move the goalposts retirement ages have increased people had to sell their homes to pay for elderly care in nursing homes you know nursing homes twenty five thirty thousand a year people now can't just expect to get get get old and say well I want free nursing care no they'll take your home to pay for it and this is just a fact of life you know now universities no longer free apart from Scotland is no longer free in England and Wales so you know people have to pay for it through through a loan system or upfront you know as I said most governments have to borrow and this is not you know unique to the UK government's have got the same sort of problems and if the country's not paying its way as it done in the past then they have to top it up with borrowings so what we all talk about the government have got the government should spend in the government to do this what we're really talking about is is our money is the money that we're paying in taxes and the businesses pay in taxes so that's it you know the government hasn't got this magic fund and there's no oil wells in the ground to sustain everybody you know that's it we have to produce and you know we pay taxes and and that those taxes are used to provide you know the streets and and and all the things that go into the things that things we haven't really built but have to be maintained in the roads and the police and the army and the nurses and the teachers and all the rest of it has to be paid for doesn't it so you know what and if you look back at when the world fair system was devised and I've covered this in previous podcasts on on the tension pensions time bomb as I call it you know you look at that time and it was that is estimated that people would you know live for less than five years in retirement it wasn't that long ago when men were you know the lifespan of a men in the last century it wasn't that long ago when it was only 45 or 50 years old now they also calculated the number of people working we'll be able to support the numbering people in retirement because the fund there's no state fund what the the pen system and the welfare system is funded out of current taxes it's not saved up for your retirement so you know there has to be enough people work in paying taxes to pay for people in retirement that boat so these are sumption that would devise when the system was was was made a way out of date now you know the the people now are living far longer and on average and and more people in retirement than ever before so that the worrying thing is about the ratio of people which are going to in more detail as in most developed countries especially in Europe you know advances in medicine and diets and and an exercise of contributed to citizens living longer and the trend is set to continue I've got some figures here by 2050 the proportion of UK population aged 65 and over is projected to reach at least a quarter or just under a quarter 24% up from 17% in 2012 doesn't sound a lot but it's a lot of people and that's according to figures by the ONS Office for National Statistics and the fastest increases actually in will be among the people and what they call the oldest age the proportion of people aged 85 and over are forecast to treble from 2% to 6% that this is an actuarial thing if you if you live that the longer you live that the longer you're expected to live if you're not I mean so you know this is in academics now saying this will this evolving Democratic demographic changes will affect everyone in society regardless of age because it all has to be paid for and an even bigger problem is that the proportion reaching retirement age as it grows that proportion of people reaching retirement age the number of working people will shrink due to birth rate decline and this is is true here and it's also true in places like Germany this is a concern because the UK state pension payments are funded through taxation and national insurance from those of working age now I've got some figures here tax revenue from those in work could fall to keep up with demand for Social Security health care I mean the demands for health care are growing and growing as new medicines come in new techniques come in people want these things so that that's going to grow it would never end and that there's someone here called David Sinclair from the International longevity Center UK yes there's an international longevity Center UK and he said that the number of people of working age to every pensioner or the old age support ratio is forecast to fall from 2.9 to 2.9 by to 2050 from 3.3 in the mid 70s to 2006 so in other words what one person in retirement for less than three people working and and there maybe 50 60 70 100 years ago it was more like four for everyone working it's projected just in the next in a 30 odd years to fall below three people working to support every person in retirement so in other words tax revenue from those that group will continue to may continue to fall and keep up with demand for all of these things that we have to pay for this will force government's says mr. Sinclair to make some tough choices to a certain extent the government have tried to make some tough choices but it doesn't win them votes and make them very popular like like with Universal Credit given this problem that the government has already pushed back the qualification age for state pension 67 I'm affected by this currently the state pension was was 65 and it's been it used to be 64 women it's been equalized now it's taken two steps to avoid big shortfalls and pension savings through automatic enrollments if you're in a job now you're probably automatically enrolled into it to a work paced workplace pension and this was introduced three years ago two percent of work workers qualification earnings is saved into a pension comprised of a contribution also from the employer and it will eventually rise up to about 8 percent by 2000 you know as you go along but I don't think this is really giving enough for the type of pension that they're investing in is a pension that is reliant largely on the stock market to grow so workers have been gradually encouraged of nudged into savings but left unprepared for the complex choices about how to fund for their pension pots and what to do in retirement so five million people nobly enrolled into this pension scheme but there is a concern over the reforms of whether it's enough blah blah blah now you can also take your own pension scheme you can join the company pension scheme and in tribute that yourself but you know most people when they're young haven't always got the amounts of money they need to fund into a pension skin I talked about this in my earlier podcast so so those are some of the facts now look you can find out for yourself what your state pension is likely to be you go online to the Department of Work and Pensions or the DWP for a forecast and as I said you can top up your at your own pension yourself so is the world welfare system broken as I said in the headline well maybe it's not completely broken yet but it's certainly creaking at the edges it needs a real major refit on overhaul but unfortunately it's only been tinkered with and patched up by successive governments because they don't want to tell it like it is it's not very popular as with universal credit you know even recently they've removed the TV licenses for the over 75 now you know the TV licence I think is about eight pounds a month but it's been an uproar I mean there's a campaign now to stop that decision so you know I expect that what will happen in reality is that will muddle along for a while and you know the next few years and the next few decades and they'll they'll patch it up here and make a few changes there but they won't really take any proper action to deal with the pensions time bomb or the elderly care problem I'm having touched on the elderly care and social care which is another's Pandora's Box all together so in the meantime what I can only suggest to you is you better start rowing your own boat you know not relying on the stay or an employer to look after you you've you know you're on your own now you've got to do something for yourself now you know there's another theory that maybe the the centuries-old party is over for the west as the the East go strong grows stronger now and takes more of the economy more of our lunch away you know this you know this is a another theory I don't know I mean the 16-year old Swedish climate campaigner grita Thornburg said why should the rest of the world suffer so we can live in luxury okay that was related to a climate thing but it but it also relates to an economic thing you know many of the the rest of the world in the developing world the third-world are living in in in poverty that we you know we we couldn't even imagine and and that has to change so you know that there's gonna be a lot of changes over the next few years and you know what can you do about it well you know getting back to my earlier story when I talks about migrants coming here and buying houses and renting out rooms you might say well that was all right then you can't do that now it's not so easy now well I I think you'd be wrong about that the same opportunities to invest in property are available to you today and in fact it's much easier to get in property than it was a few years ago for instance mortgages are easier to obtain interest rates are lower there are buy-to-let mortgages available which we're not available then you need to go to a bank and get a commercial and a very expensive right you can rent out a room tax-free I think it's seven and a half thousand a year it might have gone up and there are training courses available to help you learn how to build a property portfolio and and maybe secure an income for your retirement even without putting any money down now of those I think the last point is the most important when my own cause migrated here there was no training courses on property nobody told you how to get a mortgage or how to buy a property where to start you know how to do the legal side you know how to do anything you know that's and learn by trial and error and I had to do the same thing when I got into property so I wish I've had courses available to me because it could have accelerated my progress much faster and avoided you know helping me to avoid a lot of mistakes that I made in the days and since I was started to attend courses it's really opened up in some ways blew my mind and opened up my eyes to a world of opportunity so these courses are available if you'd like some information on a beginner's property taste a course that you could go on to much get you into property then click on the link below if there is one or if not email me at Charles at Charles Kelly dotnet now there are things you can do to boost your retirement and I've gone through those in earlier podcasts have a listen to those you know it's about starting part-time businesses it's about getting into property it's about just saving so listen to that and I also cover these things in my book yes money can buy you happiness I talked about this in the book and I give you lots of suggestions as to how you can you know boost your income not just for retirement but for now you know you've got to live for now as well so have a look at that and as I said think about those those taster courses there's some coming up in the next few weeks so get back to me and thank you for listening this has been Charles Kelly bringing your money tips hope we save and invest and accumulate and enjoy more money

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