Jonquil Lowe

Jonquil Lowe

Senior Lecturer in Economics and Personal Finance, The Open University. Also a freelance personal finance researcher, working with many UK consumer-facing organisations and author of over 25 books.

Location UK, East Midlands

Activity

  • You raise good points, Marcus. However, just because data are hard to obtain, it does not mean that researchers should give up trying. Part of the challenge in survey-based social science research is anticipating the potential problems and trying as far as possible to design the research to minimise the distortions. Beyond that, being aware of the possible...

  • This is how the European Commission defines and measures housing costs: 'Housing costs include all the costs connected with the household right to live in the accommodation (e.g. rent payments, mortgage interests, repairs). The costs of utilities resulting from actual use of the accommodation are also included. Local taxes and charges are also part of housing...

  • Apologies - originally we had intended the previous step to be a Video and if you click on the 'Thatcher interview' link at the bottom of the previous screen (step 3.15) you can link to the video which is at https://www.youtube.com/watch?v=umkXpU0ztv4 Unfortunately, due to copyright reasons we were unable to embed a clip from the video which is why we instead...

  • Yes, there are, Tania, it's called the 'total support ratio' (workers per dependant) or flipped the other way (dependants per worker) 'total dependency ratio'. For data for European countries, see http://ec.europa.eu/eurostat/statistics-explained/index.php/Population_structure_and_ageing#Further_Eurostat_information Table 2.

  • Stamp Duty Land Tax (and its Scottish and forthcoming Welsh equivalents) is also a wealth tax, taxing property wealth at the point where it changes hands.

  • Touche! (Ooops, sorry, more French.) The Cridland interim report (a step in the first of the 5-yearly independent reviews of state pension age now required under UK legislation - see https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/559943/independent-review-of-the-state-pension-age-interim-report.pdf) out a couple of days ago does...

  • In the UK, where women have had a lower state pension age than men (and still do though the gap is shrinking and pension ages will be equal from late 2018), many deferring state pension have been women who are delaying stopping work until their partner is also ready to fully or partially retire.

  • Thanks for the brilliant and stimulating debates this week. I like Andrew's comment below that he now has a bit of sympathy for governments. I was a town councillor for some years and even at that low level of government it was clear that there were few if any issues that did not have losers as well as winners. Pleasing all the people any of the time is just...

  • Inheritance may roll down to younger generations, though may contribute to perpetuating inequality, rather than reducing it, since those from poorer backgrounds would inherit less. Bear in mind though that Turner (Pension Commission) saw property as part of the solution to pensions since retired people could use downsizing or equity release to supplement their...

  • Getting a job as an employee may be challenging at older ages. Some take up self-employment as an alternative. The UK has seen a rise in self-employment which is particularly concentrated among older people running businesses part-time, seemingly to manage their transition into retirement. See...

  • Free bus passes and winter fuel payment are not means-tested. See, for example, https://www.gov.uk/apply-for-elderly-person-bus-pass and https://www.gov.uk/winter-fuel-payment/overview

  • Hey, Paul, the first UK occupational pensions can be traced back to 1686 and coincidentally applied to officers of HM Revenue & Customs. They were required to pay three pence in the pound of their salary into a pension fund and pensions became payable on retirement subject to at least seven years of service or earlier if retired on grounds of occupational...

  • Traditional economic thinking is that when capital (automation) displaces labour, the workers move to productive use in other areas of the economy - though this overlooks the difficult transition that this may pose for individual workers, some of whom may never find other work. However, the idea that capital might become so ubiquitous that labour is no longer...

  • The government has committed itself to honouring the 'triple lock' until the end of this Parliament (2020). However, I have seen some discussion about whether that necessarily means it is committed to the precise figure in the flat 2.5% that forms part of the triple lock and whether this element could be reduced, eg to 1.5%. I suspect the Brexit-related likely...

  • Hi Cheryl, we have something similar in the UK but it is framed differently. So state pension becomes fully payable once a person reaches their state pension age. However, they can choose to put off starting to get the pension until a later age if they want to and in that case it is paid at a higher rate once it does start. The increase is now 5.8% for each...

  • Many great points in this thread highlighting how pensions cannot be viewed in isolation but are part of the bigger social and economic context. Capitalism generates wealth and where a reasonable share of this flows to workers (through wages), it can take whole populations out of poverty as it did in post-Industrial Revolution Britain and is doing in countries...

  • These data for the UK on who pays what proportion of income tax may be of interest: 'In 2013-14 the bottom 50% of taxpayers were liable for 9.7% of total tax, whilst the top 50% were liable for 90.3%, showing the progressive nature of the income tax system. More than half (58.6%) of total income tax is paid by the top 10% of taxpayers, while around a quarter...

  • Depends what you mean by temporary, Maria! The stress is the system (whether we are talking about pay-as-you-go pensions like the state scheme or funded pensions like company schemes and personal plans) is largely a product of the demographic bulge caused partly by the post-War 'Baby boom', partly by living longer due to medical advances and better diet and...

  • Next week, when we look at housing, you will see a similar situation. Danny Dorling will argue that the UK has enough bedrooms to house everyone (and still have a spare room for the kids to stay in) if only we used our housing stock more efficiently. But to redistribute housing efficiently would mean many (often older) people downsizing from homes that are...

  • I was awake in the early hours last night and caught a discussion on the World Service Newshour Extra - Debt: Borrowers Beware? (download at http://www.bbc.co.uk/programmes/p04b6yj8). Part of the discussion was how consumer debt is a financialisation of redistribution from rich (savers) to poor (borrowers) and one that is unsustainable because it overburdens...

  • A key point I would like to stress here is that, when the population is ageing, whether or not the stock market is low at the time a large older generation needs to start taking money out as income is not random. The fact that there is a demographic bulge of older people may make it more likely that the stock market is low, so that the value of the investments...

  • Hi Susan, You raise an interesting point about the goals of the investment professionals not necessarily being aligned with those of the retirement saver due to the way charges are structured. The main charge - the annual management charge (AMC) - deducted from investment funds is a percentage of the amount the saver has invested and is taken every year, as...

  • The state pension system from 2016 cannot really be said to be 'improved'; it is merely different and overall it will cost less. The pre-2016 system provided a lower flat-rate pension for all plus and additional state pension for many that earnings-related and potentially very generous (up to £165/week on top of the basic pension). That system was introduced...

  • Similar projections were made , which is why Margaret Thatcher's government in 1993 set in motion the policy to raise women's state pension age to equal that of men - the first step in a whole raft of state pension reforms. projections have, however, consistently underestimated the rate at which life expectancy has been increasing and are subject to other...

  • Hi Kathryn, I agree that basing the analysis on distribution of GDP raises questions about GDP as a measure of a country's output or wealth. In particular, it does not capture the value of unpaid work, such as caring (whether for children or adults).

  • Bear in mind that the chart shows data only for mandatory pension schemes - ie state pension and any compulsory private pension saving. It does not reflect any voluntary saving for retirement. The negative progressivity index for Sweden is a puzzle and we ask you to reflect on it in the Quiz that is coming up. You're right, Andrew, that the chart says nothing...

  • In addition, there are annual and lifetime caps on the amount that qualifies for relief (currently £40,000 annual and £1 million lifetime). If you go over these limits, the tax relief you have had is in effect clawed back by a tax charge. The operation of these limits is quite complex, so that's just a broad brush outline.

  • In the UK, tax relief works as follows: income tax relief up to your highest rate on contributions up to a maximum of £3,600 or the amount of your UK earnings, whichever is highest (these limits include the tax relief). Usually relief is given in one of two ways: net pay, typically used for employer-run schemes, where the contributions are subtracted before...

  • Hi Mags, An interesting thought and essentially that is what the state scheme is doing: making everyone pay National Insurance in order to eventually get a pension (from the state) at a subsistence level, but it does have safeguards built in for those who are unable to make the payments (eg because they are ill, caring or on very low earnings). Those who can...

  • The worry is the amount of tax, in the form of National Insurance contributions, that workers have to pay in to keep the National Insurance Fund solvent. If the amount paid out in pensions rises as more older people become entitled to state pensions, then the amount paid into the Fund in National Insurance contributions also needs to rise. We are moving onto...

  • Tony, yes, you're right that the UK state pension redistributes from men to women (as groups) given women's longer average life expectancy (and the redistribution was more marked when women had a lower state pension age which is now in the process of being phased out). Because National insurance contributions are earnings-related and the new state pension is...

  • You ask for some background on the growing number of centenarians in the UK. For a discussion of the current number (just under 15,000) and trends since 1985, see https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/ageing/bulletins/estimatesoftheveryoldincludingcentenarians/2002to2015. ONS published a paper in 2012 discussing the...

  • Really interesting to hear about the pension systems in other countries - thanks for sharing.

  • Hi John, When looking at different money amounts paid at different points in time, don't forget to take account of inflation. In addition, with National Insurance, bear in mind that employees pay 12% on the main band of their earnings but also their employers pay 13.8%, so it's not just what the worker him- or herself pays. At 66, you are correct that the...

  • You could use a pension calculator, such as the one at https://www.ageuk.org.uk/money-matters/pensions/pension-calculator/ (which I should declare that I helped to develop) to get an idea of how much retirement income you might need, how much you can expect from your current level of saving and how much extra you might need to save. The pensions industry, with...

  • The government publish data on benefit fraud - see https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/473968/fraud-and-error-stats-release-fy-2014-15.pdf. It estimate that fraud amounted to £1.3 billion in 2014-15, which is 0.8% of the total amount paid out.

  • Surprisingly, UK state pensions are still funded by the National Insurance contributions collected, not out of debt. You can find the most recent accounts for the National insurance Fund on page 64 of https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/336829/QR_2010_report_17_July_2014.pdf. For the most recent year, 2012-13, it shows...

  • In 2010 an Independent Public Services Pension Commission reported: 'There is considerable variation between payments to public service pensioners. The average (mean) amount of pension paid is around £7,800 per year (falling to £6,500 when the payment of pensions to dependants is included) and about half of pensioner members receive less than £5,600 per year.'...

  • Yes, Joan, Vinson's 'personal and portable pensions' were the first step, compounded by removal of compulsory membership, government incentives (extra National insurance rebate) to transfer to personal pensions, increasingly onerous regulation of defined benefit (eg final salary) schemes, changes in accounting rules, banning firms from building up surpluses in...

  • While many use pound cost averaging (deliberately or incidentally because they are regular savers) when putting money into the stock market, few consider the same strategy when taking money out - ie withdraw in smaller regular sums - though this may change with more people using drawdown (rather than annuities) to provide their pension and is inherent in...

  • Hi Giles, I would agree that government pensions policy since 2010 has had mixed motives both encouraging saving while creating higher risks and costs for those who do try to manage their retirement provision. Just in case anyone is not familiar with 'pound cost averaging', it is a strategy of investing regular smaller sums in the stock market rather than...

  • Welcome to the course everyone! Great to see some early postings here already. You're right, Mark, the discussions are a huge part of these online courses and sharing experiences, like yours, Richard, and ideas is an important way to increase understanding, build knowledge and explore possible solutions. Really looking forward to sharing the journey with you...

  • Dol and Neuteboom say:
    'The different countries will be characterised by four...sets of indicators:
    a. Accessibility of the national mortgage market...b. Flexibility of the labour market ...
    c. Soundness of the social welfare system...d. Competitiveness of the homeownership sector ...As we saw in the previous sections, homeownership rates have developed in...

  • Hi John, The top graph on this page shows the ages at which each generation are buying homes. So, for example, taking the generation born 1983-87 (who are roughly aged around 30 today) a small proportion buy aged 22, a larger proportion at 23, an even larger proportion at 24 as shown by the rising curve. To take a snapshot of the total number in this...

  • In addition, more people are choosing to live alone in the UK - eg deferring entering relationships, separating more often - so even a stable or falling population can exhibit growing numbers of households. For example, ONS data show that in 1996, 11.5% of the UK population lived in single person households and 10.8% in lone-parent households but by 2015,...

  • That's interesting, Darah. The usual narrative is that the aggressive selling of subprime adjustable rate mortgages in the USA with subsequent high levels of default exposed mis-valuing of mortgage-backed securities which were the dominoes that fell and spread the crisis. It's always interesting to hear how events were perceived by the people on the ground....

  • Amazing though it may seem, the very wealthy really do have that much wealth. You can check out more info at http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/dcp171776_362809.pdf but here are some highlights taking from that survey report:
    • Aggregate total wealth of all private households in Great Britain was £9.5...

  • Not so much a single table but the OECD publish an analysis once a year called Pensions at a Glance which has a wealth of information about pension systems in different countries organised by topics (with country comparisons) and by each country. http://www.oecd-ilibrary.org/social-issues-migration-health/pensions-at-a-glance-2015_pension_glance-2015-en

  • Just for the record, I was self-employed for 25 years (so no employer to contribute to my pension savings) while being a single mother raising two children and working all hours to maintain my family. I feel enormously privileged in my 50s to now have work as an employee with a pension scheme (which however does not make me 'all right jack' as I will have only...

  • Households are not necessarily stable, eg with a high proportion of marriages ending in divorce and few rights regarding splitting assets for unmarried couples that part, so planning on the basis of the household is risky.

  • Sorry you are finding it dull! How to support its non-working population is a major challenge for all societies. In Week 4, you will look at radically different ways of organising society. Here, in this week, we are looking at society as currently organised and trying to tease out, within that constraint, what a 'fair' system of retirement provision might look...

  • Paul, in the UK, defined benefit schemes are still the norm for public sector employees, so relevant for the 5 million or so current public sector employees. The public sector schemes have been radically reformed and are now based on career-average earnings rather than final salaries. Also, bear in mind that many public sector employees are on low pay so that,...

  • Hi Michael, You are right that final salary schemes involve cross-subsidies from those who leave early to those who stay to the end. In the UK, the government introduced changes aimed at addressing this, by requiring early leavers' pensions to be increased in line with prices between leaving and retiring - reduces the cross subsidies to some extent but prices...

  • Hi Marilyn, No, there is no accusation here of anyone 'taking from the rest of society'. The discussion is about the mechanisms for distributing GDP regardless of how the GDP is produced. If you working the mechanism is wages; if you are a shareholder, the mechanism is distribution of profits; in some situations, including having built up entitlement to...

  • Hear, hear! Great discussion. Just to address a couple of queries: yes, you can pay voluntary NICs to fill gaps in NI record, but since you need only 35 years' of NI contributions/credits to qualify for full pension, you can have quite extensive gaps without damaging your state pension at all. Usually, you will have to pay the voluntary contributions within...

  • It was tongue in cheek - particularly as I myself am rapidly approaching the start of my seventh decade!

  • Hi Garry, Yes, I appreciate the jest! There is however a serious trade-off embedded in your comments. It used to be that you needed contributions for 90% of your working life in order to qualify for a full (basic) state pension. When this was reduced to 30 (now increased to 35), some complained that it meant paying NI for the remaining years of working life...

  • We are taking a 'micro' look at pensions this week and housing next, but in Week 4 we widen out to look at alternative ways of organising society.

  • Interesting research on UK life expectancy out today from Cass Business School: http://www.cass.city.ac.uk/news-and-events/news/2016/april/an-investigation-into-growing-inequalities-in-adult-lifespan Finds that gap between longest-lived and shortest lived of people aged 30 and over is newly widening for men and stagnant for women. They suggest lifestyle...

  • Yes, the Netherlands is not straightforward. The data for the Netherlands reflects both the state pension there and 'quasi-mandatory' private schemes. Here's how the OECD describes it: 'The pension system has two main tiers, consisting of a flat-rate public scheme and earnings-related occupational plans. Although there is no statutory obligation for employers...