Episode Details

Is the welfare state system broken, and if so, what are you going to do to fund your retirement and pay for elderly care?

When I was growing up in London there were different waves of migrants coming into the country. Many members of my extended family were coming over on the boat from Ireland, where there was little opportunity and widespread poverty. I also went to school with many first-generation migrants from Cyprus, India, East Africa and the Caribbean.

Later on, I saw other waves of immigration from places like Uganda, after Idi Amin literally kicked out all of the Asian population, and the Philippines.

I noticed that many of them bought their own houses rather than relying on council housing, perhaps because this was not so readily available to them as it was to the indigenous population. 

Like some of my own family, they rented out part of their house or took in a lodger to help make ends meet. Sometimes, the rent they would and would often cover their mortgage and enable them to save money for another house. It was inconvenient in some ways and not as comfortable as having your own space to yourself, but they did what it took to get on.

They also had a higher tendency to start their own businesses, based on my anecdotal observations. Perhaps because they could not find a job which utilise their education and skills from their own country.

I also noticed that they worked harder than the average person and often had two or three jobs.

Most British people still believed in and depended on the so-called “cradle-to-grave” welfare state brought in after the war. They were told by the government that they will be looked after from the time they were born until they were buried.

Everything was meant to be free from healthcare, education up to university level to elderly care. People pay taxes and national insurance contributions which was supposed to provide for their pension in old age. They also had the safety net of the benefit system which meant that they were paid if they were unemployed or could not work.

During my early years in financial services, people would often say things like, “the government will look after me if I don’t have enough pension savings”, or “the state will look after my wife and children if I die with no insurance”. In many ways, they were correct. The state does provide benefits for people who retire without any pension, which seems on fair to all of those people who have sacrificed and saved for retirement.

Mature Times Recently quoted a report by Canada life that almost 2 in five pensioners or 38% of claimants receive less than £150 a week.

Can you live on £150 per week? You can probably survive on it but you can’t live comfortably on the state pension or benefits, which is why are you here of pensioners freezing to death in the winter or having to make the choice between food or heat. Most people blame the government but the fact is we all have the opportunity to work and say during our lifetime. Furthermore, the amount most people pay in taxes during their lifetime hardly covers what the government needs to spend to keep everybody safe, healthy and happy let alone provide income and benefits for another 20 or 30 years in retirement. In other words, if someone on a low income was refunded all the tax they’d paid during their lifetime it would not be enough to live on for almost as many years in retirement as they had spent in work. 

The welfare system is broken and unsustainable. This is why successive governments have had to change the rules and move the goalposts. Retirement ages have increased, people have to sell their homes to pay for elderly care in nursing homes and university education is no longer free in England.  

Most governments have had to borrow money to make ends meet based on the current expenditure, which means that the country is