Feeds

Fuel foolery, merger warnings and Budgetary boons

New Budget makes some sensible changes...and some mad ones too

Internet Security Threat Report 2014

Retiring beyond our means

The second truly big change is the rise in the old age pension qualifying age. There's been a bit of pushing around of qualifying age terms in recent years: male and female ages have been equalised, and the qualifying age has gone up a couple of years. But the changes in longevity have been so huge over the past century that this just isn't sufficient.

It's worth reminding ourselves that the pension was not supposed to be a system of assurance, but of insurance – insurance against that happy circumstance of living too long. To clarify the difference: assurance is a form of saving for something that's either highly likely to happen or will happen. Burial costs, for example, other than for those lost at sea, are going to figure in all of our life and death plans. So a system of saving for something so hugely likely to happen is assurance.

Insurance on the other hand is a form of saving (or if you prefer, sharing of risks) about something that is less than likely to happen. Your house burning down for example. When Bismark first brought in the very idea of general or tax financed old age pensions, the qualifying age was 65. Average lifespan (hugely lowered by child mortality of course) was 45 for a Prussian. Average lifespan for someone who had managed to reach working age was more like that 65 figure. So, being rational (yes, I know the idea of rationality in economics has taken something of a hit just recently) your average working man would be trying to save enough to carry him through from the end of working life to his likely age of death: 65-ish.

What the pension did was insure yon sausage muncher against the risk of living too long and outliving those savings. It's a happy circumstance to live long, less happy to do so in penury.

Lloyd George's implementation of the same plan here started the pension at 70, it wasn't lowered to 65 until later and to 60 for women only after WWII. But now, of course, the average age at death is more like 77, 78 for men, 81, 82 for women, and there doesn't seem to be any great slowdown in the rate of its increase (one of the more fascinating, for a given value of "fascinating", demographic facts is that there is now almost no difference between life expectancy at birth and life expectancy at working age. We've largely conquered those appalling rates of death in infancy).

Almost everyone therefore expects to live to an age to collect a pension: it has become assurance instead of the original insurance. The proposal therefore is to tie (as some other places, Denmark among them, already have done) the pension age to the average age of death. In a perfect world, to the average age of death of the previous cohort... Thus the pension becomes what it was originally, insurance against outliving your rational level of savings.

A useful byproduct of so limiting the concept is that it could become a reasonable and serious payment again. If it is something that's paid to only half of old people and paid to all only for six or seven years rather than 12 or 14, then it could be more generous, while still reducing the total cost.

Yes, this is rather bloodthirsty, but something must indeed be done about the long-term costs of rising lifespans.

Making R&D pay

The third interesting little bit is the change to the research and development tax credit. Add this to the previously announced special low rate of corporation tax on patents owned by British companies and we've a quite marvellous tax system for research-based companies. This will of course be of interest to all you technical types that read here unlike the rest: assuming that none of you are planning to either pay NI or retire.

Here's (suitably adjusted for the new rules) what HMRC says about the scheme:

[T]he tax relief on allowable R&D costs is 200 per cent – that is, for each £100 of qualifying costs, your company or organisation could have the income on which Corporation Tax is paid reduced by an additional £100 on top of the £100 spent. It also includes a payable credit in some circumstances.

That's really rather attractive: if you're paying £100k in R&D a year, and making £100k in profits even after doing so, then you've just wiped out your entire tax bill. Add in the sheltering of profits from patents announced a few months back, and if and when you find yourself with a real hit product you'll only be paying 10 per cent corporation tax on those profits from that patent.

Effectively, if you work at it, the UK has become near tax-free for organisations which develop things and then licence the rights to manufacture them. Given that this is one of the things we seem to be rather good at (ARM Holdings and Dyson being just two examples) and given that these are exactly the sort of organisations which employ you technical types, this is really rather cheering for the readership of El Reg. To extend it a little further, these two changes have just made Hartlepool, of all places, an attractive location for an adventure I'm involved in with my day job. And it really does need to be quite something to make Hartlepool attractive really.

So, some good things in the Budget after all, along with the usual insanities. I'm left wondering whether, sometime, without having to schlep off to a parallel universe, we might ever get a budget that contains only good things?

Ah, sorry, forgot, there's politicians involved isn't there, never going to happen... ®

* There's a technical point there to do with the elasticity of supply and demand for labour with respect to price which we'll not go into and which determines who it is: suffice it to say that most of those who understand what that phrase means accept that from most to all of employers' NI is paid by the workers.

Internet Security Threat Report 2014

More from The Register

next story
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
Driving with an Apple Watch could land you with a £100 FINE
Bad news for tech-addicted fanbois behind the wheel
Phones 4u website DIES as wounded mobe retailer struggles to stay above water
Founder blames 'ruthless network partners' for implosion
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Special pleading against mass surveillance won't help anyone
Protecting journalists alone won't protect their sources
Big Content Australia just blew a big hole in its credibility
AHEDA's research on average content prices did not expose methodology, so appears less than rigourous
Vodafone to buy 140 Phones 4u stores from stricken retailer
887 jobs 'preserved' in the process, says administrator PwC
prev story

Whitepapers

Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Beginner's guide to SSL certificates
De-mystify the technology involved and give you the information you need to make the best decision when considering your online security options.