The cost of the welfare state - challenges posed and solutions

[JamesT]

I haven't kept up with a lot of the thread but it has got me wondering how we can possibly reduce the cost of the welfare state and pensions which are a huge cost of government spending.

What if we implemented a Singapore-style Central Provident Fund where social savings are compulsory, only in this case you aren't bound to the state and can switch to private savings if you wish.

Unpopular as it may be, this might also have to come with getting rid of the triple-lock. It's quite simply unsustainable and there's no reason why it has to be pegged to the highest possible payment.

The only reason it's been kept is because pensioners are an active voting bloc and will punish the party that dares to make such a decision, evidenced by Starmer's original winter fuel policy.

This goes back to the original founding of the State Pension, whether it would be funded or unfunded. The choice was made that it would be unfunded, current pensioners would be paid out of tax receipts and they would start paying out in full immediately.
Other countries chose to go the funded route where pension contributions go into a investment pot and pensioners are paid out from the returns on that investment.
You could change to an Australian-style system where private pensions are encouraged and you only get state support if that's inadequate. But that would be a long-term project. Many (most?) people would not be in a position where they could accumulate the necessary pot to replace the state pension before they retired. So government is still stuck with the obligation to pay out the current state pension to those who are relying on it.

 

[Dave61]

I haven't kept up with a lot of the thread but it has got me wondering how we can possibly reduce the cost of the welfare state and pensions which are a huge cost of government spending.

What if we implemented a Singapore-style Central Provident Fund where social savings are compulsory, only in this case you aren't bound to the state and can switch to private savings if you wish.

Unpopular as it may be, this might also have to come with getting rid of the triple-lock. It's quite simply unsustainable and there's no reason why it has to be pegged to the highest possible payment.

The only reason it's been kept is because pensioners are an active voting bloc and will punish the party that dares to make such a decision, evidenced by Starmer's original winter fuel policy.

Well something, somewhere has to give. As for pensions I agree about the triple lock but then again also why it came in as the state pension had fallen way behind the cost of living. Maybe keep the "lock" but with a maximum cap (kind of like my private pension that is linked RPi/CPI etc but has a maximum cap).

There has been a lot of debate about the better off/richer people not getting a state pension at all, however you also need at least £31k (so it is claimed) for a "moderate" income in retirement (note this is from 2024!):

Pension income needed to retire jumps as family costs rise

Experts estimates that a single person needs £31,300 a year for a moderate retirement.

www.bbc.co.uk

A single person will need £31,300 a year for a moderate income in retirement, according to a pensions industry body.
The rising cost of living and an expectation to offer financial support to grandchildren had pushed up the income required by £8,000, it said.
The Pensions and Lifetime Savings Association (PLSA) uses evidence from focus groups to make the estimates.
It is intended as a guide for those planning their retirement savings.
The rise is primarily the result of rising food and energy costs, researchers said.
The calculations are pitched at three different levels - minimum, moderate and comfortable - and are developed and maintained independently by the Centre for Research in Social Policy at Loughborough University.
They estimated that a single person needed £14,400 a year for a minimum income, and £43,100 a year for a comfortable retirement.
Couples required a joint £22,400 at the minimum level, £43,100 at a moderate level, and £59,000 at a comfortable level.

The state pension falls short of even a Minimum for a single person, just about for a couple.

As for welfare support the trick is to find a way of helping those who really need the help, and then making going back to work worthwhile. The transition can often come with traps where as you start to earn more the benefits erode at a faster rate than you are earning which kind of reduces the enthusiam to get back to work. That most jobs are minimum wage does not help not the personal allowance freeze.

And then it went off at a bit of a tangent about the 100k to 125k tax trap/cliff but I think that should be a seperate discussion!

 

[Bald Rick]

You could change to an Australian-style system where private pensions are encouraged and you only get state support if that's inadequate. But that would be a long-term project. Many (most?) people would not be in a position where they could accumulate the necessary pot to replace the state pension before they retired. So government is still stuck with the obligation to pay out the current state pension to those who are relying on it.

That’s kind of the route the Governemnt took us down 14 years ago, with various policy ‘nudges’. Such as auto-enrolment into company pensions, raising the annual ISA Limit (quite considerably), Lifetime ISAs, etc. It will be another couple of decades before the full effects of that bear fruit though.

 

[Bletchleyite]

What if we implemented a Singapore-style Central Provident Fund where social savings are compulsory, only in this case you aren't bound to the state and can switch to private savings if you wish.

I have toyed with the idea of making the State Pension actually contributory (even if it remains a defined-benefit scheme), i.e. getting away from the idea that the present earners pay for the present pensioners. The problem is you would need to phase that in over a ridiculously long period - at least 50 years, possibly more - and the UK isn't very good at long-termism in policy.

== Doublepost prevention - post automatically merged: 21 Aug 2026 ==

Well something, somewhere has to give. As for pensions I agree about the triple lock but then again also why it came in as the state pension had fallen way behind the cost of living. Maybe keep the "lock" but with a maximum cap (kind of like my private pension that is linked RPi/CPI etc but has a maximum cap).

Either capping it to wages or capping it to RPI would do. The 2.5% thing is the main problem as it cranks it right up in periods of low inflation - this was required for the "catch up" but it's caught up now so is no longer required. Because we've been in a period of high inflation the last few years that's not really done anything, but once things settle again it will and it could do with being removed before then.

 

[AlterEgo]

I believe the NLW has a London weighting, which would be accounted for in this figure.

I can assure you that as someone who has previously lived in a situation where two NMW incomes are coming in to a house and I don't live in or near London you don't live "reasonably OK."

Yes, these are existence wages, not wages you can forge any sort of life on and thrive. Britain has a lot of low waged work and it would be this I'd start tackling first if I was in charge.

 

[Bletchleyite]

Yes, these are existence wages, not wages you can forge any sort of life on and thrive.

Again, depends where you live. A household take home income of £3600/month isn't riches but will give you a pretty decent life somewhere like West Cumbria or even Carlisle. These are places where a decent terraced house costs around £100K or often less and rents are low alongside that. You won't have a new car and a weekend away every month (unless it's camping in the Lakes or North Wales), but it will be a perfectly acceptable life.

Try that in Milton Keynes and it'll be a subsistence life, by contrast.

A single person will however struggle and will probably need to be living in an HMO of some sort.

 

[Harpo]

The only reason it's been kept is because pensioners are an active voting bloc and will punish the party that dares to make such a decision, evidenced by Starmer's original winter fuel policy.

That’s called democracy isn’t it? Others here call such stuff ‘the will of the people’. Perhaps an alternative to democracy is needed? I’m sure Reform will have some ideas.

 

[BuhSnarf]

Again, depends where you live. A household take home income of £3600/month isn't riches but will give you a pretty decent life somewhere like West Cumbria or even Carlisle. These are places where a decent terraced house costs around £100K or often less and rents are low alongside that. You won't have a new car and a weekend away every month (unless it's camping in the Lakes or North Wales), but it will be a perfectly acceptable life.

Try that in Milton Keynes and it'll be a subsistence life, by contrast.

A single person will however struggle and will probably need to be living in an HMO of some sort.

Your answers to some of these questions lead me to believe you've not had to live on the bread line as a young family. A household take home of £3,600 (is easily ate up if you add in a couple of kids, rent, childcare, food, school uniforms, clothing, car for one and public transport for the other, utilities, council tax etc. Unless you're suggesting that all these people who are struggling to make ends meat, aren't actually struggling and they're all just bad with money?

 

[Bletchleyite]

Your answers to some of these questions lead me to believe you've not had to live on the bread line as a young family. A household take home of £3,600 (is easily ate up if you add in a couple of kids, rent, childcare, food, school uniforms, clothing, car for one and public transport for the other, utilities, council tax etc. Unless you're suggesting that all these people who are struggling to make ends meat, aren't actually struggling and they're all just bad with money?

It'll certainly be harder with kids, yes. I am assuming a childless couple. But of course kids give access to more benefits.

 

[cactustwirly]

Unfortunately, the strategy of the last 40 years, of trusting in the 'wisdom' of the free market has shown that well paid jobs and industries don't just appear in deprived and deindustrialised areas of our country. Hopefully we are learning that lesson, and will be more proactive in future.

Until it seemed to disappear, I was quite a fan of Starmers "green industrial revolution" idea, trying to get us at the forefront of new energy technologies, unfortunately that didn't really seem to pan out.

This is the problem with our society. You have an area of the UK with a saturated job market with a lot of high paying skilled jobs. House prices are very high, leaving a lot of people having to live in HMOs as the only affordable option, despite taking in a decent salary above minimum wage.

Other areas have affordable housing but a drought of skilled jobs.

GusB mentions above that everyone who works a good 40 hour week should be able to afford decent accommodation. This is the ideal scenario but completely out of touch with the South East. You basically need to be a higher rate taxpayer to afford anywhere decent.

 

[Egg Centric]

That will never happen. It will inevitably lead to women being more likely to become housewives again and the loss of freedom that brings.

What lack of freedom? Having done both we massively prefer it with me being the only earner, despite what is a fairly significant* financial hit. We only have to plan holidays around my leave, we don't have to worry (much) about childcare, there's a lot more time as a couple to do things together, etc etc.

*But not *that* significant due to the cliff edge nursery means testing

 

[Sorcerer]

That’s called democracy isn’t it? Others here call such stuff ‘the will of the people’. Perhaps an alternative to democracy is needed? I’m sure Reform will have some ideas.

The problem is that the will of the people is sometimes incompatible with the solutions necessary. The pensions and welfare system is unsustainable with an ageing population, but nobody wants to increase the retirement age to keep people working longer, and people have consistently wanted reduced immigration, and thus by rules of democracy, any party that defies this will be punished at the polls. This isn't me calling for the end of democracy but issues like welfare and pensions make it very easy to be critical of it, but that's another subject entirely.

 

[Broucek]

What lack of freedom? Having done both we massively prefer it with me being the only earner, despite what is a fairly significant* financial hit. We only have to plan holidays around my leave, we don't have to worry (much) about childcare, there's a lot more time as a couple to do things together, etc etc.

*But not *that* significant due to the cliff edge nursery means testing

Good for you! But on the whole, we've gone from actively preventing women with kids from being in the workplace to forcing them to stay there due to the cost of housing...

 

[Dave61]

This is the problem with our society. You have an area of the UK with a saturated job market with a lot of high paying skilled jobs. House prices are very high, leaving a lot of people having to live in HMOs as the only affordable option, despite taking in a decent salary above minimum wage.

Other areas have affordable housing but a drought of skilled jobs.

GusB mentions above that everyone who works a good 40 hour week should be able to afford decent accommodation. This is the ideal scenario but completely out of touch with the South East. You basically need to be a higher rate taxpayer to afford anywhere decent.

We have HMO's popping up all over here in the East Midlands (there are a couple directly behind us backing onto the rear of our property) never mind the south east, I do wonder how these people will cope with retirement after a lifetime of renting but that is another ticking time bomb. The local council are belatedly taking action to curb the rise of them but again are too slow & late.

 

[styles]

We have HMO's popping up all over here in the East Midlands (there are a couple directly behind us backing onto the rear of our property) never mind the south east, I do wonder how these people will cope with retirement after a lifetime of renting but that is another ticking time bomb. The local council are belatedly taking action to curb the rise of them but again are too slow & late.

I see you're in Long Eaton. This has been popular in Nottingham and Derby for many years owing partly to the university populations. In Nottingham, this was traditionally kept mainly in Lenton, with a bit of Radford, Dunkirk, maybe Wollaton in parts. It has since spread to Beeston. Nottingham City Council developed a strategy about 'balanced communities' (or something to that effect) where the plan was avoid certain areas becoming overrun with HMOs, as the evidence shows it's better to have blends of living conditions and backgrounds, when it comes to everything from noise pollution to crime to community initiatives.

For those who aren't students, maybe of whom living in Radford, I think they are destined to live in HMOs for many years. Derby and Nottingham have high costs of living, particularly council tax and rent, and affording your own property just isn't achievable for many single people.

Once you get into a relationship, the cost of living comes down massively. If you have children, you are eligible for benefits which, from second hand experience, more than cover the cost.

All this to say, I don't think it's a problem with the cost of living per se, I think it's a problem with the cost of living as a single person on a low wage.

 

[Dave61]

I see you're in Long Eaton. This has been popular in Nottingham and Derby for many years owing partly to the university populations. In Nottingham, this was traditionally kept mainly in Lenton, with a bit of Radford, Dunkirk, maybe Wollaton in parts. It has since spread to Beeston. Nottingham City Council developed a strategy about 'balanced communities' (or something to that effect) where the plan was avoid certain areas becoming overrun with HMOs, as the evidence shows it's better to have blends of living conditions and backgrounds, when it comes to everything from noise pollution to crime to community initiatives.

For those who aren't students, maybe of whom living in Radford, I think they are destined to live in HMOs for many years. Derby and Nottingham have high costs of living, particularly council tax and rent, and affording your own property just isn't achievable for many single people.

Once you get into a relationship, the cost of living comes down massively. If you have children, you are eligible for benefits which, from second hand experience, more than cover the cost.

All this to say, I don't think it's a problem with the cost of living per se, I think it's a problem with the cost of living as a single person on a low wage.

I am indeed but the thing is we are not what I would call an expensive area for housing. A decade or so back when job moved down the country (Oxford) I did consider maybe moving closer but a decent house (not oxford I might add!) would have demanded a deposit not far off the value of my current house. Thankfully WFH came to the rescue so I put up with a 2 hour each way drive once or twice a week.

I am not 100% sure those in the HMO over the garden fence are students as they seem like a mixed bunch but yes are quite young, does not seem like much of a life to me.

Yes a relationship can help but if you are both stuck on minimum wage it won't help that much, thankfully I had a decently paid job until we both retired in 2024/2025 respectively. Child benefits do help and there is more free childcare these days but even then I would challenge someone on minimum wage going back to full time work. My wife did back in the 1990's as she really wanted to despite the nursery costs consuming a huge amount of her income at the time.

 

[Egg Centric]

Good for you! But on the whole, we've gone from actively preventing women with kids from being in the workplace to forcing them to stay there due to the cost of housing...

Yes, housing is a disgrace. Unfortunately for demographic reasons boomers are holding the country hostage so there's little that can be done about this unless they can be persuaded that perhaps not living in a steadily deteroriating places needs some give and take.

 

[AlterEgo]

What lack of freedom? Having done both we massively prefer it with me being the only earner, despite what is a fairly significant* financial hit. We only have to plan holidays around my leave, we don't have to worry (much) about childcare, there's a lot more time as a couple to do things together, etc etc.

*But not *that* significant due to the cliff edge nursery means testing

It might work for you but one of the core tenets of women's emancipation from unpaid labour at home is that it enables women to be freer and have more choice, because they have their own money and career. A suggestion that our whole society should build itself around single earner households would be a net negative for women as a cohort.

 

[Egg Centric]

It might work for you but one of the core tenets of women's emancipation from unpaid labour at home is that it enables women to be freer and have more choice, because they have their own money and career. A suggestion that our whole society should build itself around single earner households would be a net negative for women as a cohort.

There's a difference between making it so that in a two person household both can work and making it so that it's essential. Similar principle to e.g. working on weekends. (One of the best ways would be sorting out the universal credit taper which no one seems to have focussed on in the marginal tax rate discussion, instead on the personal allowance withdrawal - but actually it's the most pernicious of them all at over 70% and at the people who are most vulnerable and need weaning into higher careers)

 

[styles]

It might work for you but one of the core tenets of women's emancipation from unpaid labour at home is that it enables women to be freer and have more choice, because they have their own money and career. A suggestion that our whole society should build itself around single earner households would be a net negative for women as a cohort.

It's also quite difficult to actually make the shift.

Despite all of our efforts over the past few decades on everything from gender wage gaps to shared childcare leave, women remain the majority when it comes to being primary caregivers, both for their children and for their parents.

I would actually quite enjoy being a "stay at home husband" - I enjoy being with the children, cooking, cleaning, I'd get DIY done, I do most of our admin and finance, etc. But my work pays double that of my partner, and it would just never happen without a significant downsizing and change of attitude towards holidays and fun stuff.

 

[Bald Rick]

I would actually quite enjoy being a "stay at home husband" - I enjoy being with the children, cooking, cleaning, I'd get DIY done, I do most of our admin and finance, etc. But my work pays double that of my partner, and it would just never happen without a significant downsizing and change of attitude towards holidays and fun stuff.

Same.

 

[Bletchleyite]

I would actually quite enjoy being a "stay at home husband" - I enjoy being with the children, cooking, cleaning, I'd get DIY done, I do most of our admin and finance, etc. But my work pays double that of my partner, and it would just never happen without a significant downsizing and change of attitude towards holidays and fun stuff.

I personally know one, though now the kids are a bit older he's started doing Tesco deliveries to earn a bit of extra money. I believe he mostly does these outside of office hours so one of them can always be there for the kids (given that non-office-hours deliveries are rather more popular than office-hours ones). His wife is a highly paid business consultant of some kind.

 

[Bald Rick]

I personally know one, though now the kids are a bit older he's started doing Tesco deliveries to earn a bit of extra money. I believe he mostly does these outside of office hours so one of them can always be there for the kids (given that non-office-hours deliveries are rather more popular than office-hours ones). His wife is a highly paid business consultant of some kind.

Yes I know several who were during the ‘kids years’. And two now, one of whom is retired but has the excuse of young kids.

 

[styles]

I personally know one, though now the kids are a bit older he's started doing Tesco deliveries to earn a bit of extra money. I believe he mostly does these outside of office hours so one of them can always be there for the kids (given that non-office-hours deliveries are rather more popular than office-hours ones). His wife is a highly paid business consultant of some kind.

Yeah I'd also be happy to do some night shift work. I always enjoyed it as a teenager. Headphones on, drop a hundred pallets, work them, condense, stack them back, no customers, a slightly more relaxed approach to health and safety. You finished the shift feeling like you'd earned your fry up. I've done nights at Royal Mail for Christmas as well, something I'd happily go back to to top up the pot.

 

[Egg Centric]

Yeah I'd also be happy to do some night shift work. I always enjoyed it as a teenager. Headphones on, drop a hundred pallets, work them, condense, stack them back, no customers, a slightly more relaxed approach to health and safety. You finished the shift feeling like you'd earned your fry up. I've done nights at Royal Mail for Christmas as well, something I'd happily go back to to top up the pot.

Neither as fun as moped pizza delivery, something I occasionally look at but (despite what the job ads say!) everywhere around here so far you have to supply your own moped and while I'd do it almost for free (did it as a summer job at uni and apart from the occasional robbery attempt it was fabulous fun) I'm not going to pay to do it.

 

[styles]

Neither as fun as moped pizza delivery, something I occasionally look at but (despite what the job ads say!) everywhere around here so far you have to supply your own moped and while I'd do it almost for free (did it as a summer job at uni and apart from the occasional robbery attempt it was fabulous fun) I'm not going to pay to do it.

I'm not sure if it's a universal policy, but I think Domino's supply a lot of their own bikes?

They were always the more respectable delivery drivers in London. Because their bike is supplied and properly insured, they're paid by the hour rather than per delivery like Uber Eats and Deliveroo, they get holiday pay, pension, guaranteed work, discounted dinner, etc they're encouraged to drive/ride safely and obey the road traffic laws. Whereas the Uber Eats lot are paid per delivery rather than per hour so they're practically incentivised to mount pavements, run red lights, abuse cycle boxes, etc. I'm sure it's minimum wage or close to it, but I'd gladly do it.

 

[Egg Centric]

I'm not sure if it's a universal policy, but I think Domino's supply a lot of their own bikes?

They were always the more respectable delivery drivers in London. Because their bike is supplied and properly insured, they're paid by the hour rather than per delivery like Uber Eats and Deliveroo, they get holiday pay, pension, guaranteed work, discounted dinner, etc they're encouraged to drive/ride safely and obey the road traffic laws. Whereas the Uber Eats lot are paid per delivery rather than per hour so they're practically incentivised to mount pavements, run red lights, abuse cycle boxes, etc. I'm sure it's minimum wage or close to it, but I'd gladly do it.

Yeah and indeed they advertise delivery jobs in the nearest one to me (Consett) claiming that they supply the mopeds. But if you actually apply - no they don't!

 

[styles]

Yeah and indeed they advertise delivery jobs in the nearest one to me (Consett) claiming that they supply the mopeds. But if you actually apply - no they don't!

Well that's a bit silly. I know our local Domino's in London supplied them because all the mopeds were branded with their logos.

If I were 16 again I'd gladly have taken a job riding a moped around delivering pizza!

But yeah I wouldn't be providing my own vehicle and insurance. Anecdotally, everyone I've known to do delivery work has done it without the proper delivery insurance in place. They've done it on SDP only. The one family member I know who has done this and ended up in a crash (not his fault) disposed of the takeaway he had in the car before the police arrived.

 

[Dave61]

Yes, housing is a disgrace. Unfortunately for demographic reasons boomers are holding the country hostage so there's little that can be done about this unless they can be persuaded that perhaps not living in a steadily deteroriating places needs some give and take.

As a tail end boomer myself I take exception to that claim - I am certainly not holding the country to hostage, and would love to know how you think that is.

 

[styles]

As a tail end boomer myself I take exception to that claim - I am certainly not holding the country to hostage, and would love to know how you think that is.

While not aimed at you personally, I think it's easy to see why young people may feel aggrieved at how different generations are being treated.

We have a state pension policy which ensures pensions increase above inflation, for a generation who didn't have to pay for university; whilst under the latest student loans regime the vast majority will never even pay off their loan in full because the interest outstrips the repayments. House prices relative to income have increased 5x in real terms since the same time a century ago, and 2.5x since 66 years ago (state pension age). Young people are spending proportionately more in accommodation costs, especially since the fall in council housing availability, compared to the current retirement generation, with student loans taken off their income, while pensioners receive above-inflation rises in their state income.

While I don't agree with @Egg Centric's wording as it frames it as a personal issue to yourself, it is a problem, and it's only going to increase the unfairness of inherited wealth.

I did a computer science degree on a Plan 1 student loan and am close to paying it off now, but with the current student loans system, I wouldn't study in the UK if I were 18 again today. I'd be seriously considering moving to mainland Europe.