MSE News: Government unveils Nest pensions charges

matchmade

stueystu wrote: »

Hmm, run this by me again we are will now have to pay an additional amount into a pension scheme... no choice... forgive me but is this not why i pay national insurance? if so why do we have to pay into 2 pension schemes?

Your NI payments are not saving for your old age - all they do is pay for *today's* pensioners and all the people living off social security nowadays. When you retire, you will depend on the NI payments of younger people who are working. The Government dosn't mind paying the compulsory state pension but does object to people failing to add to this with their own savings or pension, and relying on top-up benefit payments from the State. It feels too many people are failing to save for their old age, so it is forcing you and your employer to save with this new tax.

Forgive my cynicism but I fully expect that any modest pension one gets from this new scheme will mean a £1 for £1 withdrawal of the benefit you would otherwise have been entitled to claim. You will be no better off: the government is just taking the money off you early in your life rather than from general taxation when you retire.

I also expect that if you die before taking this new pension, or take the pension for only a few years, the whole lump sum you've saved will be lost and you cannot pass it on to your descendents. It's a swizz, but that's the way it works - die early and your savings will go to fund the people who live longer.

I also dislike this new tax because it's yet again penalising employers. It's a straight tax on jobs. Why should employers contribute to their employees' pensions, especially if you a small employer? Employers will have to administer the blasted thing as well, for no reward. It would have been so much simpler just to do it through NI or PAYE. But no, this Labour government always legislates everything to death, and places ever-increasing burden on employers. Why would any small employer give a job to a woman of child-bearing age nowadays, when you face the risk of her disappearing after a few months onto maternity leave, and the poor employer has to pay for her to have a baby?

hugheskevi

Hmm, run this by me again we are will now have to pay an additional amount into a pension scheme... no choice... forgive me but is this not why i pay national insurance? if so why do we have to pay into 2 pension schemes?

There is a choice - you can choose to opt-out. You will get re-enrolled every 3 years, but you can opt-out each time.

You pay NICs to fund benefits and health care (in theory) and in the process accrue rights to Basic State Pension and State Second Pension (or a contracted-out pension in place of State Second Pension).

The purpose of NEST is that the combination of Basic State Pension and State Second Pension will, for most people not saving into a private pension, be insufficient. Increasing State Pension, and hence taxation, was considered unpalatable.

But given most people without private provision were headed for an inadequate retirement, something had to be done. Hence a third pension - NEST - which is about as close as you can get to compulsory saving in a private pension.

Mind you, NEST is not particularly generous, and is considered to provide the minimum people should want to have, with even average earners probably needing to save above the minimum contribution rate, presumably in a 4th pension

yelf

stueystu wrote: »

Hmm, run this by me again we are will now have to pay an additional amount into a pension scheme... no choice... forgive me but is this not why i pay national insurance? if so why do we have to pay into 2 pension schemes?

You can opt out, but you have to opt out every 3 years

dunstonh

forgive me but is this not why i pay national insurance?

It is if you only want to live on £5000 a year (although of course NI is not just about the state pension).

Forgive my cynicism but I fully expect that any modest pension one gets from this new scheme will mean a £1 for £1 withdrawal of the benefit you would otherwise have been entitled to claim. You will be no better off: the government is just taking the money off you early in your life rather than from general taxation when you retire.

Benefits are being phased upwards in age and almost certainly longer term will be reduced. However, typically a 30 year old will get around 3-4 times what they pay in without an employer contribution so it makes sense for nearly everyone to join this scheme or the employer equivalent to get the free money from the employer.

I also expect that if you die before taking this new pension, or take the pension for only a few years, the whole lump sum you've saved will be lost and you cannot pass it on to your descendents. It's a swizz, but that's the way it works - die early and your savings will go to fund the people who live longer.

That is incorrect.

I also dislike this new tax because it's yet again penalising employers. It's a straight tax on jobs.

actually, its one of the few socialist things this Govt has done (assuming it doesnt get killed off after the election). The other being overspending and borrowing too much.

jamesd

stueystu wrote: »

Hmm, run this by me again we are will now have to pay an additional amount into a pension scheme... no choice... forgive me but is this not why i pay national insurance? if so why do we have to pay into 2 pension schemes?

Because this government has agreed to increase the Minimum Income Guarantee with inflation. With the situation at the time of the Pensions Commission that would mean that a high proportion of pensioners would end up on that means tested benefit. So this new pension is introduced to try to get the poorer pensioners to pay into a pension that will take their income above the level where they would qualify for MIG.

So it's a pension to avoid a future tax bill paying for higher MIG payouts to more people.

And that's also why poorer people are most likely not to benefit, because they would otherwise qualify for the MIG. Those on a low income who do benefit will be the ones who start out on a low income and improve their situation or who are more committed to providing for their future than average. But these interested people would probably benefit more from alternative pensions with a broad range of investment options instead. Those who dislike means tested benefits also benefit because they are less likely to need them.

You're already paying into at least two pension schemes: basic state pension and S2P/Additional State Pension. Additional State Pension is earnings-related but is being made flat rate gradually starting from 2010, at the cost of less benefits for average and higher earners, to increase payouts to low earners. Another part of the effort to keep lower earners at a high enough income so that they don't qualify for the MIG.