MSE News: £140-a-week state pensions on the cards

Dominic9

Interesting report from the Pension Policy Institute has been published.

In particular, there is a table on page 60, which shows the proportion of pensioners eligible for means-tested benefit now and under the proposed new system.

The proportions are:

2010: 60% of pensioners eligible for means-tested benefits
2020: 50% under current system, 50% under reformed system
2030: 50% under current system, 45% under reformed system
2040: 50% under current system, 40% under reformed system
2050: 45% under current system, 35% under reformed system

Note - figures above refer to pensioner households, rather than individual pensioners

oldtractor

I worked before marriage in a low paid shop assistant job. Got married and left work after my 1st was born. Home responsibilites mant my stamp was paid. I now have 30 years contributions and although family now grown I am still a stay at home housewife as I love my life doing that. I will get £140 a week when I am 66 instead of what was projected for me which was £95 a week. I have to wait til 66 rather than 60 as before but I am very pleased at the£140 never the less.

jamesd

Dominic9 wrote: »

In particular, there is a table on page 60, which shows the proportion of pensioners eligible for means-tested benefit now and under the proposed new system.

Such a table does not exist on page 60 of the document. There is table 19 on that page, which covers pensioner households rather than pensioners. The closest table for pensioners appears to be table10 on page 31, which gives these figures for pensioners eligible for Pension Credit under the various systems:

2010: current 4.5 million, flat rate 4.5 million
2020: current 4.1 million, flat rate 3.7 million
2030: current 4.9 million, flat rate 2.6 million
2040: current 5.1 million, flat rate 1.4 million
2050: current 4.4 million, flat rate 0.8 million

A significant part of the reason is the triple lock for basic state pension increases, which increases the income at which people qualify for pension credit.

The PPI paper is interesting when considering the options.

Reform 1, faster flat-rating of S2P:

5.3 million households worse off by 2034 and by 2055 that increases to 6.7 million worse off, the losers are mostly those earning between £14,400 and $40,040 a year. Negligible difference in the number of pensioners eligible for means tested benefits.

Reform 2, single tier pension (the £140 scheme)

More for those who are unemployed during working years for a log time, some women and carers, those not claiming the benefits they are entitled to and some couples.
Less for those who worked and paid for more than 30 years, those with less than 7 years contributions, those eligible for Savings Credit.
By 2034 6.8 million better off in pension income, 5.2 million worse off in pension income. By 2055 11 million better off in pension income and 5 million worse off.
Big reduction in those eligible for means tested benefits, from 4.4 million in the current system to 0.8 million (5%) by 2055.
Increased incentive for employers to stop offering defined benefit pensions because their costs would go up.
Losers include those who make the wage of the average man all of their their life, as well as the similar set of earners in reform 1.

It's not very impressive to me: the main gainers are those who failed to provide for themselves and the losers are those who do try to provide for themselves, who pay for those who didn't. Seems better to me to rely on the benefits system to look after those who don't look after themselves.

I'm not keen in the decrease in personal responsibility that this introduces. I do wonder what the effect of sending everyone a combined state and private pension forecast every year might be on encouraging providing for retirement. Some work pension schemes already do this today but not including all pensions, just the one scheme and the state pensions. Seems much more likely that people will know where they will be if they are given a picture every year.

It's fairly likely that I'd be better off, because I was out of the country for many years and the flat rate might pay more than myS2P contributions can buy. Depends how long I leave it until retiring, the shorter the time, the better off I will be.

I'm not alone in that, I think. The change eliminates the state pension benefit for working longer because you stop accruing more additional state pension as well as stopping accruing basic state pension. How long it takes before you stop accruing more additional state pension depends on your earnings.

seven-day-weekend

oldtractor wrote: »

I worked before marriage in a low paid shop assistant job. Got married and left work after my 1st was born. Home responsibilites mant my stamp was paid. I now have 30 years contributions and although family now grown I am still a stay at home housewife as I love my life doing that. I will get £140 a week when I am 66 instead of what was projected for me which was £95 a week. I have to wait til 66 rather than 60 as before but I am very pleased at the£140 never the less.

I'm glad you are going to get your £140 Pension,much of which appears to be from HRP. As an existing Pensioner not entitled to Pension Credits, I will stay on £109 a week although I paid in NI contributions for 26 years (13 years HRP).

Now how is that fair?

jem16

seven-day-weekend wrote: »

I'm glad you are going to get your £140 Pension,much of which appears to be from HRP. As an existing Pensioner not entitled to Pension Credits, I will stay on £109 a week although I paid in NI contributions for 26 years (13 years HRP).

Now how is that fair?

From the sound of the proposals you wouldn't be getting the full £140 even if you were not already retired due to your contracting out into the LGPS.

seven-day-weekend

jem16 wrote: »

From the sound of the proposals you wouldn't be getting the full £140 even if you were not already retired due to your contracting out into the LGPS.

So people with other pensions won't get the £140?

So everyone won't get the same State Pension then, will they?

Yet again people who have provided for themselves are shafted.

Really then the only difference is that any extra is not means-tested as it is with Pension Credit.

I can understand someone like my friend feeling a little miffed, she worked full-time for most of her working life and gets £140 now (including SERPS as she was never contracted out) and now someone who has never paid in a penny piece will get the same, and not means-tested. i.e. th same as someone who has paid all their life.

There should be SOME perks for having paid in all your life, surely.

I'm not saying we should not look after people, but I really do think that someone who has paid in all their lives should have more in non means-tested pension than someone who hasn't. I can't see how the new system is fairer.

jamesd

It's not intended to be fairer. It's intended to shift money from those who have provided for themselves to those who haven't, to reduce the benefits part of the government budget.

seven-day-weekend

jamesd wrote: »

It's not intended to be fairer. It's intended to shift money from those who have provided for themselves to those who haven't, to reduce the benefits part of the government budget.

Oh right...in that case I suppose it will serve its purpose.:mad:

Pay into a private/Occupational Pension scheme and get no more (and sometimes less) than someone who hasn't bothered. Great.

And this Government is supposed to be encoouraging more people to make their own provision? It will do that how, exactly?

VictimOfImpersonation

I have an old contracted out SERPS personal pension (S2P opt out I guess). It has about £35,000 transfer value in it. In what ways might this flat-rating exercise potentially affect me?

jamesd

seven-day-weekend wrote: »

And this Government is supposed to be encoouraging more people to make their own provision? It will do that how, exactly?

In the same way it did by cutting drawdown income levels by 18% with almost no notice. This government already has form for doing things to make retirement investing for income during a person's life using pensions less attractive than they were.

VictimOfImpersonation wrote: »

I have an old contracted out SERPS personal pension (S2P opt out I guess). It has about £35,000 transfer value in it. In what ways might this flat-rating exercise potentially affect me?

You may see the amount of income deducted from the additional state pension for each year contracted out increase if the state pension it's based on increases. The 35,000 itself won't be affected.

• Additional State Pension: what you get paid in addition to the Basic State Pension as a result of being contracted in.
• SERPS: older version of S2P, paid out more to average and higher earners in Additional State Pension than S2P does (to increase state pension payments to low paid workers, a Labour government measure).
• Contracting Out of SERPS or S2P: accumulating a personal or work place pension pot at the expense of losing some Additional State Pension entitlement.
• Protected Rights: the name of the pension pots built up from contracting out of SERPS in the past or S2P now. The rights protected are of the government to restrict your income choices, not your own rights. The plan is to eliminate the distinction between Protected rights and other pots next tax year at the same time as the ability to contract out is removed.
• The proposed £140 a week income: even more severe taking of state pension benefits from average and above average earners to transfer money to low paid workers, expanding the beneficiaries to long term unemployed or those not working for many years.
• SERPS: State Earnings-Related Pension Scheme, paid into the Additional State pension entitlement.
• S2P: State Second Pension, pays into the Additional State Pension entitlement.