Minimum income guarantee questions.

gustav

As I understand it, there is currently a Minimum Income Guarantee scheme in place that applies to pensioners (correct me if i'm wrong).

Question 1: Do the calculations for this take into account both the Basic State Pension Payment and any SERPS payments being paid?

2. Where is the level of Minimum Income Guarantee in relation to Basic State Pension level?

dunstonh

The minimum income guarantee was withdrawn April 2004 and replaced with the pension credit.

1 - Calculations take into account ALL sources of income. This includes state pension, graduated pension, Serps/S2P (whether contracted in or out), works pensions, annuties etc. (benefits such as attendance allowance isnt included)

Savings income is not recorded but has a different calculation. The first £6000 of savings is exempt. For amounts above this, you are treated as having £1 of income p.w. for every £500 saved.

2 - It is household income that matters. Not individual.

From age 60 a person living alone will get their income made up to £105.45 p.w. A couple will get it made up to £160.95 pw. (Over the age of 65 it is also possible to have these figures increased to £144 and £212 )

The basic state pension is £79.59pw or £127.25pw.

So the amount above state pension is not that great. It can be eaten up quite easily by the time you include graduated, serps/s2p and personal savings.

I used to think that the pension credit would be phased out over time. Now i reckon that the pension credit will remain and gradually increase at a rate faster than the basic state pension which will get lower than real value increases. This would favour the lower income households and mean less would be paid to higher income households. It will always remain a low income supplement but it would be a way to phase in means tested state pension by the backdoor.

gustav

dunstonh wrote:

A couple will get it made up to £160.95 pw.
The basic state pension is £79.59pw or £127.25pw.

So Basic State Pension is £127.25, but this is always made up to £160.95 if there is no other income?
Doesn't that then mean that the £33.70 difference between £160.95 and £127.25 is always paid by the state, regardless of whether any SERPS payment is paid?
If that's right, then what was the point of SERPS?

dunstonh

The minimum income threshold is £160.95. The basic state pension is £127.25. Serps, S2P and graduated pension are then paid on top of the £127. If you are still below the £160.95 and have less than £6k savings, it will be made up to £160.95. So the difference is paid by the state but the amount paid will be lower.

S2P was issued prior to the minimum income guarantee and now pension credit. Just like Serps and graduated pension before it. It is additional to the state pension. Now as the years go on, the amount payable under serps is going to get bigger and bigger. Potentially, S2P could account for more than the basic state pension in the long term. This will bring people out of the pension credit because their S2P pots will be much bigger.

gustav

So, do any pensioners actually benefit from SERPS at the moment?

dunstonh

Yes they do but because they havent had as many years to benefit from it, the amounts are smaller than those that will have 40 years of benefit compared with 25

gustav

A ha. Now I see. :T

Paul_Varjak

I must say, dunstonh, that it is very good of someone with you experience to share your knowledge on this site!

CIS

The basic state pension of £79.60 is the maximum basic state pension per person, the 'married persons' of £127 is a misnomer.

Each person gets a pension on their own record,therefore husband and wife couldeach get £79.60,giving in their case a 'married persons' pension of £159.20 .

The wife can claim a max of 60% pension based on her husbands conts only if she is getting less than 60% in her own right (£47.76 ),so the only way £127 would come into it is if the husband has the full basic pension of £79.60 and his wife has less than £47.76 on her oen record and claims a top up to £47.76 from her husband.

If her husband had £50.00 and she had £29.00, then she would get the topup to 60% of £50, £30,and hence get an extra £1 off her husbands record