MSE News: Government outlines flat-rate state pension

Paul_Herring

Southend1 wrote: »

This is incorrect. What you describe may happen in some cases but certainly for me the 1.4% reduced NICs isn't paid into my pension scheme, it's an extra amount in my take home pay.

... so it appears in your gross pay ready to be taxed at 20% when it meets the income tax calculation? That can't be right either! :eek:

jem16

Paul_Herring wrote: »

... so it appears in your gross pay ready to be taxed at 20% when it meets the income tax calculation? That can't be right either! :eek:

As a basic rate taxpayer, I only pay 10.6% NI instead of 12%. NI as you know is calculated on gross salary.

Tax is taken after my pension contribution has been deducted.

If I were to pay 12% that would still be taken from gross salary. Tax would still be taken after pension contributions are deducted. So I would be 1.4% of my gross salary worse off.

Southend1

Paul_Herring wrote: »

... so it appears in your gross pay ready to be taxed at 20% when it meets the income tax calculation? That can't be right either! :eek:

It doesn't appear as such: I.e. it doesn't specifically say "contracted out NI reduction = £x.xx". The NI code is different and a lower amount is taken, so yes I presume the gross amount is then subject to income tax.

Which actually raises a point I hadn't thought of. If the amount I currently save in NI is subject to income tax, then my net salary won't decrease by the full 1.4% of the NIC increase. Maybe someone more knowledgeable on these things can confirm if this is right?

Caketh

Hi
Someone else may have already noted that if you take time off work to be a carer you are deemed to have paid NI. I believe this applies to the person on Childcare Allowance also. The fact that work pensions will no longer be able to contract out of the extra state pension from about 2017, I believe, will probably be the final nail in the coffin of all final salary pension schemes. The main reason for this is that the government probably has the biggest one andf no longer wishes to pay for it. They've been trying to get rid of it for the last 15 years that I know of - this time they'll probably suceed. It will be interesting to see what happens to MPs salaries, pensions and retirement ages! I thought we were supposed to all be in this together.
The biggest problem I have with all these pension changes is that pensions are a long term plan item and we are having that opertunity removed by governments constant moving of goal posts and tinkering. Originally I would have started getting state pension a year next month, then four years this month and now 6 and a half years from now.

Paul_Herring

Caketh wrote: »

Hi
Someone else may have already noted that if you take time off work to be a carer you are deemed to have paid NI. I believe this applies to the person on Childcare Allowance also.

The full list has been linked to a few times on this thread:

HMRC wrote:

• when you are unemployed, or unable to work because you are ill, and claiming certain benefits
• If you were aged 16 to 18 before 6 April 2010, you were usually credited automatically with National Insurance credits. No new awards will be made from 6 April 2010.
• if you are on an approved training course
• when you are doing jury service
• if you are getting Statutory Adoption Pay, Statutory Maternity Pay, Additional Statutory Paternity Pay, Statutory Sick Pay, Maternity Allowance or Working Tax Credit
• if you have been wrongly put in prison
• if you are a man approaching age 65 (however, from 6 April 2010 these credits are being phased out in line with the increase in women's State Pension age)
  
• if you are caring for a child or for someone who is sick or disabled
• if you are aged 16 or over and provided care for a child under 12, that you are related to and you lived in the UK for the period(s) of care
• if your spouse or civil partner is a member of Her Majesty's forces and you are accompanying them on an assignment outside the UK

Madd_2

I don't know why anyone under 55 is taking any notice of this, it will all be changed again and again before you get to retire. If you look at it logically, the current generation paying in are the baby boomers, it's a blip, a larger workforce, who have been paying the pensions of the older generation. Of course the older generation have been happy to take full advantage of this, retiring early, getting a bigger pension than they really earned etc. even though they still moan.
But...when the baby boomers come to retirement age, the generation after us is smaller, so we have the opposite - a smaller workforce supporting a larger amount of pensioners.
Of course we can't expect the same as the greedy generation before us. They didn't pay for their own inflated state pensions, we did!
Now our children will be paying for our pensions, but we can all see how our children are struggling as it is. So the only thing the government can do is move the goal posts, they haven't saved any money ready for the blip they knew was coming, in fact quite the opposite, they've borrowed money to make their lives even cushier, and run up the biggest National Debt we've ever had.
And what is debt? It's a legal contract providing money today in exchange for repayment in the future…with interest, of course.
Is it really proper for one generation to consume well beyond its means and expect the following generation to forego their consumption to pay it all back? That is precisely our current situation.
So face the facts - the Country is broke, there is no money for our state pensions other than can be milked out of the next generation (our children). You are going to have to work many many more years. For everyone before us that retired at 50, 15 years early, we are going to have to retire 15 years later. For everyone that got a good pension from the government, which it borrowed to fund, we will get less, as we now have to pay back the debt for their 'prosperity' that they did not earn.
If you're under 55, expect to work until you die, and blame your parents for it. They were a greedy generation that spent well beyond their means to live a lifestyle they didn't earn and didn't deserve, and left their children to suffer because of it. I am of course speaking generally.
Government after government has seen this coming and ignored it, preferring instead to leap on the gravy train and look after themselves, and if you need proof of that look at the Lib Dems. Do they give a stuff about their pledges, promises or political beliefs? Not if abandoning it all means they too can jump aboard the gravy train and be in government too. One thing you can be sure of, they won't have to worry about their pensions now. They're all right Jack.
The gravy train has come to the end of the line. The government of course won't admit it, because they want to stay on it for another couple of years. But it has. They tell us inflation is 1 or 2% but walk into a supermarket and see - it's over 10%, they just fiddle the figures. So promising a bigger pension (linked of course to their inflation) in 5 years time is just another con. By the time you get there, in real terms it will be no more than it is currently in real terms, but they will have moved the goal posts again by then so what does it matter.
Divide the National debt and government liabilities between the total population of the country and you will find each and every one of us has about £130,000 of debt attached to us. Think about that. Your 5 year old daughter, the busker in the Underground, the young lad going off to Uni, the shop assistant in Boots - every one of them has a £130k debt courtesy of previous generations, and we've just arrived at payback time. Last one out turn off the lights please, if there's any electric left that they're still on.

The_History_Man

I have already retired early in my mid fifties due to ill health having paid 32 years Nat Ins contributions and was told by HMRC that I do not need to pay any more. Do the changes mean I will need to pay 3 more years contributions in order to get my full state pension at the age of 67?

Paul_Herring

Madd wrote: »

I don't know why anyone under 55 is taking any notice of this, it will all be changed again and again before you get to retire.

Because I'd sort of like some idea of what the landscape's going to be like when I hit 55, and how many years after that I can expect to wait before I get the state part of my pension, and thus how much private pension I think I'll need.

Of course, I could take the pessimistic view that there won't actually be a state pension for me at all, but still..

For everyone before us that retired at 50, 15 years early, we are going to have to retire 15 years later.

You appear to be conflating private pensions with the state pension.

If I retire at 55 on a private pension, absolutely no-one has to work any longer because of that, because I will have already have paid for that pension prior to 55.

For everyone that got a good pension from the government, which it borrowed to fund, we will get less, as we now have to pay back the debt for their 'prosperity' that they did not earn.

It may have escaped your notice, but typically the non-state pensions of public sector workers cannot be taken at 55 - the earliest they can be taken is usually closer to the state retirement age unless, may be,the public sector employee has voluntarily contributed more.

I'm willing to be corrected on this though if that's not at all true (e.g. if a teacher can take their teachers pension at 55.)

If you're under 55, expect to work until you die,

I won't be. I've saved so that I don't have to.

The state pension is intended to be an aid to retirement, not something to provide you with your sole income in order to retire so you can go on cruises, finish paying your mortgage and leave a 5 bedroom house to your children when you die.

Divide the National debt and government liabilities between the total population of the country and you will find each and every one of us has about £130,000 of debt attached to us.

That's like adding up all your credit cards, loans, mortgages and outgoings together then ignoring the equity in your house, your savings accounts and future income, and saying "Look - you're bankrupt!" Ok - the net balance of the government may be negative, but you're exaggerating the scale of it.

Paul_Herring

The_History_Man wrote: »

I have already retired early in my mid fifties due to ill health having paid 32 years Nat Ins contributions and was told by HMRC that I do not need to pay any more. Do the changes mean I will need to pay 3 more years contributions in order to get my full state pension at the age of 67?

Probably not. You'll likely fall into the "unable to work because you are ill, and claiming certain benefits" group.

gadgetmind

Paul_Herring wrote: »

I'm willing to be corrected on this though if that's not at all true (e.g. if a teacher can take their teachers pension at 55.)

I have a relative who retired from the civil service at 50 without any significant deduction because they needed to trim numbers.