MSE News: Government outlines flat-rate state pension

Paul_Herring

One thing those who have contracted out should remember - you don't have to wait until your state pension age to be able to get a pension from that contracted out money - you can (currently!) start as early as 55, so could probably make up the lost amount in the up-to 23 years (78 - 55) if you start that early.

Dave_save

I paid in over 40 years NI, the qualifying years are 30. So does this mean I get an additional amount over the basic state pension? Of course not. It only works one way.

Yet another slight of hand by slippery Dave and his able assistant Cleggy!

wozearly

Paul_Herring wrote: »

This is exactly why the UK state pension scheme is cited as an example of a 'legal' ponzi scheme.

And why without a fundamental change (instead of all this tinkering round the edges) there will always be problems with the state pension.

Problem is, how would you fix it fairly?

To work sustainably in its current "ponzi" form, the state pension would need to vary depending on the amount of NI received for that year (ie, openly admitting that the NI you paid was given to other retirees and has no bearing on your own pension entitlement). People would hate that, given the uncertainty it would cause - and with the baby boomers set to retire, would cause chaos if it replaced the current system as they would stand to lose out far more than following generations. Not politically acceptable, methinks.

We could sever the ponzi link the other way, by actually setting money aside and treating the state pension like any other funded scheme (meaning funded, not "I pay contributions therefore it must be funded"). But ending current pensions on the basis that none of the previous NI payments went into funding your own retirement would be, erm, politically unacceptable.

So that means passing the burden onto comparatively younger working generations both of funding their own retirement AND covering existing commitments to current and soon-to-be pensioners, which would be a big ask just as we're moving into a huge spike of additional retirees, a smaller proportion of working people and high unemployment. Again, probably politically unacceptable unless the transition was incredibly drawn out, which doesnt really solve the problem.

Of the non-solutions, cutting future entitlements as well as raising contributions in an effort to somewhat de-toxify the approach by reducing payouts compared to the current model, particularly over time, is fairly logical. But will hurt hard emotionally on the large number of people who will, quite rightly, feel diddled in comparison to what they thought they would get (based on the current model, which turned out to be overly generous). And it doesn't feel very "fair" emotionally, even if it makes sense economically.

No easy answers, sadly. And no votes or thanks in fixing it, either, except from as yet unborn generations...

njm123

StevieJ wrote: »

This is going to be an administrative nightmare for private sector final salary schemes.

It won't be a nightmare for the schemes - most companies will simply close them and wind them up - they won't pay the additional NI.

The nightmare will be for the employees.

Reduced state pension because they were contracted out and no private pension in anything like the shape they though they were getting.

If you were expecting to retire with a final salary pension after 2017 - this condem governments just ended your retirement unless you've got stacks of other savings you can work til you drop now.

posh*spice

High Earners & SAHMs

Are there any other concerns?

There are likely to be concerns that women from high-earning households who take time out to have children will not receive their National Insurance credits.
To gain the credits, a woman needs to be registered for child benefit.
Last week, the Government announced that households where one parent earns more than £50,000 a year will lose some of their child benefit, and those families in which one parent earns over £60,000 a year will lose it entirely.
The move has proved controversial, particularly since those families where both parents earn just under £50,000 each will keep their payments.
Ministers said today that in future, even if they do not think they will receive child benefit payments, women should register for it so they are on record, to ensure they get their National Insurance credits.

http://www.mirror.co.uk/news/uk-news/pension-shake-up-the-key-questions-answered-1534144

If you deregistered for Child Benefit just last week - now you should re-register!!!! !!!!!!

Paul_Herring

wozearly wrote: »

Problem is, how would you fix it fairly?

<snip>

Well quite.

However the state pension is not the only UK pension scheme funded with this method - there are quite a few ("vast majority" according to a 2010 Telegraph article) public sector pensions funded in exactly the same way - ignoring of course, the fact that part most of those pensions are funded by the private sector tax payers.

Paul_Herring

posh*spice wrote: »

If you deregistered for Child Benefit just last week - now you should re-register!!!! !!!!!!

There's a difference between not registering for eligibility for Child Benefit (so won't be getting NI credits,) and registering eligibility, and subsequently opting out of receiving it (which will still earn credits.)

You appear to be conflating the two

posh*spice

Paul_Herring wrote: »

There's a difference between not registering for eligibility for Child Benefit (so won't be getting NI credits,) and registering eligibility, and subsequently opting out of receiving it (which will still earn credits.)

You appear to be conflating the two

OK so you are sure there is no need to re-register to recieve it and then just pay it back through my tax return?

hyubh

Paul_Herring wrote: »

However the state pension is not the only UK pension scheme funded with this method - there are quite a few ("vast majority" according to a 2010 Telegraph article) public sector pensions funded in exactly the same way.

'Vast majority' in term of schemes, not in terms of overall membership numbers (e.g., while teachers at a school will be in a 'pay as you go' scheme, teaching assistants, school cooks and cleaners etc. will be in a funded one). Even then, why would moving (say) the TPS to a funded basis be especially difficult? If there's the will, the government could just close the existing scheme to new members and start afresh with a new scheme.

It's not quite the same situation, but if Canadian states could do it not so long ago, I don't see why the UK can't.

goughtimes

posh*spice wrote: »

You're going to paying more NI contributions.

Not just more in NI but also private pension contributions could go up due to our employers having to pay more NI for employing us. Said on the BBC today that they are going to change the law to allow this to happen.