State pension changes - impact on those due to retire soon?

harz99

kidmugsy wrote: »

3) AH I hadn't realised that it was "a gift to current voters near to retirement" - I suppose it's not legally a gift since something is expected in return i.e. votes.
I'm not convinced they've got their political calculation right on that: the envy and resentment of those who are too old to share the spoils may carry more weight. Second childhood and all that.

Especially as there will be a General Election before 2017, so those of us who are, or perceive ourselves to be, disadvantaged by these proposed changes will have the opportunity to express our displeasure at the ballot box!

Old_Slaphead

harz99 wrote: »

Especially as there will be a General Election before 2017, so those of us who are, or perceive ourselves to be, disadvantaged by these proposed changes will have the opportunity to express our displeasure at the ballot box!

Hobsons choice really - this lot or last lot who decimated private pension provision

jamesd

Jack_Griffin wrote: »

That definition of baby boomers is more apposite to the US. Look at the graph.

I've looked at that graph and this one. While the US had a more level middle of the baby boomer generation, the British one still had substantially higher birth rate until around 1964 compared to the drop after that.

The Telegraph article identifies a first wave - the immediate post war part of the boomer generation - and that may be what you prefer to use as your only definition of baby boomer. But that's not the usual UK definition, which you can find at say the Intergenerational Foundation.

How people want to define the baby boom generation varies. I'll sometimes write about early and late when I want to distinguish which parts I'm referring to.

I agree that the immediate post-war part of the generation will have reached retirement before this change.

If we were writing about just the highest peaks I might agree with you but in this context I'm referring to the generation normally called the baby boomers, not specific peaks.

BobQ

jamesd wrote: »

It's a gift to current voters near to retirement, paid for by those less close to it and increases the cross-generational subsidy to the baby boomer generation from the later ones.

Now that the draft bill has been published, there is an opportunity to comment on it, raise anomalies and otherwise influence its final form (via lobby groups, unions, pensioners groups, writing to their MP or the committee etc)

My bet is that those approaching retirement are more likely to try and and improve it than the the younger ones who stand to lose the most in the long term.

BobQ

wakeupalarm wrote: »

The other bigger winners are those who were contracted out and accumulated little s2p, but now have the opportunity to increase their state pension to the full single tier rate of £144 AND have their contracted out pension as well. Many of these will be public sector workers in final salary schemes who already have fantastic pensions and will be able to get even more from the state at the expense of younger generations.

But these people will be paying higher NI contributions from 2017 to fund these additional years. It hardly seems fair that anyone who invests in an occupational pension are treated less favourably than those who do not. Surely its fair that if you pay the 12% NI you get the same benefits for those post 2017 years?

They are not all public sector workers, some have private sector final salary schemes (admittedly this has declined). More importantly many will have a mixture of contracted in and contracted out contributions and many with have many years to retirement.

Are you really saying that because someone who spent 20 years contracted in and 20 years in a defined benefit scheme should be excluded from the state second pension in their last 10 years of employment while being expected to pay into it?

Jaycee_Dove wrote: »

As well as at the expense of their contemporary low paid self employed who are funding this pay out to the rich as well.

The low paid self employed are a winner since the years they paid reducedn NI will be treated as if they had paid a full employee NI contribution.

Who are these low paid self employed and what "rich" are they funding?

Jaycee_Dove

BobQ wrote: »

The low paid self employed are a winner since the years they paid reducedn NI will be treated as if they had paid a full employee NI contribution.

Who are these low paid self employed and what "rich" are they funding?

They are only winners on the new system. Those in identical circumstances who reach pension age the day before it arrives are £37 pw worse off.

I suspect there are plenty of low paid self employed who were only able to save modest sums and who are penalised by missing the new system by not getting the equivalent of an S2P to bump up their pension. But who are also penalised by the old system because their modest savings debar pension credit to bump them up as well.

And the 'rich' they are funding are the self employed with large savings who in the years immediately after 2017 will get the same much higher SP than existing self employed despite having far larger other income. And despite not having paid the higher NIC levels for self employed that will surely have to come in post 2017.

Jaycee_Dove

wakeupalarm wrote: »

If someone retiring in 2016 has 42 years they will more then likely have built up an amount of s2p that combined with the basic £107 will take them above the £144. The younger generation retiring after 2017 is denied the opportunity to build up anything above £144. That is why the younger generations will be worse off in the long run under the new scheme.

The self employed do not currently get S2P. That is the point. Under the new scheme they effectively will via its removal and equalisation of self employed and employed SP rates. Unless as a self employed person you earned enough to make large savings to build the equivalent of an S2P you are stuck between a rock and a hard place on the current scheme.

If you have modest savings they will not - in the current dire climate - fund anything close to a £37 pw gap between the current SP for self employed and the new univeersal SP post 2017 (or indeed the similar level of current SP with pension credit now).

And if they have saved pretty much anything they will not qualify for Pension Credit to plug the gap.

They will in fact be 'rewarded' by PC for not having saved 1 p and penalised if they made an effort but by circumstance could only do so in a small way.

wakeupalarm

BobQ wrote: »

But these people will be paying higher NI contributions from 2017 to fund these additional years. It hardly seems fair that anyone who invests in an occupational pension are treated less favourably than those who do not. Surely its fair that if you pay the 12% NI you get the same benefits for those post 2017 years?

Those contracted-in will also continue to pay the FULL NI contributions they have always paid, not some reduced amount but they will be prevented from accumulating any further state pension.

Those who contracted-out knew they were contracting out of the Additional State Pension, and were building up their own funds via occupational pensions as you say, now they can build further state pension that those contracted-in can't. They are being given two bites of the cherry.

BobQ wrote: »

They are not all public sector workers, some have private sector final salary schemes (admittedly this has declined). More importantly many will have a mixture of contracted in and contracted out contributions and many with have many years to retirement.

Are you really saying that because someone who spent 20 years contracted in and 20 years in a defined benefit scheme should be excluded from the state second pension in their last 10 years of employment while being expected to pay into it?

Those contracted-in are having to pay into it but are being denied the option to accumulate any more than the £144 that those who are contracted-out are being given the option to even though they already have contracted-out occupational funds/pension to cover the additional state pension they opted out of.

The changes particularly hit younger workers as they are limited to £144.

This article may explain it better.
http://www.moneymarketing.co.uk/channels/corporate-adviser/news/altmann-blasts-far-worse-flat-rate-pensions-white-paper/1064564.article

jamesd

wakeupalarm, if you want to pick winners why not pick those who paid no NI contributions at all during their lives but who will still get £144? Those on benefits for life or those in prison for long sentences, say.

The contracted out group includes around 80% of people at some point in their life so if you wish to select within that group it's useful to say which parts you mean - whether it's only those in public sector final salary schemes, say.

Those who accrued more than 144 while contracted in will get to keep that excess.

If I was to pick injustice in this scheme I'd pick either those in prison for most of their life or those who for other reasons than disability made no or almost no NI payments of any type. Or the way the pension payout ends up being mostly unrelated to how much you pay into the pension.

mark55man

to me the losers are the youth who will have to pay more for longer for less - even though the baby boom have had a lot of the advantages so far (property the 80's and 90's) they are still finding ways to transfer money from the youth.