state pension and tax

badmemory

Silvertabby wrote: »

Why does the option of weekly payment even exist? It must cost DWP (correction, the taxpayer) an unnecessary fortune to fund the extra pay runs - and to what end, as most bills are calendar monthly?

Mr S is due to receive his State pension next year. He will get it every 4 weeks - but even that is a faff. We'd much prefer it to be paid calendar monthly, on the last working day of each month, just like the majority of salaries/pension income.

My financial life would be so much easier too if it was paid monthly. Although I must confess it would be much simpler if I wasn't shuffling money around to get the get the best savings deals. After all these accounts do need their minimum financing levels reached and when that is more than your income it tends to need a little juggling.

But it being paid monthly is never likely to be an option (I asked) and neither is state pension being taxed at source, another question I asked.

Soon they will be having great breast beating sessions about how older people (retirees) are keeping too much in their current accounts. It's not rocket science people - we are keeping more in our current accounts because we have never in our whole lives been overdrawn and pushing 80/90 is not a good time to start but it is becoming harder to plan when income dates & outgoing dates are a mismatch.

Silvertabby

But it being paid monthly is never likely to be an option (I asked) and neither is state pension being taxed at source, another question I asked.

Pity - much easier for Mr S (and me, eventually) if we could have asked DWP to apply BR tax rate to our State pensions.

greenglide

Why does the option of weekly payment even exist? It must cost DWP (correction, the taxpayer) an unnecessary fortune to fund the extra pay runs - and to what end, as most bills are calendar monthly?

It does cost them a fortune in computer use and especially bank charges making weekly payments which is why four weekly became the "default periodicity" many years ago when order books were phased out.

They intentionally don't advertise weekly payments but I believe weekly payment is a legal right.

Monthly payments has many problems. It would be a huge change to a very old system and would be expensive. Even worse all the legislation deals in weekly amounts and there is no way you can easily slice and dice the weekly amount to give a proper monthly payment so legislation changes would be required.

Of course the time to do this was when new State Pension was introduced in 2016 but the pensions act didn't contain any changes for that. This was made worse when the implementation was brought forward to 2016 and the "hoped for" new system to run it (it was never more than an aspiration IMHO) never got off the ground. The existing system was bodged on a "minimum changes" basis to give the minimum system including lots of clerical workarounds.

It will be years before there is any hope of monthly payments. Even longer for taxation at source.

ewaste

I actually wish everything would move to a 4 weekly cycle although I wouldn't be opposed to everything being monthly either. I also agree that paying pensions weekly is probably a costly anachronism.

xylophone

From House of Commons Library Briefing Paper

Number CBP-00260, 31 March 2017


The State Pension is a weekly benefit, paid in multiples of a week.
It is paid four weekly in arrears, weekly in advance or, where the
beneficiary agrees at intervals of up to 13 weeks in arrears.

Regardless of the frequency with which it is paid, it remains a weekly benefit.

The timing of State Pension payments for people reaching State Pension
age on or after 6 April 2016 was provided for in the Pensions Act 2014
(Consequential, Supplementary and Incidental Amendments) Order
2015 (SI 2015/1985) (article 9). This inserted new regulations 22CA and
22DA into the existing claims and payments regulations:

• Regulation 22CA specifies that the new State Pension is paid in
arrears, at intervals of one week, two weeks, four weeks, or 13
weeks, if the beneficiary agrees.

Silvertabby

Regulation 22CA specifies that the new State Pension is paid in
arrears, at intervals of one week, two weeks, four weeks, or 13
weeks, if the beneficiary agrees.

Crazy. It would have made perfect sense for new State pensions brought into payment post April 2016 to be paid 4 weekly. I cannot begin to guess how much the 1 or 2 week option is costing the tax payer.

greenglide

• Regulation 22CA specifies that the new State Pension is paid in
arrears, at intervals of one week, two weeks, four weeks, or 13
weeks, if the beneficiary agrees.

It is also paid annually for people where the amount is below a certain limit making any other periodicity uneconomic. This tended to be people abroad who used to be paid by "payable order" which was basically a sterling cheque which could attract signcant fees to cash. I assume there are still costs to receive a bank transfer in other countries.

Strange that this isn't mentioned in the regulations!

greenglide

It would have made perfect sense for new State pensions brought into payment post April 2016 to be paid 4 weekly.

The huge majority of SP payments are by four weekly payments although the weekly payments are still significant.

Payments of other benefits (incapacity benefit in particular) was fortnightly and weekly payment (which was an option) was only allowed in cases of hardship.

badmemory

Just to make it worse - there are still some people who are paid weekly in advance!

I know one person who insists on being paid weekly in arrears just because he can. Frankly he has enough so that they could pay him annually & he wouldn't know the difference. Of course for people who are used to dealing with their finances on a weekly basis a change to 4 weekly could be very difficult & for many a change like that once over 65 could be very challenging. And yes I do know that sounds patronising, it isn't meant to be, it is just observation.

System

greenglide wrote: »

It will be years before there is any hope of monthly payments. Even longer for taxation at source.

How then does my pivate pension provider manage to cope with any payment interval I choose?
I can have calendar monthly, weekly, quarterly, annually, completely randomly, ad hoc additions or variations simply by dropping them a line.
And they apply the tax code to each one.
Thousands of organisations manage taxation at source.

The "too hard to calculate" argument is nonsense. If parliament says the weekly rate is £x, then the monthly rate will be x times 52 divided by 12.