state pension and tax

zagfles

badmemory wrote: »

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.

But it's true - look at the problems with universal credit - the main issues aren't the amounts but that it's paid in arrears and it's paid monthly. Some people are incapable of a bit of simple budgeting and don't have enough savings or credit to last them even a few weeks, and these aren't just people on the lowest incomes, it's people who are are simply useless with money and will spend it all as soon as it comes in.

p00hsticks

Clifford_Pope wrote: »

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.

except there aren't exactly 52 weeks in a year - so more accurately,
x divided by 7 multiplied by 365.25 divided by 12.

greenglide

And the derivation of a monthly amount will normally leave odd pennies rounding. The legislation doesn't allow for that.

This would require legislation and massive IT changes to very old systems. No government has ever had stomach for this and they would have to commit to there being no other changes while this was implemented.

JezR

This is a similar reason as to why there isn't income tax deducted at source via PAYE for state pensions as required. When the Office of Tax Simplification looked into this although it thought that the system should have been set up that way in the first place, constructing in effect a payroll system for circa 12 million state pension recipients had risks and costs of its own. Those most inconvenienced by this are those receiving State Pensions greater than the personal allowance but with no other pensions within PAYE - roughly 30,000 people.

badmemory

JezR wrote: »

Those most inconvenienced by this are those receiving State Pensions greater than the personal allowance but with no other pensions within PAYE - roughly 30,000 people.

Is this figure accurate? No wonder most people don't understand what I am rabbiting on about.

My big financial mistake was not taking my private pension the day I was 65, but I didn't need it so it seemed pointless to take it. If I had taken it then it would have been enough to pay the tax on it & on my state pension & (a necessary requirement) leave 50% of it after tax. Within a few months annuity rates had plummeted & even though it has grown a fair bit since it is still not enough.

I will have to do something in the next few years or I believe I won't get 25% tax free which I would have foregone if it removed my tax/SA issue, but as it won't I may as well take it.

System

greenglide wrote: »

And the derivation of a monthly amount will normally leave odd pennies rounding. The legislation doesn't allow for that.

This would require legislation and massive IT changes to very old systems. No government has ever had stomach for this and they would have to commit to there being no other changes while this was implemented.

Only a state organisation would find it difficult to respond to the consequences of changes in pension practice initiated by their own government. Everyone else is assumed to be capable of jumping to it whenever the govenment tinkers with any of its rules.

It cuts no ice when employers say that a change in pension freedoms say or taxation would require IT changes and "we haven't the stomach for it".

noh

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.

DWP do pay runs every working day. There are no extra runs involved if a person receives their pension weekly or four weekly.
Payments are deliberately spread out over the month according to the recipients birth date and NI number to even out the load on the payment systems.

greenglide

There are no extra runs involved if a person receives their pension weekly or four weekly.

But there are increased bank charges (DWP makes payments to their sponsoring bank for each BACS payment made). Each account selected for payment causes processor charges and disc space usage. You don't get owt for nowt. Somebody has to pay for the computers required.

JezR

badmemory wrote: »

Is this figure accurate? No wonder most people don't understand what I am rabbiting on about.

It is the figure that was stated by the OTS in 2013, but it isn't noted where they got it from. There will be others where their private pensions are insufficiently to pay the tax due over the total.

noh

greenglide wrote: »

But there are increased bank charges (DWP makes payments to their sponsoring bank for each BACS payment made). Each account selected for payment causes processor charges and disc space usage. You don't get owt for nowt. Somebody has to pay for the computers required.

Undoubtedly but I expect the cost is marginal. I haven't yet found out how much the DWP pay for BACS payment services.

I have though discovered that in 2014 49% of all payments through the BACS system were made by the DWP according to info in this document https://publications.parliament.uk/pa/cm201314/cmselect/cmworpen/1082/108208.htm