State or private pension?

sevenhills

We have a state pension paid for by ourselves via the tax system.
They are generally inaccurate, but I often see posts on facebook saying that the UK pension is poor compared to other countries. Is that true?
Which country has the highest pension, is it fair?
Of the NI contributions, how much goes towards the state pension?


What size lump sum would be needed to pay me £165 per week in 10.5 years time?

lisboa84

If the state pension is increasing by at least 2.5% per year under the triple lock system, then in 10 years time it will be more than 210 a week.

xylophone

https://www.weforum.org/agenda/2018/02/retirees-in-these-countries-receive-100-of-a-working-salary/

bostonerimus

I've compared the US social security I'll get to what I'll get from the UK in flat rate SP and the US SS is about twice as much. FYI US SS is paid for by a 6.2% tax from the employee and a matching 6.2% from the employer on wages up to $128k. However, as I'm paying Class 2 NI the UK SP is actually a far better deal...but it wouldn't be if I was paying Class 1 NI

Silvertabby

bostonerimus wrote: »

I've compared the US social security I'll get to what I'll get from the UK in flat rate SP and the US SS is about twice as much. FYI US SS is paid for by a 6.2% tax from the employee and a matching 6.2% from the employer on wages up to $128k. However, as I'm paying Class 2 NI the UK SP is actually a far better deal...but it wouldn't be if I was paying Class 1 NI

Is that tax on all of your earnings - or is the first £X tax/ni free, as in the UK? Plus, how much of the US State pension goes on paying for medical insurance/costs for things not covered by medicare?

Also, do US pensioners on nothing but SS get extras in the form of housing benefit, council tax (equivalent) benefit, winter fuel allowance, 'free' nursing home care, etc ?

bostonerimus

Silvertabby wrote: »

Is that tax on all of your earnings - or is the first £X tax/ni free, as in the UK? Plus, how much of the US State pension goes on paying for medical insurance/costs for things not covered by medicare?

The 6.2% social security tax is calculated on gross income before any deductions are made. While there is a minimum threshold for you to pay income tax, that's not the case for the social security tax. There's also a 1.45% tax taken out for Medicare and obviously people under 65 not on Medicare have to get their medical insurance through their employer or something like ObamaCare.

Also, do US pensioners on nothing but SS get extras in the form of housing benefit, council tax (equivalent) benefit, winter fuel allowance, 'free' nursing home care, etc ?

Yes, but the level and types of benefits depend on which state you live in. When I retired early I had low taxable income (less than the $16k poverty level) for a couple of years as I was mostly living off savings. This qualified me for free medical care, fuel allowance and also food stamps.

If I inflate my current UK flat rate pension until I'm 67 maybe it will be 11k or 12k GBP so let's say that's around $16k/year. My US SS forecast at age 67 is $28k/year. The US system is still linked to income so the more you put in the more you get out.....but it's not a linear relation so those on lower incomes get proportionally more. So my UK SP just reflects 35 years of contributions while my US SS is calculated on the actual amounts I've contributed. The link that Xylophone posted has a nice comparison chart

Silvertabby

bostonerimus - ineresting, thank you. However, it does sound like you and your employer pay a lot more into your State pension scheme than we do.

And if the UK government announced that it would be issuing food stamps instead of hard cash there would be rioting in the streets !

bostonerimus

Silvertabby wrote: »

bostonerimus - ineresting, thank you. However, it does sound like you and your employer pay a lot more into your State pension scheme than we do.

It's a difficult comparison...ie far higher percentage payments on a narrow band of income in the UK vs lower percentage payments on a wider band in the US. I think the OECD graph in Xylophone's link is instructive as that distills things and shows the UK SP benefit to be almost the worst value in the developed world; the US is almost twice as good, but not as good as most European counties.

And if the UK government announced that it would be issuing food stamps instead of hard cash there would be rioting in the streets !

Maybe, but I'm surprised that hasn't already occurred with Universal Credit. My only experience of benefits in the UK is signing on the dole a couple of times during summers out of college and paying Voluntary Class 2 NI and HMRC are pretty efficient sending me the yearly bill. I have experience the system in Massachussetts and they were very pro-active in signing me up for benefits after I applied for health insurance and was put on the free Medicaid program because my taxable income was below the poverty level. I took advantage of the medical insurance program as there was no alternative, but I did not take money for fuel assistance, boiler and home insulation upgrades or the food stamps. I received several letters and finally a phone call to ask why I was not taking the money and I explained my low income was an aberration because I was living off savings for a couple of years until my pension started. I was told I would not get anymore phone calls, but that letters would still arrive as state law required it. Massachusetts can be very cold in the winter and the state doesn't want anyone to freeze because they can't afford fuel etc

DairyQueen

The US system is much more generous. A US citizen could have a gaggle of ex-spouses and each could claim social security from that individual's SS payments subject to a minimum 10-year contribution record. US taxpayers will be pleased to know that I am not claiming on my physician-ex's contributions. As boston mentions, the US system is based on amounts contributed rather than a flat-rate system. It therefore benefits high-earners.

I think that the minimum SS paid to a US retiree is in the region of $12,000.

Pretty much every country in the developed world pays a higher SP than the UK although note that, in developing countries, for some bizarre reason the SPA is lower than in developed countries. For example, Brazil has just proposed increasing SPA to 62 for females and 65 for males. Unsurprisingly, this has caused a backlash.

We can but dream.

bostonerimus

DairyQueen wrote: »

The US system is much more generous. A US citizen could have a gaggle of ex-spouses and each could claim social security from that individual's SS payments subject to a minimum 10-year contribution record. US taxpayers will be pleased to know that I am not claiming on my physician-ex's contributions. As boston mentions, the US system is based on amounts contributed rather than a flat-rate system. It therefore benefits high-earners.

I think that the minimum SS paid to a US retiree is in the region of $12,000.

Pretty much every country in the developed world pays a higher SP than the UK although note that, in developing countries, for some bizarre reason the SPA is lower than in developed countries. For example, Brazil has just proposed increasing SPA to 62 for females and 65 for males. Unsurprisingly, this has caused a backlash.

We can but dream.

The max US social security pension for someone retiring at age 65 today is about $33k/year and the average is about $18k/year. It's calculated using your years of maximum earnings, but it's on a sliding scale so as you earn more your SS payment does not go up in a linear fashion so a dollar for a low earner buys more SS than the same dollar for a higher earner. However, eliminating even a modulated connection between benefit and earning as has been done in the UK would not be popular in the US. The UK flat rate reforms have reduced the benefit for high earners and haven't really increased it for low earners as they would have received a similar amount from the basic pension and pension credits. The people who did really well from the reform were people paying Class 2 NI that only qualified them for the old basic pension. ie the self-employed and expats.

bostonerimus

DairyQueen wrote: »

Pretty much every country in the developed world pays a higher SP than the UK although note that, in developing countries, for some bizarre reason the SPA is lower than in developed countries. For example, Brazil has just proposed increasing SPA to 62 for females and 65 for males. Unsurprisingly, this has caused a backlash.

Pension age should be related to longevity...so maybe it will be lower in countries with a shorter average lifespan.