Means testing state pension?

waveydavey48

Thanks for those interesting and informed replies.

zagfles wrote: »

Where have you read it? No credible political party, think tank or organisation is suggesting means testing the state pension as far am I'm aware. It's usually just clueless people on social media. Recent pensions policy has gone the other way. Anything could happen, the govt could do almost anything, but there's lots they'll do before stealing pensions from people who've earnt them. You could use UFPLS

There have been a few articles floating about on this subject, the one which caught my attention was by "moneywise" quoting the IMF and the OECD.

Spreadsheetman

I could easily imagine NI being extended to the retired as a "social care tax" or similar.

zagfles

michaels wrote: »

Whilst means testing may be political suicide simple demographics means that the current arrangement is not 'affordable' forever, the implied tax rates are too high so something will have to give.

I imagine they'll carry on with the current solution - increasing the state pension age.

zagfles

waveydavey48 wrote: »

Thanks for those interesting and informed replies.



There have been a few articles floating about on this subject, the one which caught my attention was by "moneywise" quoting the IMF and the OECD.

Do you have a link?

zagfles

arnoldy wrote: »

A few years ago we would never have imagined that child benefit would be means tested...............

Or that the personal allowance would be 0 for some people.

Child benefit isn't an earned contributory benefit. Nor is the PA. Means testing the state pension would destroy the incentives to save in a pension for a large proportion of the workforce, something the govt have been desparately encouranging people and employers to do - why save in a private/works pension if you'll end up getting "taxed" heavily because your state pension will reduce as a result?

The child benefit and PA changes didn't cause the same problem.

hugheskevi

If a Government were to want to introduce means-testing of a State Pension, it would be highly likely to have most of the following compromises to have any chance of being accepted by Parliament and the electorate:

• Making workplace pension compulsory, as there would likely be huge opt-out prompted by widespread belief it is 'not worth saving' whether that is a justified claim or not

• Being introduced only for future pensioners as a minimum, and more likely only for those at least 10 years from State Pension age

• The means-test only applying to those with high incomes, with the standard reliance on inflation bringing the limit down over time

• Not quite as certain as the above, but possibly rules to prevent the rapid depletion of pension by people intending to then fall-back on the State. This could perhaps be something like requiring pension assets above a particular level before pension flexibilities can be used, similar to the £20,000 income requirement which used to exist.

The key point is that it is difficult to see any implementation which would immediately raise significant revenue without causing huge political losses. As such, it is hard to see why any Chancellor would be attracted to the policy ahead of other alternatives such as abandoning triple lock, increasing State Pension age, abolishing Winter Fuel Payments, etc.

Although a more gradual introduction might work, why would any political party choose to push through extremely unpopular reform that won't lead to any fiscal benefit for many years.

waveydavey48

zagfles wrote: »

Do you have a link?

https://www.moneywise.co.uk/news/2018-11-23/uk-state-pension-should-be-means-tested-says-international-monetary-fund

crv1963

waveydavey48 wrote: »

https://www.moneywise.co.uk/news/2018-11-23/uk-state-pension-should-be-means-tested-says-international-monetary-fund

I think that it would be political suicide for any party to implement means testing the State Pension. In my view the simplest and most likely way for any government to claw back the SP would be to use the tax system.

ruperts

I think auto enrolment is part of the scene being set for either means testing the SP or the softer option of allowing it to be eroded by inflation. Presently the demographic make up of the voting public means no political party would be able to get it through, but i don't doubt that they would do it in a heartbeat if they could get away with it. If generational inequality gets much worse and something triggers young people to start voting in greater numbers then it may well be politically feasible in the future. Plan for the worst, hope for the best.

crv1963

ruperts wrote: »

I think auto enrolment is part of the scene being set for either means testing the SP or the softer option of allowing it to be eroded by inflation. Presently the demographic make up of the voting public means no political party would be able to get it through, but i don't doubt that they would do it in a heartbeat if they could get away with it. If generational inequality gets much worse and something triggers young people to start voting in greater numbers then it may well be politically feasible in the future. Plan for the worst, hope for the best.

I think auto enrollment is a way that the Govt can in the future erode other older age benefits such a pension credits etc. The sums currently being saved are simply not large enough to provide a decent pension for most.