State pension

jackson5london

Hi Guys,

Would like to make a question to understand more about how state pension works. Let’s assume that we have 2 persons. Person A receives minim wage and pays approximately £90 every month for National Insurance. Person B receives £3000 per month and he pays approximately £270 every month for National Insurance. Will these 2 receive the same state pension?



Thank you in advance for your help

worried_jim

jackson5london wrote: »

Hi Guys,

Would like to make a question to understand more about how state pension works. Let’s assume that we have 2 persons. Person A receives minim wage and pays approximately £90 every month for National Insurance. Person B receives £3000 per month and he pays approximately £270 every month for National Insurance. Will these 2 receive the same state pension?



Thank you in advance for your help

Yes they would get the same if they were in the work place the same amount of time.

msallen

Under the CURRENT rules yes. However in the past the person earning more and paying more NI would have rec'd more pension through SERPS. Many people retiring over the next couple of decades will have a mixture of old and new pension entitlements, and SOME of them will therefore receive higher than the basic pension.

drumtochty

Under the old system as msallen advises and these are very rough numbers and stopped additional increases from April 2016, the person on the mimimum wage or a similar deinflated amount would have earned another £2 per week for each year worked from the Second State Pension and Serps from around April 1978 until April 2016 at todays prices. If the were contracted in to the state pension but no increase for the years they were contracted out of the state pension. That was in addition to the figure today of £129 a week for the basic state pension after 30 years.



The person on £36,000 a year or similar would have earned say another £4 a week for those years they were contracted in to the state pension at todays prices plus the old basic state pension today of £129 a week.


The last time I found the information and it was about 4 years ago, the government in an answer in the House of Commons had advised the average state pension paid then including the Second State Pension and SERPS and the old Graduated Pensions was around £150 per week.


This was around the figure for the new state pension for those who qualified for the full new state pension in 2016.



Again can I advise these are very rough figures.

xylophone

Thank you in advance for your help

They can both obtain a state pension forecast to check their current position.

https://www.gov.uk/check-state-pension

t0rt0ise

"From each according to his ability to each according to his needs."

shinytop

t0rt0ise wrote: »

"From each according to his ability to each according to his needs."

yup, and £90 per month gets you the same NHS health care as £270. And the same as £0. Thank goodness ....

Silvertabby

jackson5london wrote: »

Hi Guys,

Would like to make a question to understand more about how state pension works. Let’s assume that we have 2 persons. Person A receives minim wage and pays approximately £90 every month for National Insurance. Person B receives £3000 per month and he pays approximately £270 every month for National Insurance. Will these 2 receive the same state pension?


Thank you in advance for your help

Probably. It's called the Welfare State. However, Person B is much more likely than Person A to pay into a private/occupational fund, and so will have more to live on in retirement.

xylophone

Person B is much more likely than Person A to pay into a private/occupational fund, and so will have more to live on in retirement.

But person A's employer should be providing a workplace pension scheme and both he and the employer should be contributing.

The same applies to person B but with a higher salary his pension should eventually be higher.

Silvertabby

xylophone wrote: »

But person A's employer should be providing a workplace pension scheme and both he and the employer should be contributing.

The same applies to person B but with a higher salary his pension should eventually be higher.

That's why I said 'more likely', sweetie - seems a lot of People A are opting out of the workplace pension on affordability grounds.

Believe it or not, a lot of people in the LGPS (including full timers on much more than minimum wage) opt out on affordability grounds.

xylophone

sweetie

Ooh, you are awful! But I like it..:)

Yes, I know that people unwisely don't join up.

Somebody I knew had reason to be grateful that her husband was forced to "see the light" many years back when it became compulsory to join the employer's scheme - he died under 60 when she was just over , and the widow's pension made all the difference to her standard of living.

When he first took the job with the company, the contributions to the DB FS Scheme were "too expensive" and "he didn't expect to stay long" - in fact he was there from around his late twenties to the day he died suddenly and unexpectedly from a heart attack.