Would allowing State Pension to be drawn flexibly (with an actuarial reduction) make sense?

kangoora

Silvertabby wrote: »

We'd have to abolish the minimum income guarantee at SPA to do that.

Agreed. I do find it a little incongrous that the national minimum wage is £8.21/hour so £17k for a 40 hour week whereas a single persons pension is £168.60/week so £8767 a year.

Meaning a pensioner is expected to survive on the equivalent of £4.21/hour (when equated to a 40 hour week).

Does anyone know the justification for why a pensioner seems to only need 50% of the income of someone working - apart from the obvious one that it saves the government and taxpayer money?

Dox

michaels wrote: »

But with auto enrolment won't the vast majority have additional pension income going forward?

If they haven't already cashed in their small pot at 55, they will have only the tiniest amount of savings.

The major flaw though is the idea that the majority of people will have a clue what you're talking about (?actuarial reduction? fix!! penalty!!! foul!!!! judicial review...); and as for how the state would cope with the administration...what could possibly go wrong with another massive government computer project?

theoretica

Does the country/state benefit more from having people retire earlier or stay in work longer?


If this would only apply to people who had other resources in addition to the state pension then many could, I think, achieve a similar result by drawing more heavily on private pensions before the state pension age.

theoretica

kangoora wrote: »

Does anyone know the justification for why a pensioner seems to only need 50% of the income of someone working - apart from the obvious one that it saves the government and taxpayer money?

I think that people working full time on minimum wage are supposed to have a higher income than the minimum needed not to be in poverty. A better comparison might be benefit levels.

Zero_Sum

kangoora wrote: »

Agreed. I do find it a little incongrous that the national minimum wage is £8.21/hour so £17k for a 40 hour week whereas a single persons pension is £168.60/week so £8767 a year.

Meaning a pensioner is expected to survive on the equivalent of £4.21/hour (when equated to a 40 hour week).

Does anyone know the justification for why a pensioner seems to only need 50% of the income of someone working - apart from the obvious one that it saves the government and taxpayer money?

Pensioners have a lot less costs. Dont have costs of raising kids. House paid for (if renting, theyll get HB on top of pension). Free transport with bus pass

Zero_Sum

Back original question, its something ive also thought should be looked at.
But you will need to prove you have sufficient works pension to meet a minimum income limit to get it. As others have suggested, you'll get loads abusing it then claiming they dont have enough to live on, demanding more benefits

Marcon

Given the utter confusion created where people defer their state pension, the idea of adding yet more options by allowing them to draw it early doesn't bear thinking about.

Spacie22

I wonder if it would be possible to allow people to claim early if they have significantly more than maximum 35 years contributions (real ones not automatic credits). Starting work at 18 and working for 45 years only takes you to 63.

peachyprice

michaels wrote: »

But with auto enrolment won't the vast majority have additional pension income going forward?

Not when people can opt out of auto-enrolment. There are people who decline the WBP because they can't afford the deductions from their salary.

Aretnap

michaels wrote: »

What would be the drawback of allowing the same with the State Pension? It would obviously not cost the taxpayer any money if the correct deduction/augmentation was applied but it would allow people more flexibility in deciding to take it earlier or later than the standard age as suited their circumstances.

Would the actuarial reduction involve a detailed health assessment and an individualised estimate of life expectancy?

If so, who would pay for that process?

If not, wouldn't people who are in poor health be more likely to take their pensions early? And hence a lot of people who would probably not have made it to retirement age and so would have claimed little or no state pension would end up claiming quite a lot. Whether it would be fair to give people that option is a matter of opinion of course, but it would certainly mean an extra cost to the taxpayer.

(Of course the flaw in that analysis might be that it assumes that most people have a chuffing clue about what's in their best interests, which is probably an optimistic assumption...)