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

atush

kangoora wrote: »

The american social security system works on this principle with people drawing around 70% of maximum benefit from age 62 - but the american governemnt would be more inclined to say 'Tough, your decision' if anyone comes back bleating they can't afford retirement after taking it early.

Yes i can take mine age 62 with a reduction.

You must have 10 years in, or 40 'quarters' to get any US state pension.

Seabee42

Who would pay for the extra administration? In some respects it makes sense let them take their pension rather than an incapacity benefit or some other benefit but even then are they better of doing so?


Keep it simple is definitely the way to run anything touched by the government.

nigelbb

Spacie22 wrote: »

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.

There are no contributions as such because National Insurance is just a form of income tax on earned income. There isn't some personal pot for each pensioner. There are just the rules & there are winners & losersfor. The rules are that you need 35 years working or credits) to qualify for a maximum pension at State Pension Age. If you work after you have hit the 35 years then further NI contributions just go into the government money box to pay for schools, roads, hospitals, pensions etc

badmemory

Auto enrolment seems to be for some, how little can the employer pay into this pension re earnings. Such as only earnings above NI levels & top limit that is also a joke. Of course the employEE is thinking they have their own pension so no worries & may not, until retirement, have a clue how bad their non-state pension actually is.


Allowing people to take their state pension early is just going to muddy the waters still further. I have mentioned before allowing older people to have higher benefits, in the way that minimum wages are different for 21 & 25 year olds.

Thrugelmir

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?

State pension is there to provide a basic level of support. Not a living wage.

pensionpawn

I see this as a much fairer way of dealing with the rise in pension age and could be implemented along the lines of (and potentially using the same system as) deferring the state pension. For every year that you defer the SP your annual pension will increase by 5% (10% before the SP changes). Why not implement that in reverse so that for every year prior to your SP age that you commence your SP, the annual pension falls by 5%. This will at least allow those members of society with a lower life expectancy to see some of the SP that they have earned before being beamed up!

colsten

pensionpawn wrote: »

I see this as a much fairer way of dealing with the rise in pension age and could be implemented along the lines of (and potentially using the same system as) deferring the state pension. For every year that you defer the SP your annual pension will increase by 5% (10% before the SP changes). Why not implement that in reverse so that for every year prior to your SP age that you commence your SP, the annual pension falls by 5%. This will at least allow those members of society with a lower life expectancy to see some of the SP that they have earned before being beamed up!

I don't think your idea would work, for several reasons, including

• how would anyone identify who has lower life expectancy? If by region / county / city etc, how would stop people from just moving to that region / county / city etc?
• people underestimate their own life expectancy
• those desperate for money could plunge themselves into life-long poverty
• many of the eligible people wouldn't accept that their SP should be lower than those who are likely to live longer
• for people whose only income is the state pension, it's already tough to life off the full SP amount. Reducing it for early drawing would almost certainly require another benefit to bridge the gap
• perversely, the scheme could be most attractive to those who are better off

colsten

badmemory wrote: »

Of course the employEE is thinking they have their own pension so no worries & may not, until retirement, have a clue how bad their non-state pension actually is.

Don't they get a clue from their annual pension statements / from following how their investments perform?

nigelbb

pensionpawn wrote: »

I see this as a much fairer way of dealing with the rise in pension age and could be implemented along the lines of (and potentially using the same system as) deferring the state pension. For every year that you defer the SP your annual pension will increase by 5% (10% before the SP changes). Why not implement that in reverse so that for every year prior to your SP age that you commence your SP, the annual pension falls by 5%. This will at least allow those members of society with a lower life expectancy to see some of the SP that they have earned before being beamed up!

In a limited way this is how the French state pension systems is implemented. You can retire from age 62 onwards but unless you have 165 quarters (trimestres) of contributions your pension is reduced. You get your full pension at age 67 whether or not you have 165 trimestres. The reduction is 1.25% per quarter i.e. 5% for each year. The minimum pension you can draw is 75% of what your full pension would have been.

The French state pension is vastly more generous than UK state pension as it is earnings related (the contributions are vastly larger too). The basic scheme aims to provide up to a maximum of 50% of the retiree's income during their highest earning years up to a limit of €35,000 annually (in 2010). There is also a compulsory occupational pension scheme to supplement the state pension increasing income of retirees from the 50% level to between 70% and 80%.

Thrugelmir

nigelbb wrote: »

In a limited way this is how the French state pension systems is implemented. You can retire from age 62 onwards but unless you have 165 quarters (trimestres) of contributions your pension is reduced. You get your full pension at age 67 whether or not you have 165 trimestres. The reduction is 1.25% per quarter i.e. 5% for each year. The minimum pension you can draw is 75% of what your full pension would have been.

The French state pension is vastly more generous than UK state pension as it is earnings related (the contributions are vastly larger too). The basic scheme aims to provide up to a maximum of 50% of the retiree's income during their highest earning years up to a limit of €35,000 annually (in 2010). There is also a compulsory occupational pension scheme to supplement the state pension increasing income of retirees from the 50% level to between 70% and 80%.

The French people are unhappy about proposed reforms. France like all the other developed countries faces the challenge of an ageing population. With fewer people in work to support those that aren't. Likewise there's little private pension provision to supplement the state's.