The reality of the Pension Debt (To encourage discussion)

Paul_Herring

SquatNow wrote: »

[on being asked for a first hand citation that NI is no longer linked to pension entitlement]

I can't be bothered to find an exact quote,

Why not? Because one doesn't exist perhaps?

I was very specific about what I wanted you to find, it surely can't be that difficult to back up what you're saying surely?

jamesd

Paul, SquatNow may have been thinking of the plan to make the Additional State Pension flat rate, so that your pension payment is not linked to how much NI you pay. This is starting in 2009, when the Upper Accrual Limit is introduced five years earlier than originally planned. At that point those earning just below higher rate tax will pay NI up to the Upper Earnings Limit, which is being raised to the higher rate tax threshold, but not get any extra pension benefits on NI contributions between the UAL and UEL. So this will be a 100% NI tax with no benefits in that range of income, affecting all of those from just below higher rate tax and up.

Longer term the plan is to have the UAL adjusted so that the ASP become purely a flat rate pension without any earnings component, by 2030. And at that point the former pension-related NI will be simply a tax on higher earners to subsidise the raised pensions of the lower earners.

There's more than a little truth in aspects of what SquatNow is writing, but the views are let down by some glitches in the details.

EdInvestor

jamesd

The creation of the National Second Pension plan or whatever they are calling it? Why would be need a compulsory second "national insurance" when we already have one?

One suspects the ludicrously ignorant SquatNow probably means the planned Personal Accounts, rather than S2P, though I can quite understand why you might have been confused by his reference. It seems very unlikely he would know anything about S2P, since he is completely wrong about all other aspects of the state pension that he mentions.

jamesd

I assumed that SquatNow had seen something to give that impression and tried to work out what it might have been. Up to SquatNow to say what was really meant, though.

SquatNow isn't fundamentally wrong about the way the system has worked in the past or about the consequences of the demographic shift as the baby boom generation retires. Fortunately immigration is helping a bit, but still not enough to replace the whole baby boomer generation. We really need to be more active in that, particularly in trying to attract skilled immigrants.

SquatNow

jamesd wrote: »

It might be difficult for a government to get elected if it actually tried to do this - the same boomer generation is not likely to appreciate being asked to pay for its benefits when they could instead continue with the current practice of making their children pay for them.

This is exactly the point I am trying to make!

Incidently, IIRC entitlement to full state pension based on having paid NI is only to people born before 1965.

People born after that aren't entitled to a state pension based on their NI payments.

SquatNow

EdInvestor wrote: »

Yet more rubbish from someone who clarly has no grasp of the facts.

And again.

It's not worth debating with someone so poorly informed.

Please discuss the topic rather than just insulting people. If you can't make an on topic comment, then don't bother posting. Simply hurling insults at people doesn't prove you are supperior, it simply makes others think you have a small !!!!!!.

Paul_Herring wrote: »

Why not? Because one doesn't exist perhaps?

I was very specific about what I wanted you to find, it surely can't be that difficult to back up what you're saying surely?

If you wish to quote a post and a reply, please quote the entire portion that is relevant to your reply. Posting an "edited" version may give the impression that the post being quoted means something other than it really does.

The full quote should be "I can't be bothered to find an exact quote, so try this one:
The creation of the National Second Pension plan or whatever they are calling it? Why would be need a compulsory second 'national insurance' when we already have one?"

This refers to the recent announcement by the government that there will be an additional compulsory state pension plan.. IIRC it will be 3% of net pay plus a couple of percent by the employer. My facts are roughly correct even if my terminology isn't.

jamesd

SquatNow wrote: »

Incidently, IIRC entitlement to full state pension based on having paid NI is only to people born before 1965.

People born after that aren't entitled to a state pension based on their NI payments.

Not so. Everyone who is working is entitled to two state pensions, regardless of when they were born:

1. The Basic State Pension. A fixed weekly amount. New legislation is reducing the maximum number of years required for a full BSP to 30 and fewer years will qualify for a pro-rata amount. Except that for those retiring before 2010 there is a minimum number of qualifying years required to get any.

2. The Additional State Pension. This is variable depending on income, maximum for moderately young people would be about 3,500 a year in addition to the BSP. This is being changed due to recent legislation, to increase payments to those on lower income at the expense of those on higher, it's also planned that by 2030 it will become fully flat rate like the BSP, with this reduction in earnings-related component planned to start sometime between 2012 and 2015.

See Pensions Reform for a summary of the planned changes.

jamesd

SquatNow wrote: »

The creation of the National Second Pension plan or whatever they are calling it? Why would be need a compulsory second 'national insurance' when we already have one?"

This refers to the recent announcement by the government that there will be an additional compulsory state pension plan.. IIRC it will be 3% of net pay plus a couple of percent by the employer.

Two reasons:

1. The Additional State Pension is being changed over time to become flat rate and as you've noted both the basic and additional state pensions are actually funded out of current tax revenue, not by investing the NI payments.

2. The proposed Personal Accounts will be money purchase pensions where the retirement benefits are paid for out of the proceeds of investing the contributions. Since the basic contributions are a percentage of earnings this will also be an earnings-related pension to somewhat replace the loss of the earnings component of the ASP.

The plan is that the combination of basic and flat rate additional state pension should produce a pension of 145 a week for a low earner (250 a week before tax). In addition a low earner using a personal account is expected to receive 35 a week more, taking them to 180 a week in 2007/8 Pounds. A high earner (670 a week before tax) is expected to receive 153 in basic and additional state pensions plus 132 from personal account investments for a total of 285 a week.

The contributions will be employer 3% (but only on earnings within a certain range), 4% employee and 1% tax relief from the government. The maximum conribution wil be 3600 a year (based on 2005 earnings, varies with general earninglevels). Employees will be permitted to opt out but employers will be required to offer it.

Source: Pensions Reform Factsheet and The Pensions Bill, introduced to Parliament 5 December 2007.

Paul_Herring

SquatNow wrote: »

Paul_Herring wrote:

Why not? Because one doesn't exist perhaps?

I was very specific about what I wanted you to find, it surely can't be that difficult to back up what you're saying surely?

If you wish to quote a post and a reply, please quote the entire portion that is relevant to your reply. Posting an "edited" version may give the impression that the post being quoted means something other than it really does.

I did quote the entire portion that is relevant. I asked you for a citation. You refused to give one. (In case there's any confusion, I require a link to a government controlled website, as opposed to The Sun's or Daily Mail, stating that NI is no longer considered qualification for state pension.)

The full quote should be "I can't be bothered to find an exact quote, so try this one:
The creation of the National Second Pension plan or whatever they are calling it? Why would be need a compulsory second 'national insurance' when we already have one?"

This refers to the recent announcement by the government that there will be an additional compulsory state pension plan.. IIRC it will be 3% of net pay plus a couple of percent by the employer. My facts are roughly correct even if my terminology isn't.

This is not a citation. Merely another quote pulled from an unverified source. Nor is it saying that NI isn't considered qualification for a state pension.

To go back to what I asked; I want a cite for the following - the bit in bold.

SqatNow wrote:

Since NI is no longer considered to be towards your pension, (this is OFFICIAL!!!) they are effectively paying 20% extra income tax.

You have yet to provide one. Since you're skirting round the issue and claiming ad-hominem, I'm rather inclined to think you won't be able to find one.

defender_of_the_weak

Incidently, IIRC entitlement to full state pension based on having paid NI is only to people born before 1965.

As others on this ite have pointed out, this is in error. The problem is that if your thread is lttered with IIRC and followed with incorrect information it crucially undermines the arguments you are trying to put forward. Much as I enjoy the debates in the last couple of weeks you have demonstrated an incomplete knowledge of pensions, bankruptcy, equity release plans and commercial banking economics. These holes in your knowledge merely allow people like me and many other posters the opportunity to pull it apart