State Pension Increases

foduk

I retired in 2012 , on the old state pension scheme. Since 2016, when the pension rules changed, the basic state pension has risen by approximately £950 per annum. However, retirees on the post-2016 rates have had increases of £1245 over the same period. Given that both pensions increase at the same percentage rate, the gap will only get wider.

JoeCrystal

Doesn't work like that. The Old State Pension is based on the Basic State Pension and an Additional State Pension (SERPS and S2P) if you were entitled to them, linked to your earnings (The maximum possible State Pension would be £296 per week, for example). The New State Pension is literally just a single rate without any link to earnings, so it is really can't be compared to the Old State Pension. If I remember correctly, the average state pension under the old scheme is £147.55 per week while the average state pension under the new scheme is £158.28 per week in 2019, so the difference is really nominal. 

eskbanker

foduk said:

Since 2016, when the pension rules changed, the basic state pension has risen by approximately £950 per annum.

You wish!

Dazed_and_C0nfused

eskbanker said:

foduk said:

Since 2016, when the pension rules changed, the basic state pension has risen by approximately £950 per annum.

You wish!

It has, in April 2016 the basic State Pension was £6,203.

From 6 April 2021 the basic State Pension will be £7,155.

An increase of £952 

molerat

From April 2016 to April 2021 the maximum old state pension increased by £1716, the new state pension increased by £1245 if you really want to compare apples with oranges

Both old and new basic pensions increase by the triple lock and old additional pension and new protected amount increases by cpi.

eskbanker

Dazed_and_C0nfused said:

eskbanker said:

foduk said:

Since 2016, when the pension rules changed, the basic state pension has risen by approximately £950 per annum.

You wish!

It has, in April 2016 the basic State Pension was £6,203.

From 6 April 2021 the basic State Pension will be £7,155.

An increase of £952 

It was a lame joke playing on the ambiguity, i.e. there haven't been increases of £950 applied every year....

jamesd

You're comparing only part of the normally higher old system with the whole of the normally lower new system to create a misleading comparison.

Under the old system there was the basic state pension based on up to thirty years of paying in plus an earnings-related part that increased it to around £190 for a low earner with full work record. For a lifelong high earner it's now over £300 maximum potential under the old rules.

Someone solely under the new system gets no earnings-related part and instead gets 1/35th of the new amount per year of paying in or credits, capped at 35 years.

As a result the new system will make those with full work records in the future substantially worse off, with the money that would have gone to them shifted to those with only limited paid work. That tends still to be a cost to men and a benefit to women and the long term unemployed, though there are other niches like working abroad that can make someone better off under the new system. And of course there are plenty of women with full working lives who will be worse off under the new system than the old.

Due to working abroad I'm one of the relatively small number of men who's better off under the new rules.

NameWithheld

jamesd said:

As a result the new system will make those with full work records in the future substantially worse off, with the money that would have gone to them shifted to those with only limited paid work. That tends still to be a cost to men and a benefit to women and the long term unemployed, though there are other niches like working abroad that can make someone better off under the new system. And of course there are plenty of women with full working lives who will be worse off under the new system than the old.

Due to working abroad I'm one of the relatively small number of men who's better off under the new rules.

I think it also benefits those who spent long periods contracted out, especially if they have sufficient time to make up to the full new pension.

I have got just enough time

t0rt0ise

The OP did say the basic state pension. It's true of salaries too which are increased by a percentage, the gap between lower and higher paid employees gets wider.

jamesd

NameWithheld said:

I think it also benefits those who spent long periods contracted out, especially if they have sufficient time to make up to the full new pension.

I have got just enough time

Yes, it does, I did that as well. I bought seven years when I came back so I now have two spare years when it comes to getting the single tier maximum.

t0rt0ise said:

The OP did say the basic state pension.

Yes, but was comparing it to the whole single tier, which includes a bit of earnings substitute.

It's entirely possible that they are only on the BSP and wish that they could be under the new rules if they have five more years of credits to get them to that maximum from the 30 it takes for the BSP. Because of traditional roles there are quite a lot of women in this position. Improving the lot of such women reaching their state pension age after 2016 was one of the objectives of the change.

moe52

foduk said:

I retired in 2012 , on the old state pension scheme. Since 2016, when the pension rules changed, the basic state pension has risen by approximately £950 per annum. However, retirees on the post-2016 rates have had increases of £1245 over the same period. Given that both pensions increase at the same percentage rate, the gap will only get wider.

I'm glad someone else has noticed this as there doesn't seem to be much information on this increasing discrepancy. I'm no expert, but being on the old state pension and my partner on the new, I made a quick calculation that I could of course got wrong or misunderstood the entire issue!   

I'm assuming the old pension to be £137 per week and the new rate to be £179 per week and a 3% annual increase over 10 years. Currently the difference between old and new is therefore £42 (original difference I believe was £36 in 2016).

Making the above calculation, the difference in 10 years time will be £56 (240 - 184).

Percentage increases seem unfair in this situation where those on the lower rate pension just keep getting lower down the scale, Surely, the Government could add the physical amount added to the new state pension onto the old pension rate rather than using a percentage on both the old and new state pensions?

Please don't blast me for this post if I'm wrong, just explain why I'm wrong. Thanks