State Pension Increases

Marcon

moe52 said:

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

Cost and complexity - not to mention the fact that those retiring under the old system/transitional arrangements get the benefit of State Additional Pension as well as basic pension, as explained above.

molerat

£36 in 2016, £42 now and £56 in 10 years time will be worth exactly the same in real terms.  You are no better or worse off whichever scheme you are on.  Giving those on the lower amount the same £ increase would make them better off, the idea is to keep the pension at the same relative value. Yes the new pension has a higher base value but the total achievable is lower than the old pension.  It also does away with pension credit which opens other doors, be careful what you wish for as it could actually leave some worse off.

xylophone

You are no better or worse off whichever scheme you are on. 

There are so many ifs/ands/buts ....For one thing, suppose an old state pensioner whose BSP and ASP together just happen to equal a full NSP of £179.60 - (£137.60 + £42). 

Let's suppose his spouse reached SPA on 6 April and was entitled to a full NSP of £179.60.

Let's suppose the "Triple Lock" remains in place  and that earnings rise by (say) 6% and that CPI is 3%.

The husband's BSP will rise by 6% but his ASP by only 3%.

Thus he will receive £145. 86 BSP and £43.26 ASP - total £189.12.  Total increase £9.52

His spouse's NSP will increase by 6% so she will receive £190.38, total increase £10.78.

xylophone

It also does away with pension credit 

Not necessarily - it depends on individual circumstances.

For example, a single person might be entitled to a full NSP of £179.80 (which is in excess of GPC) but have no savings and be afflicted by some disability.

https://www.ageuk.org.uk/globalassets/age-uk/documents/information-guides/ageukig50_pension_credit_inf.pdf

You may be eligible for Guarantee Credit if:

• you’ve reached State Pension age. This is currently 66 years old for both men and women.

• your weekly income is less than £177.10 and you’re single, ..............

If you have a disability, care for someone, have dependent children or have certain housing costs, you may be eligible for Pension Credit, even if your income is higher than the amounts above.

zagfles

moe52 said:

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

The new state pension replaces both the basic state pension and the earnings related additional pension SERPS/S2P. Many people got far more than the new state pension under the old system, I know people getting over £200 a week.

In general people were better off with the basic state pension plus SERPS/S2P than the new single tier pension. Even people getting NI credits eg for looking after children/elderly relatives got credits towards S2P, as well as the basic pension.

There are exceptions for instance the self employed, who are much better off under the new pension because they never got any SERPS/S2P. Virtually everyone else did.

It's complicated by the fact that many people were in occupational schemes which were "contracted out" of SERPS/S2P, ie the scheme replaced SERPS/S2P and got NI rebates for doing so. Under the new single tier pension, those with contracted out service have their single tier reduced to reflect this.

It's far more complicated than this and there are winners and losers and anomalies, but it's wrong to simply assume that the new state pension just replaces the old basic state pension.

moe52

zagfles said:

moe52 said:

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

The new state pension replaces both the basic state pension and the earnings related additional pension SERPS/S2P. Many people got far more than the new state pension under the old system, I know people getting over £200 a week.

In general people were better off with the basic state pension plus SERPS/S2P than the new single tier pension. Even people getting NI credits eg for looking after children/elderly relatives got credits towards S2P, as well as the basic pension.

There are exceptions for instance the self employed, who are much better off under the new pension because they never got any SERPS/S2P. Virtually everyone else did.

It's complicated by the fact that many people were in occupational schemes which were "contracted out" of SERPS/S2P, ie the scheme replaced SERPS/S2P and got NI rebates for doing so. Under the new single tier pension, those with contracted out service have their single tier reduced to reflect this.

It's far more complicated than this and there are winners and losers and anomalies, but it's wrong to simply assume that the new state pension just replaces the old basic state pension.

Thanks for the explanation. I had the required amount of contributions but unfortunately I didn't come out one of the winners and will wait and see what comes out with the 'waspies' challenge although I'm not holding my breath! But as you mentioned, the self employed are better off with the new state pension for which we are thankful. Thanks again.

zagfles

moe52 said:

zagfles said:

moe52 said:

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

The new state pension replaces both the basic state pension and the earnings related additional pension SERPS/S2P. Many people got far more than the new state pension under the old system, I know people getting over £200 a week.

In general people were better off with the basic state pension plus SERPS/S2P than the new single tier pension. Even people getting NI credits eg for looking after children/elderly relatives got credits towards S2P, as well as the basic pension.

There are exceptions for instance the self employed, who are much better off under the new pension because they never got any SERPS/S2P. Virtually everyone else did.

It's complicated by the fact that many people were in occupational schemes which were "contracted out" of SERPS/S2P, ie the scheme replaced SERPS/S2P and got NI rebates for doing so. Under the new single tier pension, those with contracted out service have their single tier reduced to reflect this.

It's far more complicated than this and there are winners and losers and anomalies, but it's wrong to simply assume that the new state pension just replaces the old basic state pension.

Thanks for the explanation. I had the required amount of contributions but unfortunately I didn't come out one of the winners and will wait and see what comes out with the [censored] challenge although I'm not holding my breath! But as you mentioned, the self employed are better off with the new state pension for which we are thankful. Thanks again.

It's really a case of the new state pension being incredibly generous to the self employed - despite paying well under half the NI of employee & their employer they get the same as an employee.

Other people who often think they've missed out when they haven't is people who've been in contracted out employment, usually people who've got a final salary pension etc. For them, it usually makes no difference whether they reached state pension age just before or just after the switch to the new system, under the old system they'd just get the basic state pension, but under the new system they'd get their new state pension reduced to the level of the old basic state pension, regardless of how many years they have, due to their contracted out service. So they think they've lost out when they haven't.

BTW please don't mention the W word here, discussion is banned and threads get deleted.

GunJack

zagfles said:

Other people who often think they've missed out when they haven't is people who've been in contracted out employment, usually people who've got a final salary pension etc. 

Yeah, but try explaining it to them!! It often seems that while pensions are one of the more important financial products (for want of a better word) so many people just glaze over when you try.....

Silvertabby

GunJack said:

zagfles said:

Other people who often think they've missed out when they haven't is people who've been in contracted out employment, usually people who've got a final salary pension etc. 

Yeah, but try explaining it to them!! It often seems that while pensions are one of the more important financial products (for want of a better word) so many people just glaze over when you try.....

A friend's husband who, like me, Mr S and my friend has an Armed Forces pension was adamant that he had been 'robbed' and that he should have been given the option of contracting out of SERPS/SP2 back in 1978 instead of having the decision made for him.

I finally got through to him by saying that his COPE of £99 per week was being paid with his RAF pension instead of his State pension and that he would have never received this payment twice.

If he had opted to keep this £99 per week as part of his State pension he wouldn't have received it until he was 65......but he had been receiving it as part of his RAF pension since he was 55.

So he was actually £99 x 52.2 x 10 in pocket.  Plus all the reduced NI he paid between 1978 and retirement.  That finally shut him up!

ADD.  I haven't told him that as I'm the youngest of the four of us I am able to top up my State pension to the max by paying voluntary class 3s.  I really don't want the whinging.  

german_keeper

GunJack said:

zagfles said:

Other people who often think they've missed out when they haven't is people who've been in contracted out employment, usually people who've got a final salary pension etc. 

Yeah, but try explaining it to them!! It often seems that while pensions are one of the more important financial products (for want of a better word) so many people just glaze over when you try.....

I remember a chap at work a couple of years back ranting about not being entitled to a "full" state pension and getting shafted by the government again. I explained to him that this was the one example over the last few years where we hadn't been shafted and had actually come out of the NSP arrangements very well indeed. Talked him through the changes and how we could build up a full state pension on top of our works pension etc etc.

A couple of days later I walked down the room and heard him on exactly the same rant. Human nature I suppose. I think some people just like to have a rant, play the victim, or even just don't like to admit they were wrong.