Old v New Pension

foduk

I retired on the old state pension formula of Basic + SERPS + Graduated. In total, it is slightly more than the current new Single Pension. However the next annual increase of 2.5% applies in total to the New Single Pension but only to the basic rate of my pension, the additional elements increase by only 0.5%. In time, my pension will be overtaken and I will be receiving less than other pensioners (despite a full 48 year working life). I asked a government pension financial web site, if/when this occurred, would I receive parity. Their answer was no. Is this fair?

molerat

Where do you get those increase % from as they haven't been announced yet and will likely be considerably more than that.

It is the way the cookie crumbles, both pensions have positive and negative factors.

Linton

foduk said:

I retired on the old state pension formula of Basic + SERPS + Graduated. In total, it is slightly more than the current new Single Pension. However the next annual increase of 2.5% applies in total to the New Single Pension but only to the basic rate of my pension, the additional elements increase by only 0.5%. In time, my pension will be overtaken and I will be receiving less than other pensioners (despite a full 48 year working life). I asked a government pension financial web site, if/when this occurred, would I receive parity. Their answer was no. Is this fair?

Swings and roundabouts.

I like you am a pre 2016 pensioner.  I deferred my SP by 5-6 years which increased its already greater than new SP value by more than 60%.  Someone doing the same thing with post 2015 SP would only get about half that increase.  is that fair?

dunstonh

Is this fair?

The kids today would build a working entitlement that would cap out £179.60pw.  That is £9,339 a year.    You worked during a period where entitlement in state pensions could result in £15k a year.

QrizB

foduk said:

In time, my pension will be overtaken and I will be receiving less than other pensioners (despite a full 48 year working life). I asked a government pension financial web site, if/when this occurred, would I receive parity. Their answer was no. Is this fair?

I'm not aware of any requirement for the UK benefit system to be fair.
On the plus side, once your pension is ~£2pw below the New State Pension, you may become eligible for Pension Credit which brings with it a range of other benefits that you might not qualify for otherwise.

p00hsticks

foduk said:

I retired on the old state pension formula of Basic + SERPS + Graduated. In total, it is slightly more than the current new Single Pension. However the next annual increase of 2.5% applies in total to the New Single Pension but only to the basic rate of my pension, the additional elements increase by only 0.5%. In time, my pension will be overtaken and I will be receiving less than other pensioners (despite a full 48 year working life). I asked a government pension financial web site, if/when this occurred, would I receive parity. Their answer was no. Is this fair?

They say old age makes you more forgetful.

Did you not remember that you brought this exact same topic up for discussion on this board six months ago ?

https://forums.moneysavingexpert.com/discussion/6250352/state-pension-increases/p1

Also, can I ask from what age you got your state pension (I'm pretty confident it's going to be considerably earlier than when I shall be getting mine)  ?

QrizB

p00hsticks said:

They say old age makes you more forgetful.

Did you not remember that you brought this exact same topic up for discussion on this board six months ago ?

https://forums.moneysavingexpert.com/discussion/6250352/state-pension-increases/p1

Indeed, of the four posts the OP has made on the forum, three have been exactly this:

• https://forums.moneysavingexpert.com/discussion/comment/70198200/#Comment_70198200 in February 2016
• https://forums.moneysavingexpert.com/discussion/6250352/state-pension-increases in March 2021
• https://forums.moneysavingexpert.com/discussion/6304695/old-v-new-pension in October 2021 (this thread)

And they haven't replied to any of them.

jamesd

foduk said:

I retired on the old state pension formula of Basic + SERPS + Graduated. In total, it is slightly more than the current new Single Pension. However the next annual increase of 2.5% applies in total to the New Single Pension but only to the basic rate of my pension, the additional elements increase by only 0.5%. In time, my pension will be overtaken and I will be receiving less than other pensioners (despite a full 48 year working life). I asked a government pension financial web site, if/when this occurred, would I receive parity. Their answer was no. Is this fair?

It can look fair or unfair depending on individual circumstances. There is something you can do about it but it might not be wise to do it.

If you defer claiming your state pension it'll be increased by 10.4% per year of deferral, pro-rated for parts of a year. You can start deferring once even if you've already claimed it. This is what you can do about it if you wish. Those on the new system only get 5.8% increase per year of deferring. The extra money increases with CPI in both cases, not triple lock for either. A reason not to do it is if your income from other sources is so low and your savings are so low that you will start to qualify for means tested Pension Credit if you don't do it. So it's a possibly good move for those with lots of income but not for those in households with little.

Under the old system the additional state pension portion is inheritable by a spouse. The new pension version isn't inheritable at all. Barring some possible minor niche cases.

The earnings part didn't have a cap on accrual years so that part could be earned for almost fifty years even though the basic state pension accrual ended after thirty. This could take a high earner to over three hundred Pounds a week and even a low earner wold get around 25% more than the new state pension if they had a full working life.

The new one is more generous than the old one to those with little work earnings and years but lots of credits. Stereotypically women but plenty of others also fit into this category.

The old one allows many spouses to get at least 60% of their spouses state pension if their own is lower, the new one doesn't.

So for you, maybe less good. But if you were to add in a spouse getting an uplift who then inherits the overall household for whole lifetimes could still end up being better off.

Silvertabby

The long term aim of the new single tier pension is to make it more affordable.

Contracting out (of the additional State pension) ended in 2016, meaning everyone and their employer pays unreduced NI.  Under the old scheme, contracted in high earners could rack up more than £300 per week State pension, whereas now that same earner, paying the same level of NI, will be capped at £179.60 per week.

jamesd

Not just the cuts to state pension for those with lots of work history, though. Also the increase (paid for by those cuts) for those mostly using credits to take them above or closer to the Pension Credit means test level, with Pension Credit funded out of general taxation, not NI. This one switched a general taxation cost to an NI cost as in effect an increase in general taxation that then had to pay for less.