Here's how much the state pension triple lock and other benefits could rise by in April 2024

GibbsRule_No3.

Writing as someone on the new, transitioning pension. Thus getting a part uplift to my SP due to it being after 2016 but also having a contracted out part, so not getting the full new SP. I do wonder at the difference between the “Old” and “New” pension amount that the press usually mention (conveniently not saying some old are better than the new, due to how they paid in etc) if those pensioners on the old basic should get the 8.5% and the new pensioners could get the 7.8%. Would those on the old basic, who can now more than likely get access to extra payments, more so than those on the new rate, who could possibly just miss out on the extra payments, eventually equal out and move from the extra payments, saving the government money in the long run?  I am lucky and with my work pensions, never be liable for extra payments but I do have older friends, that due to their work pensions miss the extra payments by very little and would be better off if they did have access to the UC part. Yet they don’t get the rise I get from being on the new rate.

Not sure I expressed what I meant very well, so please be gentle. Always winners and losers in the long run.

Pat38493

Linton said:

Pat38493 said:

Possibly an unpopular view on a board with many pensioners, but I fail to see why there should be a link between pension increases and average earnings.   Most state pensioners are not working anymore and don’t have to make any continuing contribution to national productivity in order to get the pension. 

I can of course see a strong argument for the state pension to increase with inflation, but not earnings.

The reason was that during the period form the 70s' the workers were getting richer but the rertired weren't.  

Which to me seems fine.  If the workers are getting richer it's presumably because the workers are more productive.  The retired are not so as long as they are covered for inflation (not getting poorer), to me that seems fair.  

When we have all the debates about safe withdrawal limits and so on, I have never seen anyone claim that they are using the forecast rise in future earnings of the country to figure out how much they need in retirement.

Exodi

Silvertabby said:

8.5% includes the one-off bonus to the likes of the NHS.  To be fair, this really isn't a true reflection of average pay rises - 7.8% sounds like a much more accurate figure.

As for the 2022 increase, the salary increase figure was artificially inflated due to those whose salaries had been reduced to 80% (during Covid) being restored back to their original 100%.  Not a true pay rise by any stretch of the imagination, so limiting that year's increase to CPI (being higher than the minimum 2.5%) seemed fair to me.  After all, I'm not aware of any pensioners who had their pension incomes reduced to 80% at that time. 

Spoken as a State pensioner. 

A lot of pension arguments made are emotive and with little heed to context like you have. I greatly admire your neutrality. Unfortunately I'm probably not so neutral.

As a full time employee in his 30s, I could have only dreamed of a 10.1% increase last year, or the suggested 8.5% this year.

It's not difficult to see why the triple-lock can not be sustainable long term. The current unfunded state and public pension liabilities are astronomical and ever-increasing.

The current system of effectively bribing pensioners with unsustainable pension increases, solely because they make up a significant part of voters that actually turn up to vote, is frustrating, but perhaps when I'm a pensioner I'll be happily to trade my vote for the same.

I am loathed to pay National Insurance when there exists a remote possibility that the State Pension will eventually need to be cut down or means tested in the next few decades because it's simply unaffordable.

Of course, as someone said before, not likely to be a popular opinion on a board populated by a significant amount of pensioners.

Linton

Pat38493 said:

Linton said:

Pat38493 said:

Possibly an unpopular view on a board with many pensioners, but I fail to see why there should be a link between pension increases and average earnings.   Most state pensioners are not working anymore and don’t have to make any continuing contribution to national productivity in order to get the pension. 

I can of course see a strong argument for the state pension to increase with inflation, but not earnings.

The reason was that during the period form the 70s' the workers were getting richer but the rertired weren't.  

Which to me seems fine.  If the workers are getting richer it's presumably because the workers are more productive.  The retired are not so as long as they are covered for inflation (not getting poorer), to me that seems fair.  

When we have all the debates about safe withdrawal limits and so on, I have never seen anyone claim that they are using the forecast rise in future earnings of the country to figure out how much they need in retirement.

ISTM you can argue either way - if the country is getting richer/becoming more productive one could say that everone should benefit, otherwise non-workers become increasuingly unable to to play a full part in society.

The effect of no earnings link is cumulative over successive generations.  With an expanding economy, if generation 1 retires when SP corresponds  to earnings from employment generation 2 starts with a comparatively lower SP than generation 1.  So future retirees suffer more than current ones. Perhaps that thought may lead you to change your mind on the earnings link.

Generally I dont believe the double lock makes a great deal of difference.  But  if a step change in inflation occurs one year with a similar step change in wages the next then SP benefits twice.

I see no problem with the eanings link in principle but would also argue, despite being a pensioner, that non workers such as pensioners benefit unfairly from tax breaks compared with those with similar earnings from employment - in particular no NI and ISAs providing significant tax free income.

Having said my bit, I can now comment that what should be isnt really in scope for these forums.  We have to deal with the world as it is.

michaels

Pat38493 said:

Linton said:

Pat38493 said:

Possibly an unpopular view on a board with many pensioners, but I fail to see why there should be a link between pension increases and average earnings.   Most state pensioners are not working anymore and don’t have to make any continuing contribution to national productivity in order to get the pension. 

I can of course see a strong argument for the state pension to increase with inflation, but not earnings.

The reason was that during the period form the 70s' the workers were getting richer but the rertired weren't.  

Which to me seems fine.  If the workers are getting richer it's presumably because the workers are more productive.  The retired are not so as long as they are covered for inflation (not getting poorer), to me that seems fair.  

When we have all the debates about safe withdrawal limits and so on, I have never seen anyone claim that they are using the forecast rise in future earnings of the country to figure out how much they need in retirement.

Actually I have mentioned this a few times, looking for a constant real terms income over a long retirement could lead to a substantial fall relative to those who earn an income - eg retire at 100% median income on a fixed real income and you fall below the poverty line of 60% of median earnings after 30 years of retirement if real incomes were to go back to growing at 2% pa.

Problem is looking for a retirement income that increases in real terms by 2% pa makes the required pot size look even more unaffordable.

xylophone

I am loathed to pay National Insurance 

I'm sure that the Government and all those benefiting from your contributions (including yourself) do not hate you......

Remember that NI pays for more than the State Pension.

https://en.wikipedia.org/wiki/National_Insurance

The National Insurance Funds are used to pay for certain types of welfare expenditure and National Insurance payments cannot be used directly to fund general government spending. However, any surplus in the funds is invested in government securities, and so is effectively lent to the government at low rates of interest. National Insurance contributions are paid into the various National Insurance Funds after deduction of monies specifically allocated to the National Health Services (NHS). However a small percentage is transferred from the funds to the NHS from certain of the smaller sub-classes. Thus the four NHS organisations are partially funded from NI contributions but not from the NI Fund.[9] Less than half of benefit expenditure (42.1%) now goes on contributory benefits, compared with over 65% in 1978–79 because of the growth of means-tested benefits since the late 1970s.[10]

https://www.gov.uk/national-insurance/what-national-insurance-is-for

Linton

michaels said:

Pat38493 said:

Linton said:

Pat38493 said:

Possibly an unpopular view on a board with many pensioners, but I fail to see why there should be a link between pension increases and average earnings.   Most state pensioners are not working anymore and don’t have to make any continuing contribution to national productivity in order to get the pension. 

I can of course see a strong argument for the state pension to increase with inflation, but not earnings.

The reason was that during the period form the 70s' the workers were getting richer but the rertired weren't.  

Which to me seems fine.  If the workers are getting richer it's presumably because the workers are more productive.  The retired are not so as long as they are covered for inflation (not getting poorer), to me that seems fair.  

When we have all the debates about safe withdrawal limits and so on, I have never seen anyone claim that they are using the forecast rise in future earnings of the country to figure out how much they need in retirement.

Actually I have mentioned this a few times, looking for a constant real terms income over a long retirement could lead to a substantial fall relative to those who earn an income - eg retire at 100% median income on a fixed real income and you fall below the poverty line of 60% of median earnings after 30 years of retirement if real incomes were to go back to growing at 2% pa.

Problem is looking for a retirement income that increases in real terms by 2% pa makes the required pot size look even more unaffordable.

SP is important as it provides a guaranteed minimum preventing the elderly living in what is considered poverty.  It is less important that substantial income beyond SP is linked to wages because those in retirement would have a well established standard of living and so would be under less, if any, social pressure to increase it in line with everyone else (assuming of course that everyone else's standard of living is increasing).

xylophone

With regard to the state pension, I sometimes think that people on these boards tend to forget that there are still those, notably older women, for whom the state pension forms the bulk of their income in retirement.

Foe those in more fortunate circumstances, it should be remembered that they will "pay back" some part of their state pension increase in tax, in some cases quite substantial amounts of tax.

And even those in modest circumstances will find that they will be paying income tax for the first time since they retired, particularly in view of the freezing of the Personal Allowance.

Take somebody whose only income is a full new state pension and a very small pension from a time that they were employed (say £2000 a year). This will take that person over the £12,570 PA and will hardly enable him/her to live the life of Riley!

Pat38493

Linton said:

Pat38493 said:

Linton said:

Pat38493 said:

Possibly an unpopular view on a board with many pensioners, but I fail to see why there should be a link between pension increases and average earnings.   Most state pensioners are not working anymore and don’t have to make any continuing contribution to national productivity in order to get the pension. 

I can of course see a strong argument for the state pension to increase with inflation, but not earnings.

The reason was that during the period form the 70s' the workers were getting richer but the rertired weren't.  

Which to me seems fine.  If the workers are getting richer it's presumably because the workers are more productive.  The retired are not so as long as they are covered for inflation (not getting poorer), to me that seems fair.  

When we have all the debates about safe withdrawal limits and so on, I have never seen anyone claim that they are using the forecast rise in future earnings of the country to figure out how much they need in retirement.

ISTM you can argue either way - if the country is getting richer/becoming more productive one could say that everone should benefit, otherwise non-workers become increasuingly unable to to play a full part in society.

The effect of no earnings link is cumulative over successive generations.  With an expanding economy, if generation 1 retires when SP corresponds  to earnings from employment generation 2 starts with a comparatively lower SP than generation 1.  So future retirees suffer more than current ones. Perhaps that thought may lead you to change your mind on the earnings link.

Generally I dont believe the double lock makes a great deal of difference.  But  if a step change in inflation occurs one year with a similar step change in wages the next then SP benefits twice.

I see no problem with the eanings link in principle but would also argue, despite being a pensioner, that non workers such as pensioners benefit unfairly from tax breaks compared with those with similar earnings from employment - in particular no NI and ISAs providing significant tax free income.

Having said my bit, I can now comment that what should be isnt really in scope for these forums.  We have to deal with the world as it is.

I see your point but I am still not totally convinced since retirement is generally at the late end of life.

The bigger thing though, is that if you are right, why are we not trying to do our pension cash flow modelling based on forecast future economic growth if it's higher than forecast inflation?

Also - why are schemes like DB schemes in the public sector, and older DB schemes in deferment, using this approach?

If your argument is correct, surely it should be correct for all pensions and pension planning?

As you say though, that's basically how it is today.

Linton

Pat38493 said:

Linton said:

Pat38493 said:

Linton said:

Pat38493 said:

Possibly an unpopular view on a board with many pensioners, but I fail to see why there should be a link between pension increases and average earnings.   Most state pensioners are not working anymore and don’t have to make any continuing contribution to national productivity in order to get the pension. 

I can of course see a strong argument for the state pension to increase with inflation, but not earnings.

The reason was that during the period form the 70s' the workers were getting richer but the rertired weren't.  

Which to me seems fine.  If the workers are getting richer it's presumably because the workers are more productive.  The retired are not so as long as they are covered for inflation (not getting poorer), to me that seems fair.  

When we have all the debates about safe withdrawal limits and so on, I have never seen anyone claim that they are using the forecast rise in future earnings of the country to figure out how much they need in retirement.

ISTM you can argue either way - if the country is getting richer/becoming more productive one could say that everone should benefit, otherwise non-workers become increasuingly unable to to play a full part in society.

The effect of no earnings link is cumulative over successive generations.  With an expanding economy, if generation 1 retires when SP corresponds  to earnings from employment generation 2 starts with a comparatively lower SP than generation 1.  So future retirees suffer more than current ones. Perhaps that thought may lead you to change your mind on the earnings link.

Generally I dont believe the double lock makes a great deal of difference.  But  if a step change in inflation occurs one year with a similar step change in wages the next then SP benefits twice.

I see no problem with the eanings link in principle but would also argue, despite being a pensioner, that non workers such as pensioners benefit unfairly from tax breaks compared with those with similar earnings from employment - in particular no NI and ISAs providing significant tax free income.

Having said my bit, I can now comment that what should be isnt really in scope for these forums.  We have to deal with the world as it is.

1) I see your point but I am still not totally convinced since retirement is generally at the late end of life.

2) The bigger thing though, is that if you are right, why are we not trying to do our pension cash flow modelling based on forecast future economic growth if it's higher than forecast inflation?

3) Also - why are schemes like DB schemes in the public sector, and older DB schemes in deferment, using this approach?

If your argument is correct, surely it should be correct for all pensions and pension planning?

As you say though, that's basically how it is today.

1) Yes but think of the long term issue.   Say SP based purely on inflation had existed since 1980 when it was £27/week  for a single purson.  This corresponds to £110/week today. 

2) See my posting above - in retirement you dont need your income above SP to increase above inflation because you will have become very accustomed to a particular standard of living during your working life.

3) As (2).  Also DB pensions are based on earnings so will presumably increase with average earnings in the long term, the long term being the real problem.