State Pension, or just another Benefit?

kdzkdz

I was really surprised to hear Martins opinion on air, that, the state pension was not to be regarded as an expectation of future income based on bought contributions paid over a working lifetime.

He said National insurance was a tax, and the state pension merely a benefit! 

If this had always been the case then the public has been duped, because there is and always has been among retirees an expectation that thier contributions would primarily provide them with the security of a pension guarentee in thier retirement. 

molerat

Been done to death many times on here.  As with most things the legal realities and the public's understanding / expectations often differ.

Stubod

It is inevitable that at some point in the future the SP will be means tested like it is in Australia. 

I have been trying to find out what the income threshold is in Australia before you can start claiming it. On the face of it it's not that much, but I find it quite difficult to understand their system for calculating it.

Linton

kdzkdz said:

I was really surprised to hear Martins opinion on air, that, the state pension was not to be regarded as an expectation of future income based on bought contributions paid over a working lifetime.

He said National insurance was a tax, and the state pension merely a benefit! 

If this had always been the case then the public has been duped, because there is and always has been among retirees an expectation that thier contributions would primarily provide them with the security of a pension guarentee in thier retirement. 

I do not understand the significance of "merely" a benefit and why it justifies a  "!".

If you want to call NI a tax, fine. Similarly you can call SP a benefit iuf it makes you happy. It doesnt make any difference. However unlike most taxes NI is mainly applicable to a restricted section of the community as is SP - ie those who are or were employed.

Flugelhorn

NI is just a tax, the more you earn, the more NI you pay - however what you get out at the end is basically the same regardless of of how much NI you have paid

Grumpy_chap

kdzkdz said:

I was really surprised to hear Martins opinion on air, that, the state pension was not to be regarded as an expectation of future income based on bought contributions paid over a working lifetime.

He said National insurance was a tax, and the state pension merely a benefit! 

If this had always been the case then the public has been duped, because there is and always has been among retirees an expectation that thier contributions would primarily provide them with the security of a pension guarentee in thier retirement. 

You may find this thread interesting:
https://forums.moneysavingexpert.com/discussion/6495406/is-state-pension-a-benefit/p1

jamesd

Unlike income tax, NI is hypothecated, meaning allocated only for specific purposes.

While NI years are currently used to work out the benefits there's no contractual or legal entitlement and the qualifying criteria or benefits can be changed at any time.

The last major batch of changes, in 2016, substantially cut the benefit for people with long work history xxxto transfer money to those with more limited work history, notably women. Using numbers from 2016 a full working life low earner could get £190 under the old system but only £155 under the new.

The state pension has been a benefit since the day it started. 
https://petition.parliament.uk/archived/petitions/121267

xylophone

I have been trying to find out what the income threshold is in Australia before you can start claiming it. On the face of it it's not that much, but I find it quite difficult to understand their system for calculating it.

https://www.servicesaustralia.gov.au/income-test-for-age-pension?context=22526

At least there is no Inheritance Tax!

Some Australian visitors were quite appalled when I described the UK system, particularly the 40% levy.

JoeCrystal

Stubod said:

It is inevitable that at some point in the future the SP will be means tested like it is in Australia. 

I have been trying to find out what the income threshold is in Australia before you can start claiming it. On the face of it it's not that much, but I find it quite difficult to understand their system for calculating it.

I did have a quick look at it and if I remember correctly, it is indeed not that straightforward but it is also based if it is single or a couple claiming as well while taking into the foreign incomes and assets as well. Here is a summary but quite likely plain wrong but do your own research.

They will pay you a pension but it get reduced by 50 cents for each dollar over $204 per fortnight (for a single person). But if your fortnight is higher than the cut off point then they will pay you zero for that fortnight. Interestingly enough, the cut off point (for a single person) is $2,397.40 for a fortnight or in other words $62,322 per 52 weeks basically. (Basically 48,995 pounds at this point).

They do asset test so count all your assets and work out your "income" from it. Aka your savings accounts and fixed terms, bonds, shares, gifts and so on. So if you are a single, then first $60,400 of your financial assets has the deemed rate of 0.25% applied. Anything over $60,400 is deemed to earn 2.25%. Even selling your house and therefore have a large amount of money will affect the "income".

Unlike in this country in which you have to build up the contributions, Australia just approach it from other end instead. 
* You just need to live in the country for at least 10 years during your life, five years must be without a break. (There are agreements in which living or working in other countries count but UK's agreement came to an end in 2001 so no longer valid.)
*Must be living and resident in Australa (unless you got an approved reason for having to live overseas). If you are no longer living in Australa and did not have a valid reason, well, no more pension from the government!

I barely scratch the surface but all I can think is how insane tracking all the datas and assessments it must do. But they seem to manage though.

kdzkdz

Thanks everyone for the positive response to my thread, the information sources have proved to be very illuminating.

However from what I've read the current state pension value is well down in the league compared to other countries.
It simply does not adequately cover even the basic cost of day to day living by far.(I mean really!)
are our pensioners destined to have the quality of life of a third world country?

hugheskevi

kdzkdz said:

Thanks everyone for the positive response to my thread, the information sources have proved to be very illuminating.

However from what I've read the current state pension value is well down in the league compared to other countries.
It simply does not adequately cover even the basic cost of day to day living by far.(I mean really!)
are our pensioners destined to have the quality of life of a third world country?

International comparisons are fraught with difficulty, and a simple comparison of State pension provision is naive.

Pension systems are some combination of State and private provision, usually some combination but some are more heavily weighted in one direction than the other. They can be universal, means-tested or contributory. The UK system has always traditionally had a large private component (primarily employer provision), incentivised by a generous tax relief system.

It is also necessary to take into other things which are provided free or at a reduced cost, in particular healthcare, social care, and taxes (eg those over State Pension age do not pay National Insurance).

The analysis that tries to take all these things into account usually has the UK mid-table amongst developed countries in terms of pension provision.

It really is essential to consider the role played by private pension - the 'deal' in the UK has always been that if you do not make any private provision for yourself/family, you cannot expect much beyond the minimum provided in one way or another through the State system. This is very different to many European countries where State provision is much more widespread, but private provision is not as extensive.

Those in a 3rd world country could only dream of free healthcare, free accommodation (Housing Benefit), free social care (if no assets), and entitlement to either a contributory or means-tested pension from age 66.