Will the state pension exist for a 42 year old?

Andy_L

MetaPhysical said:

Brenster said:

I am 43, and i dont see how they could just stop it.  As has happened over the past 20 years, the age at which you get it may increase, however thier would be riots if they just pulled it, and if they did scrap it, we would all be owed thousands in a rebate as we have been paying into the pot via NI since starting work. 
Also to make it means tested would just be another kick in the teeth for those who have planned and made sacrifises throughout thier working life, so this would be unfair also. 
We do not have a crystal ball, but i personally feel i will get it age 70/71, it rises to 68 soon, and i can see it rising by 1 year per decade on average to keep up with extended life expectancy.

There is no "pot" and there never has been.  We pay NI and taxes and they disappear to people who are currently retired, amongst other things.  We do have a National Insurance record where it is stated quite clearly we are entitled to a pension at SPA with the maximum years of contributions (like I have for example) but that it is subject to change.  It does not come out of our personal "pot" as such and no money or provision has been explicitly ring-fenced for you or me.  What would happen to millions who had bought more years of NI to cover holes if the government then decided to means test the SP after all?  Do they pay us all back? It would wreck the plans of people who have been saving enough to add to the SP anchor to give them a reasonable income, saving with great sacrifice elsewhere in their lives.  To pull the carpet on that now would wreck the lives of millions of people, 99% of everyone over 45 I'd venture to say.  It would be an unholy mess of historic proportions to pull the rug on this one.  Never say never though, politicians are nuts, all of them are.

If bankers operated like this they would be prosecuted.  "Yes we know you have been contributing Mr MetaPhysical all these years but, actually, the money in your retirement plan is not your money, it's not ring fenced for you"

"The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers, and the self-employed. Voluntary contributions are also paid into the Fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension."

https://www.gov.uk/government/publications/national-insurance-fund-accounts/great-britain-national-insurance-fund-account-for-the-year-ended-31-march-2023

Linton

Andy_L said:

MetaPhysical said:

Brenster said:

I am 43, and i dont see how they could just stop it.  As has happened over the past 20 years, the age at which you get it may increase, however thier would be riots if they just pulled it, and if they did scrap it, we would all be owed thousands in a rebate as we have been paying into the pot via NI since starting work. 
Also to make it means tested would just be another kick in the teeth for those who have planned and made sacrifises throughout thier working life, so this would be unfair also. 
We do not have a crystal ball, but i personally feel i will get it age 70/71, it rises to 68 soon, and i can see it rising by 1 year per decade on average to keep up with extended life expectancy.

There is no "pot" and there never has been.  We pay NI and taxes and they disappear to people who are currently retired, amongst other things.  We do have a National Insurance record where it is stated quite clearly we are entitled to a pension at SPA with the maximum years of contributions (like I have for example) but that it is subject to change.  It does not come out of our personal "pot" as such and no money or provision has been explicitly ring-fenced for you or me.  What would happen to millions who had bought more years of NI to cover holes if the government then decided to means test the SP after all?  Do they pay us all back? It would wreck the plans of people who have been saving enough to add to the SP anchor to give them a reasonable income, saving with great sacrifice elsewhere in their lives.  To pull the carpet on that now would wreck the lives of millions of people, 99% of everyone over 45 I'd venture to say.  It would be an unholy mess of historic proportions to pull the rug on this one.  Never say never though, politicians are nuts, all of them are.

If bankers operated like this they would be prosecuted.  "Yes we know you have been contributing Mr MetaPhysical all these years but, actually, the money in your retirement plan is not your money, it's not ring fenced for you"

"The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers, and the self-employed. Voluntary contributions are also paid into the Fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension."

https://www.gov.uk/government/publications/national-insurance-fund-accounts/great-britain-national-insurance-fund-account-for-the-year-ended-31-march-2023

That does not mean it's a large pot with £multi-trilions waiting for your retirement.  AIUI the NIF is more like a current account than a savings account, the money going in balances the money paid out.  In practive it's an accounting fiction.

Andy_L

Linton said:

Andy_L said:

MetaPhysical said:

Brenster said:

I am 43, and i dont see how they could just stop it.  As has happened over the past 20 years, the age at which you get it may increase, however thier would be riots if they just pulled it, and if they did scrap it, we would all be owed thousands in a rebate as we have been paying into the pot via NI since starting work. 
Also to make it means tested would just be another kick in the teeth for those who have planned and made sacrifises throughout thier working life, so this would be unfair also. 
We do not have a crystal ball, but i personally feel i will get it age 70/71, it rises to 68 soon, and i can see it rising by 1 year per decade on average to keep up with extended life expectancy.

There is no "pot" and there never has been.  We pay NI and taxes and they disappear to people who are currently retired, amongst other things.  We do have a National Insurance record where it is stated quite clearly we are entitled to a pension at SPA with the maximum years of contributions (like I have for example) but that it is subject to change.  It does not come out of our personal "pot" as such and no money or provision has been explicitly ring-fenced for you or me.  What would happen to millions who had bought more years of NI to cover holes if the government then decided to means test the SP after all?  Do they pay us all back? It would wreck the plans of people who have been saving enough to add to the SP anchor to give them a reasonable income, saving with great sacrifice elsewhere in their lives.  To pull the carpet on that now would wreck the lives of millions of people, 99% of everyone over 45 I'd venture to say.  It would be an unholy mess of historic proportions to pull the rug on this one.  Never say never though, politicians are nuts, all of them are.

If bankers operated like this they would be prosecuted.  "Yes we know you have been contributing Mr MetaPhysical all these years but, actually, the money in your retirement plan is not your money, it's not ring fenced for you"

"The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers, and the self-employed. Voluntary contributions are also paid into the Fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension."

https://www.gov.uk/government/publications/national-insurance-fund-accounts/great-britain-national-insurance-fund-account-for-the-year-ended-31-march-2023

That does not mean it's a large pot with £multi-trilions waiting for your retirement.  AIUI the NIF is more like a current account than a savings account, the money going in balances the money paid out.  In practive it's an accounting fiction.

In 2022 it had a closing balance of  £56,874,726,000
In 2023 it had a closing balance of £72,486,113,000

looks like a large pot to me

MattMattMattUK

Universidad said:

MattMattMattUK said:

I am nearly forty, I take the view that I will either not get a state pension or it will only come in my mid or even late seventies and what I do get if I get anything will be means tested and worth little if anything.

Honestly, this is too pessimistic, on two main counts. 

Being realistic is not being pessimistic. 

Universidad said:

Firstly, the idea that we need to pay more tax, 

The bottom two thirds of earners (anyone on less than £60k) have the lowest effective rate of income taxation in the EU, whilst the top third have the fifth highest. Many EU countries also levy additional non-tax charges on top (compulsory health insurance). Most have municipal taxes that are comparative to or higher than Council Tax, some have higher rates of VAT, a few have marginally lower rates (17-19%) but also levy VAT on food and children's clothes, as well as full rate on domestic energy etc. The UK tax burden, whilst somewhat high by historical UK standards is very low for the developed world, excluding the USA. We are still running a deficit, our services are substandard, no amount of efficiency savings can make up for the fact that we are not collecting enough tax revenue, so the alternative is to pay more tax, or to start scrapping services.

Universidad said:

and secondly the idea that the state pension will disappear. 

A universal state pension is unaffordable in it's current form, people do not pay enough tax to fund it, means testing (scrapping for those who have provided for themselves), scrapping all together, or raising taxes to cover the cost are going to be the only options.

Universidad said:

You say that we will need to pay more tax, but our generation already does - in the form of fiscal drag, student loans (aka graduate tax), HICBC, and more. And in many cases there's double dipping - not only do we pay a graduate tax, but we don't get the grants of our parents generation, and have had tuition fees introduced.

We may pay more tax than the Boomers and Gen X paid, but it is still far from enough to fund the services the country needs. Not everyone pays student loans, indeed less than half of Millennials and less than 20% of the workforce overall. Everyone with children who earns enough pays HICBC and the same, fiscal drag impacts Gen X, Millennials and Gen Z. Some people had grans for university, but only 5-10% of people went to university, so that is largely irrelevant. 

Universidad said:

If I weren't making significant extra pension contributions my effective top rate of marginal tax rate would have been something like 70% - how much more tax would it have been possible for me to pay? So maybe the government does need to raise more tax revenue, but it's not really feasible to squeeze the working middle class too much harder - that's just maths. If I'm ever working for 20p in the pound, I'll adjust my situation until I'm not.

However looking at top marginal rates is not the whole picture, the real factor is the marginal rate across all of one's income, so whilst the marginal rate between £50k-60k might be 68% for those with children and so lose child benefit and taking that loss as a tax, rather than a withdrawal of benefit, their marginal rate of income taxation is still only 30.01%, where as in most of Europe (France, Germany or Norway as examples) it would be 40-45%. They also have tax systems where they do not have stepping in marginal rates, one would have to create a very convoluted situation to only receive 20p in the pound, you would need to go out of your way to disadvantage yourself.

Universidad said:

On the second point, you're effectively suggesting a similar double-dip will happen on the state pension - we'll pay throughout our working lives for someone else to have it, but then not get one of our own, so then we will also pay for our own (private) pension.

I am not suggesting a double dip at all, the reality is we are all paying now for people who have retired, we do not "pay in", we pay tax based on our circumstances and we receive benefits based on our age and circumstances, however the sad reality is that 55% of people reach retirement age never having made a net contribution, every year they cost the country more than they paid in, more than half of households receive more in cash benefits than they pay in all taxes, that is not sustainable. 

Universidad said:

But that's a bridge too far, and again it has nothing to do with fairness, but with practical limits. Unless you foresee an apocalyptic future in which our elderly starve on the streets, then the government will need to keep providing for those people.

We may well have to move to a situation of more multi-generational homes, perhaps with three generations (parents, grandparents and children) living in the same home, or, we all pay more taxes, the electorate will need to choose.

Universidad said:
And there might be, but it probably doesn't involve: (in depth) means testing, (significant) rises to state pension age, or (massive) cuts to the value of the state pension. 

I would be strongly against means testing of the state pension, but I also support tax rises to make the state pension affordable, we cannot have one without the other.

Universidad said:

Because if you do any of those things, you wind up paying to keep people above the waterline in ever more expensive ways. This can be in obvious ways, such as moving some pensioners to more expensive benefits, but it can be in other ways, such as coercing healthy, working age people to leave the workforce.

Or we find cheaper ways to do it, that might be more equity release schemes, multi-generational households, even "warehousing" people who cannot provide for themselves to bring the cost down, or, we could pay enough tax to fund things properly.

Universidad said:

Any "solutions" to the pensions problem can't lead to a lowering proportion of working vs. non-working people, but that's exactly what happens when you coerce people to retire early, or force them to leave work to care for elderly relatives who don't have means of their own.

I am not proposing "coercing" anyone to leave the workforce, if anything they are going to need to work longer to pay for their retirement. Again, if you want the state to fund care for elderly, so that relatives do not have to leave the workforce then that has to be paid for from taxation, so the choice will be leave work to look after their elderly relatives, or pay more tax.

MattMattMattUK

ewaste said:

MattMattMattUK said:

Boomers, Gen X and older etc. never paid enough tax, Millennial (my generation) and younger could pay enough tax if rates were increased, but no one seems to want to pay enough take to fund the country, so instead things will just keep deteriorating. 

Younger generations and those still working are already being squeezed with increasingly higher tax take while trying to simultaneously deal with the cost of living, with one of the primary problems being unaffordable housing. In addition real terms wages have failed to keep up with that cost of living, work for many hasn't improved their standard of life as things have been going backward for a generation. They're also being told to save for their own retirement while providing for the retirements of previous generations who enjoy guarantees and tools simply no longer available. 

Yet the bottom two thirds of earners already pay a low rate of tax by the standards of advanced economies (the USA is an anomaly, but they lack most of the safety net provided in most civilised countries), yes the rate of income taxation is the highest it has been in early forty years, but it is also considerably lower than in other advanced European economies. The top third have comparable rates to most of Europe. 

ewaste said:

There is unlikely to be any serious effort to redress the intergenerational wealth and income inequality given the underlying demographics, we'll keep pulling up the ladders. 

We do not need to "redress" intergenerational wealth inequality because people die, they pass that money down the generations, those old people to not live forever, hoarding wealth for hundreds of years. 

ewaste said:
It's not even in the mainstream political discourse, boomer bingo is what it rapidly devolves into "don't buy that Coffee and don't subscribe to Netflix and you'll be able to save for a deposit". 

There is an over simplification in the media, as well as the general culture wars going on, but the coffee and random services complaint does have an grain of truth in it. A coffee in the way to and from work and buying lunch (Subway, Pret/McDonalds, even a meal deal) at work can easily reach £4k a year or more, add in Netflix, Disney+ and Prime and that is another £1,600 a year, factor in holidays, lease cars etc. and it becomes very obvious why a group of people are unable to save for a deposit to buy a home, they are spending £6-10k a year on non-essentials. Now of course that is not all of them, there will be some who do none of those things and still do not earn enough to save, but there are many people who fail to understand that some lifestyle sacrifices are required to save up for nice things, like buying one's own home. 

Pat38493

Andy_L said:

Linton said:

Andy_L said:

MetaPhysical said:

Brenster said:

I am 43, and i dont see how they could just stop it.  As has happened over the past 20 years, the age at which you get it may increase, however thier would be riots if they just pulled it, and if they did scrap it, we would all be owed thousands in a rebate as we have been paying into the pot via NI since starting work. 
Also to make it means tested would just be another kick in the teeth for those who have planned and made sacrifises throughout thier working life, so this would be unfair also. 
We do not have a crystal ball, but i personally feel i will get it age 70/71, it rises to 68 soon, and i can see it rising by 1 year per decade on average to keep up with extended life expectancy.

There is no "pot" and there never has been.  We pay NI and taxes and they disappear to people who are currently retired, amongst other things.  We do have a National Insurance record where it is stated quite clearly we are entitled to a pension at SPA with the maximum years of contributions (like I have for example) but that it is subject to change.  It does not come out of our personal "pot" as such and no money or provision has been explicitly ring-fenced for you or me.  What would happen to millions who had bought more years of NI to cover holes if the government then decided to means test the SP after all?  Do they pay us all back? It would wreck the plans of people who have been saving enough to add to the SP anchor to give them a reasonable income, saving with great sacrifice elsewhere in their lives.  To pull the carpet on that now would wreck the lives of millions of people, 99% of everyone over 45 I'd venture to say.  It would be an unholy mess of historic proportions to pull the rug on this one.  Never say never though, politicians are nuts, all of them are.

If bankers operated like this they would be prosecuted.  "Yes we know you have been contributing Mr MetaPhysical all these years but, actually, the money in your retirement plan is not your money, it's not ring fenced for you"

"The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers, and the self-employed. Voluntary contributions are also paid into the Fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension."

https://www.gov.uk/government/publications/national-insurance-fund-accounts/great-britain-national-insurance-fund-account-for-the-year-ended-31-march-2023

That does not mean it's a large pot with £multi-trilions waiting for your retirement.  AIUI the NIF is more like a current account than a savings account, the money going in balances the money paid out.  In practive it's an accounting fiction.

In 2022 it had a closing balance of  £56,874,726,000
In 2023 it had a closing balance of £72,486,113,000

looks like a large pot to me

Yes but it's a theoretical number in an accounting balance sheet - there is not that amount of actual cash sitting behind it waiting to be paid out.

enthusiasticsaver

Means testing anything costs a whole layer of administration and phasing out a standard state pension when many see it as their right due to NI contributions would be political suicide for any party so no I cannot see it going in the forseeable future and certainly not for a 42 year old who is within 30 years of retirement.  The triple lock may be unrealistic going forward unless inflation stabilises though and there may be more emphasis on workplace pensions.  I also do not think they will tweak the tax rate for pensioners given it will be very difficult to enforce that when the pension age is so movable.  

Albermarle

Pat38493 said:

Andy_L said:

Linton said:

Andy_L said:

MetaPhysical said:

Brenster said:

I am 43, and i dont see how they could just stop it.  As has happened over the past 20 years, the age at which you get it may increase, however thier would be riots if they just pulled it, and if they did scrap it, we would all be owed thousands in a rebate as we have been paying into the pot via NI since starting work. 
Also to make it means tested would just be another kick in the teeth for those who have planned and made sacrifises throughout thier working life, so this would be unfair also. 
We do not have a crystal ball, but i personally feel i will get it age 70/71, it rises to 68 soon, and i can see it rising by 1 year per decade on average to keep up with extended life expectancy.

There is no "pot" and there never has been.  We pay NI and taxes and they disappear to people who are currently retired, amongst other things.  We do have a National Insurance record where it is stated quite clearly we are entitled to a pension at SPA with the maximum years of contributions (like I have for example) but that it is subject to change.  It does not come out of our personal "pot" as such and no money or provision has been explicitly ring-fenced for you or me.  What would happen to millions who had bought more years of NI to cover holes if the government then decided to means test the SP after all?  Do they pay us all back? It would wreck the plans of people who have been saving enough to add to the SP anchor to give them a reasonable income, saving with great sacrifice elsewhere in their lives.  To pull the carpet on that now would wreck the lives of millions of people, 99% of everyone over 45 I'd venture to say.  It would be an unholy mess of historic proportions to pull the rug on this one.  Never say never though, politicians are nuts, all of them are.

If bankers operated like this they would be prosecuted.  "Yes we know you have been contributing Mr MetaPhysical all these years but, actually, the money in your retirement plan is not your money, it's not ring fenced for you"

"The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers, and the self-employed. Voluntary contributions are also paid into the Fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension."

https://www.gov.uk/government/publications/national-insurance-fund-accounts/great-britain-national-insurance-fund-account-for-the-year-ended-31-march-2023

That does not mean it's a large pot with £multi-trilions waiting for your retirement.  AIUI the NIF is more like a current account than a savings account, the money going in balances the money paid out.  In practive it's an accounting fiction.

In 2022 it had a closing balance of  £56,874,726,000
In 2023 it had a closing balance of £72,486,113,000

looks like a large pot to me

Yes but it's a theoretical number in an accounting balance sheet - there is not that amount of actual cash sitting behind it waiting to be paid out.

Actually I think that there is 'cash' in this account. It is like a current account for state pensions and few other benefits. NI in and pensions out each year.

However of course if you calculate the size of pot needed to cover all current and future state pension liabilities, it was £3.8 Trillion at the last count. Approx a 45 times larger sum, than was in the National Insurance fund account at the end of 2023 and equivalent to the whole economic output of the UK for over 2.5 years.

To get more scary if you add in unfunded public sector pensions, this figure increases to £5 Trillion.

Eldi_Dos

Pat38493 said:

Andy_L said:

Linton said:

Andy_L said:

MetaPhysical said:

Brenster said:

I am 43, and i dont see how they could just stop it.  As has happened over the past 20 years, the age at which you get it may increase, however thier would be riots if they just pulled it, and if they did scrap it, we would all be owed thousands in a rebate as we have been paying into the pot via NI since starting work. 
Also to make it means tested would just be another kick in the teeth for those who have planned and made sacrifises throughout thier working life, so this would be unfair also. 
We do not have a crystal ball, but i personally feel i will get it age 70/71, it rises to 68 soon, and i can see it rising by 1 year per decade on average to keep up with extended life expectancy.

There is no "pot" and there never has been.  We pay NI and taxes and they disappear to people who are currently retired, amongst other things.  We do have a National Insurance record where it is stated quite clearly we are entitled to a pension at SPA with the maximum years of contributions (like I have for example) but that it is subject to change.  It does not come out of our personal "pot" as such and no money or provision has been explicitly ring-fenced for you or me.  What would happen to millions who had bought more years of NI to cover holes if the government then decided to means test the SP after all?  Do they pay us all back? It would wreck the plans of people who have been saving enough to add to the SP anchor to give them a reasonable income, saving with great sacrifice elsewhere in their lives.  To pull the carpet on that now would wreck the lives of millions of people, 99% of everyone over 45 I'd venture to say.  It would be an unholy mess of historic proportions to pull the rug on this one.  Never say never though, politicians are nuts, all of them are.

If bankers operated like this they would be prosecuted.  "Yes we know you have been contributing Mr MetaPhysical all these years but, actually, the money in your retirement plan is not your money, it's not ring fenced for you"

"The National Insurance Fund (NIF) holds National Insurance Contributions (NICs), paid by employees, employers, and the self-employed. Voluntary contributions are also paid into the Fund. Receipts paid into the NIF are kept separate from all other revenue raised by national taxes and are used to pay social security benefits such as contributory benefits and the State Pension."

https://www.gov.uk/government/publications/national-insurance-fund-accounts/great-britain-national-insurance-fund-account-for-the-year-ended-31-march-2023

That does not mean it's a large pot with £multi-trilions waiting for your retirement.  AIUI the NIF is more like a current account than a savings account, the money going in balances the money paid out.  In practive it's an accounting fiction.

In 2022 it had a closing balance of  £56,874,726,000
In 2023 it had a closing balance of £72,486,113,000

looks like a large pot to me

Yes but it's a theoretical number in an accounting balance sheet - there is not that amount of actual cash sitting behind it waiting to be paid out.

Wonder who installed the IT system for that.

BlackKnightMonty

I’m 46. My suspicion is that it will be means tested.

There’s just not enough money being raised through taxation to afford it.

Less than half of all UK households are net contributors to tax after benefits/services are considered.
https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2022

As the demographics shift to more retirees and less workers, the tax base will reduce further.

What needs to happen is a focus on raising wages after years of stagnation. That is what brings a sustainable future.

I think a hard look at the £50k and £100k marginals would help smooth the earnings base. It’s hard enough already to argue for a +£100k salary. Which might sound a lot; but with 60% marginal income tax actually isn’t!