Will the state pension exist for a 42 year old?

booneruk

Universidad said:

• National Insurance is "just another tax" that has nothing to do with the state pension..

I didn't say that, I said paying national insurance builds eligibility towards a number of state provisioned benefits, the SP being one.

badmemory

They have already reduced the NI %age.  This will continue until most of it is included in the normal tax rates until all those paying tax will pay it, including pensioners who have enough income to pay tax.  They should have started doing it years ago but politicians are basically scared of change.  They won't be able to do it in one move or they (& I mean both parties whichever does it) will lose too many voters & it will not just be because they are pensioners but others who get unearned income so don't pay NI.

Albermarle

hugheskevi said:

It is interesting to look at the OBR's long-term forecasts of revenue and expenditure.

The tax take is forecast to remain very steady at about 40% of GDP.

Expenditure is forecast to remain at around 40% of GDP until about 2040, then steadily increase to around 50% by 2070. The main cost driver is health (5 percentage points) followed by State Pensions (3 percentage points).

The only expenditure categories with meaningful decreases in expenditure as a share of GDP are education and public service pensions.

It will be interesting to see how this is responded to - tax increases are unpopular, and the usual categories put forward for unsustainable spending - such as public service pensions - are far too small (and falling) to make any meaningful difference. Any policies such as reducing healthcare or state pensions expenditure are extremely unpopular with voters, but then so are tax increases.

I think it is quite hard to anticipate what might happen, but given the short-term nature of politics and that the really pressing issues don't take effect until around 2040, there has to be a decent chance of not a great deal happening for the next decade given the unpopular decisions it would entail.

Regarding the comment highlighted in bold.

I remember reading an article in one of the broadsheets maybe 15 or even 20 years ago, saying this dilemma between increasing need for social/health care, and the unwillingness to accept higher tax increases was a timebomb waiting to happen. Clock is still ticking I guess...

As is well known the a lot of population wants European style public services, but with US tax levels. So the politicians are forced to pretend this is possible, when it is not.

handful

badmemory said:

They have already reduced the NI %age.  This will continue until most of it is included in the normal tax rates until all those paying tax will pay it, including pensioners who have enough income to pay tax.  They should have started doing it years ago but politicians are basically scared of change.  They won't be able to do it in one move or they (& I mean both parties whichever does it) will lose too many voters & it will not just be because they are pensioners but others who get unearned income so don't pay NI.

I think it's quite clear that the cost of the recent triple lock increase in SP will be paid for when the Jeremy Hunt proposed tax cuts are on NI contributions rather than something like personal allowances. Therefore giving an effective tax cut to employees but circumventing pensioners nicely!

Andy_L

booneruk said:

Universidad said:

Albermarle said:

NIC is just another tax, it just happens due to history that your SP entitlement is linked to your qualifying NI years.  Many people get full SP when they have paid no or little NI, as they get qualifying years by other means, such as being a carer or parent of young children. 
So the link between NI payments and the state pension is at best indirect.

So why don't we charge NICs to people over state pension age?

A quirk of the system. NIC is certainly just another tax, although paying it builds your entitlement to a number of potential benefits, one of which is the SP.

plus (almost?) all the contribution based benefits other than the state pension that NI entitles you to can't be claimed by people over SPA so charging them NI would be a bit off

badmemory

Having paid NI is just a proof of entitlement to some benefits it doesn't actually collect the money to pay the benefits.  If you pay anything tax wise then you are paying towards those benefits.  Entitlement would still be proved even if the NI rate was only half a %.  It is just a way of maintaining a record.