Just for interest...(none political)....ifMeans testing SP, what minimum income level would you set?

Stubod

Hi,

As per title, and nothing to do with any political party. But if "whoever" where to introduce a means tested SP, what do you think would be a reasonable cut of point (ie "other total income") to set the cap at??

I have looked at the Australian system, but it seems very complicated and also includes assets?

Assuming the SP age stays at (say) 67.

eg, Perhaps start paying if an individuals total income is less than (say) £35K / or the average wage? ..and does anybody have any idea how much this would actually save??

mebu60

The State Pension is already effectively means tested as it counts as income for tax purposes. If the PA isn't increased any time soon the 'new' SP will exceed it. Anyone with other income sources will almost certainly be paying some tax on that other income whether earnings, private pension, savings interest or investment returns (outside of tax wrappers). 

BlackKnightMonty

Means tested in terms of retirement income?

So if you have no other/minimal retirement income then you might get it?

JoeCrystal

Stubod said:

Hi,

As per title, and nothing to do with any political party. But if "whoever" where to introduce a means tested SP, what do you think would be a reasonable cut of point (ie "other total income") to set the cap at??

I have looked at the Australian system, but it seems very complicated and also includes assets?

Assuming the SP age stays at (say) 67.

eg, Perhaps start paying if an individuals total income is less than (say) £35K / or the average wage? ..and does anybody have any idea how much this would actually save??

They seem to manage. Of course, you need to bear in mind that any resident in Australia who lives in the country (subject to rules) can get Old Age Pension without any need to pay any contributions, which is why it is so essential to ensure it is fully mean-tested and with income/asset tests.

The UK is different in that, provided you meet specific criteria, there is nothing to stop anyone who pays at least a minimum amount of contributions in the UK from contributing voluntarily when living overseas for decades. Indeed, it is peanuts to do so, especially if you can take advantage of Class 2 NI. 

If you are serious about mean testing, you would need to start mean testing every single person worldwide who receives a state pension from the UK. That is only fair and naturally takes into account local values as well. It would be silly to pay a state pension that can provide a far better standard of living in that country than it would get in this country.

I'm just saying that such ideas do need to take overseas pensioners into account, after all. Unsurprisingly, the top overseas countries during TY 21/22 were Spain with £716m, Australia with £625m, the USA with £534m, Ireland with £484m, France with £440m, Canada with £328m, New Zealand with £165m, and Cyprus with £119m. These eight countries account for about 75% of all overseas pension payouts.

Grumpy_chap

Stubod said:

Hi,

As per title, and nothing to do with any political party. But if "whoever" where to introduce a means tested SP, what do you think would be a reasonable cut of point (ie "other total income") to set the cap at??

I have looked at the Australian system, but it seems very complicated and also includes assets?

Assuming the SP age stays at (say) 67.

eg, Perhaps start paying if an individuals total income is less than (say) £35K / or the average wage? ..and does anybody have any idea how much this would actually save??

I struggle to see how this thread won't become political.

We already know that the SP age will not stay at age 67 - unless the previously announced increases in SP age are scrapped.  I consider that unlikley.

If I were to set a means test for the SP, I'd set it really high, like annual income from other sources of £100 Bn or over.  Even then there will be tabloid uproar, the party in power will lose the next election and the new lot will reinstate the universal SP.  

JoeCrystal

Grumpy_chap said:

I struggle to see how this thread won't become political.

Indeed, Stubod seems to think it is just a matter of minimum income. No, if you want to be means-tested, then the government, aka politics, will have to decide on a suitable minimum income. The government believes it is a weekly income of £218.15 if you're single; your joint weekly income is £332.95 if you have a partner. In other words, no state pension is available for anyone with a personal retirement provision of more than £218.15 per week. And any state pension would only be there to top it up to £218.15 per week instead.

Yes... that is quite acceptable and can easily save tons of money!  By Jove, I think I managed to eliminate the government deficit in one go! 

michaels

Surely the state pension is contributions based not a benefit so should not be subject to means testing.  We pay our NI stamp and then earns us pension rights just the same as with a private pension.  Would it make sense to confiscate some of a private pension just because a person is rich (beyond via income tax)?  Why would we do the same for a contributions based government provision pension?

FIREDreamer

michaels said:

Surely the state pension is contributions based not a benefit so should not be subject to means testing.  We pay our NI stamp and then earns us pension rights just the same as with a private pension.  Would it make sense to confiscate some of a private pension just because a person is rich (beyond via income tax)?  Why would we do the same for a contributions based government provision pension?

The LTA charge did just that for private pensions. I suspect that something similar may return.

Stubod

BlackKnightMonty said:

Means tested in terms of retirement income?

So if you have no other/minimal retirement income then you might get it?

..basically yes. Given that the SP is unaffordable in the long term it is inevitable that at some point it may get means tested. (Accept that this may be a couple of decades away). I think there is also a limit as to how far (any govt.) can keep pushing the age limit back, leaving means testing as a possible consideration regardless of your political persuasion?

Grumpy_chap

michaels said:

Surely the state pension is contributions based not a benefit so should not be subject to means testing.  We pay our NI stamp and then earns us pension rights just the same as with a private pension.  Would it make sense to confiscate some of a private pension just because a person is rich (beyond via income tax)?  Why would we do the same for a contributions based government provision pension?

The state pension is, legally, a benefit, just not a means tested benefit:
https://petition.parliament.uk/archived/petitions/121267

You make a very valid point that, if the SP were to be means tested, the result would be fewer people saving for private pensions.  That would mean more older people with less money and less able to fund their own care etc. so this slack would need to be picked up by the state.  The nett cost could end up being higher rather than the universal SP.

BlackKnightMonty

michaels said:

Surely the state pension is contributions based not a benefit so should not be subject to means testing.  We pay our NI stamp and then earns us pension rights just the same as with a private pension.  Would it make sense to confiscate some of a private pension just because a person is rich (beyond via income tax)?  Why would we do the same for a contributions based government provision pension?

To get an NI qualifying year you only need to earn very little somewhere around £8.5k -£12.5k depending on your employment. The NI contributions off this will be minuscule!