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

Dazed_and_C0nfused

BlackKnightMonty said:

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!

Earning £123/week each and every week is sufficient. 

And there is no employee NI paid on that.

theoretica

Currently, income from employment is subject to NI, but other types of income are not.  Making all income, including pensions, subject to the 'employee' NI (which could go, for instance, to the NHS) would claw back some money from pensioners with higher incomes, without needing to means test the state pension. 

Dazed_and_C0nfused

theoretica said:

Currently, income from employment is subject to NI, but other types of income are not.  Making all income, including pensions, subject to the 'employee' NI (which could go, for instance, to the NHS) would claw back some money from pensioners with higher incomes, without needing to means test the state pension. 

But now that tax and NI thresholds are, for most people, aligned, once fiscal drag moves those on the standard new State Pension into paying tax they would be paying NI as well.

Or would there be a different threshold for pension income?

LHW99

theoretica said:

Currently, income from employment is subject to NI, but other types of income are not.  Making all income, including pensions, subject to the 'employee' NI (which could go, for instance, to the NHS) would claw back some money from pensioners with higher incomes, without needing to means test the state pension. 

Alternatively increasing the Upper Earnings Limit, and making NI payable on all earned income at whatever age, could achieve the same thing.

Sea_Shell

Maybe someone can do the maths...

How many average workers does it take, to pay enough NI to equal the annual SP of one retiree?

Pyramid scheme? 😉

Grumpy_chap

LHW99 said:

theoretica said:

Currently, income from employment is subject to NI, but other types of income are not.  Making all income, including pensions, subject to the 'employee' NI (which could go, for instance, to the NHS) would claw back some money from pensioners with higher incomes, without needing to means test the state pension. 

Alternatively increasing the Upper Earnings Limit, and making NI payable on all earned income at whatever age, could achieve the same thing.

I am not sure it would.

Making all income subject to "employee" NI would spread the burden / NI contributions net wider.

Increasing the UEL would increase the burden on those already in the NI contributions net.

There is a surprising amount of unearned income - pensions, dividends, property income, interest

hugheskevi

Sea_Shell said:

Maybe someone can do the maths...

How many average workers does it take, to pay enough NI to equal the annual SP of one retiree?

Pyramid scheme? 😉

About 6.5 full-time workers on average earnings would pay sufficient NICs in a year to pay a single new State Pension for one year (employee NICs only, not employer).

Include employer NICs and it is about 2.15 workers per pensioner.

SouthCoastBoy

If the sp ever gets means tested there is going to be a lot of very disgruntled voters. Not necessarily just pensioners but the majority. 

I can see pensioners having to pay ni first.

barnstar2077

From the governments point of view, it would be far easier for them to scrap the triple lock or freeze the personal allowance for longer.  Then let inflation do the hard work. Yes, more people will need benefits, but not all people. 

Universidad

michaels said:

Surely the state pension is contributions based not a benefit so should not be subject to means testing.

Technically a "contributory benefit", so a little of both. I think the problem presents itself best where people have made voluntary contributions. It will be very hard to argue that there isn't an entitlement in those cases.

Grumpy_chap said:

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.

And it should be noted that this would undermine decades of policy from labour and conservative governments alike. We've been incentivising private pensions for a long, long time - and this is one of the reasons that our state pension is comparatively poor when compared to other developed nations with less focus on private pensions.

To undo that at a stroke would, I suspect, create a legion of unintended consequences.

Stubod said:

Given that the SP is unaffordable in the long term it is inevitable that at some point it may get means tested.

I disagree, in the sense of reducing and eliminating the state pension for people above a certain income. It's far easier to make the wealthy pay mores by increasing the tax burden. 

The problem of means testing the state pension is that it's expensive to do, and if you set the threshold too high then it actually costs you money. Meanwhile if you set it too low, you'll wind up paying out what you save in state pension in other means tested benefits. If a sweet spot exists in the middle, you're just going to hit the middle class again.

We're already seeing in many walks of life that if there's no path to improving ones circumstances, and no social mobility, then things start to fall apart. 

Dysfunctional societies are intrinsically expensive, and between the people with nothing to lose and the people with nothing to gain, we're heading towards an impasse.