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

michaels

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. 

I paid NI on the money on my pension when I earned it. Make me pay it a second time and with basic rate tax relief only applied I would be worse off saving in a pension that simply taking the income and saving it.  NI twice on the same income? How can that make sense?

RogerPensionGuy

This thread if a fair thread indeed.

I think the removal of the cold weather allowance for the 10 million pensioners now and that growing dynamic is just the 1st gentle record/CD being played to see how much kickback they get testing the water for later.

Unless the cold weather allowance loss is reversed, it will just be the start of cutbacks for pensioners for years and decades that will lead to state pension means tested to reduce or remove state pension payments for prudent people,  savers, pensioners.

The cold weather allowance is being stopped for people on full state pension, so my glass half empty feeling is them looking at pensioners with private pensions above state pension really don't need the state pension.

Unless the government u-turns on not increasing income tax, NI & VAT in the next few budgets, pensions and pensioners will be the easiest low hanging fruit for picking short term cash, but doing so will have very long term effects as more people just leave pensions alone due lack of confidence etc.    

MK62

michaels 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. 

I paid NI on the money on my pension when I earned it. Make me pay it a second time and with basic rate tax relief only applied I would be worse off saving in a pension that simply taking the income and saving it.  NI twice on the same income? How can that make sense?

Exactly......it would make saving into a pension pointless for the majority.....

hugheskevi

RogerPensionGuy said:

I think the removal of the cold weather allowance for the 10 million pensioners now and that growing dynamic is just the 1st gentle record/CD being played to see how much kickback they get testing the water for later.  

Terminology is important here. It is the Winter Fuel Payment that has been removed. The Cold Weather Payment remains in place.

The Winter Fuel Payment has absolutely nothing to do with the cost or usage of energy, and is simply a cash payment made around November regardless of the weather or cost of fuel, Cold Weather Payments are different.

Cold Weather Payments are linked to periods of very cold weather, and when this happens recipients of Pension Credit (and other benefits, but not State Pension alone) receive £25 per day. Unlike Winter Fuel Payments, Cold Weather Payments are connected to the need to use fuel and are paid within 3 weeks of the cold spell ending .

They also contribute to the growing problem of a trivial Pension Credit eligibility leading to much greater benefit receipt due to passporting, and so someone with a £1 or £2 income above the Pension Credit eligibility threshold is significantly worse off.

RogerPensionGuy said:

The cold weather allowance is being stopped for people on full state pension, so my glass half empty feeling is them looking at pensioners with private pensions above state pension really don't need the state pension   

An individual with full State Pension can also receive Pension Credit and so would continue to be eligible to receive Winter Fuel Payments. It is receipt of Pension Credit that will give eligibility for Winter Fuel Payment, not the amount of State Pension received.

This would be the case if they were entitled to Pension Credit premia, typically for caring or disability:

Extra Pension Credit for severely disabled people or carers

If someone gets Attendance Allowance or the middle or highest rate care component of DLA, PIP, Scottish Adult Disability Payment or AFIP, they may be entitled to extra Pension Credit of £81.50.

If someone gets Carer’s Allowance or Carer Support Payment they may be entitled to extra Pension Credit of £45.60. They may also get this extra Pension Credit if they are entitled to Carer’s Allowance or Carer Support Payment but they are not being paid it, or being paid it at a lower amount than normal, because they are being paid a higher amount by another, income-maintenance benefit such as State Pension (this is called underlying entitlement).

Stubod

RogerPensionGuy said:

This thread if a fair thread indeed......

..yep, and 3 pages in and nobody has actually answered the question  I actually asked...  ..... but that's fine, it was only for a bit of fun / debate...... 

JoeCrystal

Stubod said:

RogerPensionGuy said:

This thread if a fair thread indeed......

..yep, and 3 pages in and nobody has actually answered the question  I actually asked...  ..... but that's fine, it was only for a bit of fun / debate...... 

Because it IS a minefield! There is always someone who is just over the limit and thus complain about it. 😀

Bluebell1000

To answer the actual question, I'd make it similar rates to child benefit if I were needing to means test it. Tapered reductions after around £60k, but as individual not household earnings.

Moonwolf

Stubod said:

RogerPensionGuy said:

This thread if a fair thread indeed......

..yep, and 3 pages in and nobody has actually answered the question  I actually asked...  ..... but that's fine, it was only for a bit of fun / debate...... 

Part of the reason it hasn't been answered is because it is very complicated.

1) Should it be a minimum amount to live on?  What is that?  Does that include housing?  Do you take account of the differences between prices in the north and south east?  Do you ask people to move to somewhere cheaper, is that fair on someone who has lived in the same area all their life?  Should the minimum allow for maintenance if someone owns their own home?

2) How does it interact with other means tested benefits?  Is it an extra allowance or does it just end up being the same benefit as Universal Credit but for pensioners?  To a certain extent we have that now, pensioners on only the state pension often qualify for other benefits. (although with the state second pension that isn't always true)

3) How do you means test?  Should I lose £1 for every £1 of private pension I have saved, 50p, 25p?  With a threshold income first?  If so, why did I save for a pension, all the tax benefits would have evaporated?  In terms of investment lost, the cost to the country of a significant portion of pension funds suddenly not being added to could be fairly high even if a big chunk are in world funds.  This also applies to keeping older people in the workforce?  Why would I go an earn a few £ in a retirement job if I lose it immediately.  This is already a perceived issue with Universal Credit and Carers Allowance - means testing means work can be discouraged.

4) Probably, ideally we would like to find the difference between those who could save but didn't and spend too much money on Starbucks and avocado toast; and those who just couldn't save because of income levels.  However, is that possible?

Essentially, means testing is a complex tool and unless you know how it will be done then setting an income level is difficult. 

MetaPhysical

I think there will be riots in the streets if they means test the state pension, akin to those in France.  This would be a step too far and massively undermine incentives to save for the future.  Why save and scrimp and do without the money now if you lose the state pension and the feckless still receive it? Yes, they may well quote Australia.  However, their pensioners have had since 1972 to adapt to this and also their system is none contributory unlike ours is with NI contributions.  It would be THEFT! I have planned my workplace contributions into my pot around receiving the state pension when I am 67.  I have a full record of 38 years and I have earned my right to it!

RogerPensionGuy

Stubod said:

RogerPensionGuy said:

This thread if a fair thread indeed......

..yep, and 3 pages in and nobody has actually answered the question  I actually asked...  ..... but that's fine, it was only for a bit of fun / debate...... 

Roughly pensioners on say a full state pension of lets say 12K PA are getting that cold weather payment of say £300 removed. 

So down the road it will become a blended removal or loss. 

Examples. 

Zero personal pension people get full state pension payment. 

3K PA of personal pension, 3K will get chopped off their state pension payments. 

7K PA of personal pension and 7K off state pension. 

Personal pension at state pension or over state pension will get zero state pension. 

***

The above links in well to a wealth tax. 

Pensioner has zero personal pension and lives in the house they paid for, they have no debts or mortgages and house is valued at say 300K. 

They have a wealth of say 300K.

They could do equity release to generate income like a personal pension and get a reduced or removed state pension effect. 

Or the government could just juggle the numbers and plonk a charge plus interest on the property to settle the bill way down the road. 

All the above will undermine long-term pensions and planning for many and have huge costs way down the road of the tin can kicking road policies like so many that have been getting made over decades. 

Low hanging fruit is just too tempting for short term cash flow and political reasons. 

Time to rethink long-term financial planning in my little head.