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

MK62

westv said:

SouthCoastBoy said:

westv said:

RogerPensionGuy said:

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. 

***

. 

How will those figures be calculated on a DC pot? Compared to an annuity? Single or joint life? Or perhaps the SWR between 2% and 3%? Another figure? 

Yes, a minefield, and annuity rates are always changing. I assume they do have an algorithm that is used when assessing care home fees liability 

Aren't fees based on savings not income?

I believe it's both......

Andy_L

Stubod said:

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?

That's a bit of an assumption to take as given

Bostonerimus1

If the SP were to be means tested I think it should be on net worth rather than income. I say this because of my experience with the Massachusetts benefits system in the years after I retired early. I had ample savings and DC pension balances, but the income I declared on my tax return put me below poverty level and so I became eligible for fuel benefits, food stamps and reductions in healthcare costs. The state actively tried to get me to sign up, but I declined and ended up going in to see a caseworker to explain my situation and that I definitely didn't need the assistance.

The flat rate UK pension system is one approach to cost control and if more is needed the retirement age will be increased...again.

Grumpy_chap

Bostonerimus1 said:

If the SP were to be means tested I think it should be on net worth rather than income.

Any kind of "wealth tax" (whether that is a tax or withdrawal of a universal benefit) based on nett worth is inherently difficult.
The normal amongst us may well have "wealth" in a form that is wholly inaccessible (principal private residence) or DC pension (so subject to access age and safe withdrawal rates if properly managed).

Sticking with pension element of "wealth", an individual with DC pension supporting a safe withdrawal rate of, say £20k per year, would quite likely be deemed to have sufficient "wealth" to tax.  An individual with DB pension yielding 2/3rd of final salary, say £30k (from final salary of £50k) has no asset and no "wealth" to tax but their pension provision is clearly worth more.

The actually wealthy have their "wealth" in non-liquid assets that are also highly volatile so go up and go down in value.  At what minute of the day will the "wealth" tax be assessed?

Bostonerimus1

Grumpy_chap said:

Bostonerimus1 said:

If the SP were to be means tested I think it should be on net worth rather than income.

Any kind of "wealth tax" (whether that is a tax or withdrawal of a universal benefit) based on nett worth is inherently difficult.
The normal amongst us may well have "wealth" in a form that is wholly inaccessible (principal private residence) or DC pension (so subject to access age and safe withdrawal rates if properly managed).

Sticking with pension element of "wealth", an individual with DC pension supporting a safe withdrawal rate of, say £20k per year, would quite likely be deemed to have sufficient "wealth" to tax.  An individual with DB pension yielding 2/3rd of final salary, say £30k (from final salary of £50k) has no asset and no "wealth" to tax but their pension provision is clearly worth more.

The actually wealthy have their "wealth" in non-liquid assets that are also highly volatile so go up and go down in value.  At what minute of the day will the "wealth" tax be assessed?

There are mechanisms for calculating net worth, DB pensions would be included by the usual actuarial calculations  and DC pensions would be accessible for anyone applying for SP. You might exclude real estate. End of the tax year could be the date to use for the net worth calculation. But it's obviously complicated and prone to errors and schemes to cheat, which is why I think just delaying the SP age by a year or so will be the mechanism to control costs and means testing is a big red herring. An alternative might be to have a sliding scale on the TFLS as the DC balance increases.

k6chris

As others have said, I think the idea of keeping the pledge not to raise the rate and bands of NI (working people etc), but instead apply it to all income, whether earned or not, will prove very attractive.  Listen out for the planting of seeds to distinguish between earned and unearned income. Unearned income implies broad shoulders!  Longer term they can then reduce NI to say 5%, which benefits everyone.....  This plus a longer term change to say a 0.5% valuation tax on houses (rather than council tax) should raise significant taxes whilst keeping the election pledges in the most literal sense. 

Grumpy_chap

k6chris said:

Listen out for the planting of seeds to distinguish between earned and unearned income. Unearned income implies broad shoulders!  

At risk of drifting this thread away from the subject matter (which the title was only referring to state pension), far easier would be to terminate ISA's.  They are somewhat irrelevant given that there is now the savings allowance plus the savings starting rate.

SouthCoastBoy

k6chris said:

As others have said, I think the idea of keeping the pledge not to raise the rate and bands of NI (working people etc), but instead apply it to all income, whether earned or not, will prove very attractive.  Listen out for the planting of seeds to distinguish between earned and unearned income. Unearned income implies broad shoulders!  Longer term they can then reduce NI to say 5%, which benefits everyone.....  This plus a longer term change to say a 0.5% valuation tax on houses (rather than council tax) should raise significant taxes whilst keeping the election pledges in the most literal sense. 

I like the idea of a .5% of house value for council tax, that would mean a several hundred pound decrease in council tax 😀 

Stubod

..thanks for all our comments so far....I didn't think for one minute this would go to 5 pages!

I don't accept it would be "difficult", or would necessarily cause "riots", (this would very much depend on the "income" level set. ie if it where based on (say) £50k per person then the majority would not be effected (??)). 

Regarding "complexity", well yes, there may be a small percentage of people that this could apply to, but again probably not the majority, and if it's that complex how does the existing taxation system cope with it??

My (simplistic) assumption was that (for example), an income limit of (say), £50k per person would get no SP, and anything less would be topped up to this limit up to a maximum of (whatever) the SP was at the time....(and I accept that nothing is that simple when it comes to declaring an annual income, although I assume that is how your current tax is calculated anyway??)

 

FIREDreamer

Stubod said:

..thanks for all our comments so far....I didn't think for one minute this would go to 5 pages!

I don't accept it would be "difficult", or would necessarily cause "riots", (this would very much depend on the "income" level set. ie if it where based on (say) £50k per person then the majority would not be effected (??)). 

Regarding "complexity", well yes, there may be a small percentage of people that this could apply to, but again probably not the majority, and if it's that complex how does the existing taxation system cope with it??

My (simplistic) assumption was that (for example), an income limit of (say), £50k per person would get no SP, and anything less would be topped up to this limit up to a maximum of (whatever) the SP was at the time....(and I accept that nothing is that simple when it comes to declaring an annual income, although I assume that is how your current tax is calculated anyway??)

 

So basically an extra 30% tax on top of basic rate tax for someone with a pension of £50k. Sounds fair. 🙄

That will kill off the pensions sector.