Gov launching pension age review

Stubod

No, I don't think so and in fact almost certainly not - it's here to stay. There isn't really any precedent around the world for getting rid of the State Pension or even means testing it. As stated earlier it is means tested to a certain extent by virtue of it being taxed.

..I believe it is means tested in Australia????

Silvertabby

Stubod said:

No, I don't think so and in fact almost certainly not - it's here to stay. There isn't really any precedent around the world for getting rid of the State Pension or even means testing it. As stated earlier it is means tested to a certain extent by virtue of it being taxed.

..I believe it is means tested in Australia????

It is, but it has always been means tested, since it was introduced in the early 1900s.  

That said, the original (1919) UK State pension was means tested, in addition to being limited to 'those of good conduct'.  The means test was dropped in the 1920s, along with the 'good conduct' requirement.  

BlackKnightMonty

Silvertabby said:

Stubod said:

No, I don't think so and in fact almost certainly not - it's here to stay. There isn't really any precedent around the world for getting rid of the State Pension or even means testing it. As stated earlier it is means tested to a certain extent by virtue of it being taxed.

..I believe it is means tested in Australia????

It is, but it has always been means tested, since it was introduced in the early 1900s.  

That said, the original (1919) UK State pension was means tested, in addition to being limited to 'those of good conduct'.  The means test was dropped in the 1920s, along with the 'good conduct' requirement.  

Paying tax on your State Pension (which I dispute) is not the same thing as being means tested.

Means tested means not receiving the State Pension at all for a lot of people. Show me where on .gov.uk it says you will not get your State Pension because you are considered too wealthy.

Cobbler_tone

You’re getting into semantics, although I wouldn’t class the tax bands as ‘means testing’, it’s usually something that is given/not given due to income. Definitions would agree.
The state pension is not means tested.

Triumph13

Back-door, partial means testing via taxation would definitely be a simpler and more palatable route.  It's hard to make a rational argument why pension income, above a certain level, should be taxed more generously than earned income, as is the current NI situation.  Although I'm sure views would vary on what that level would be and what level of tax would be 'fair'.

Currently, the point at which a pensioner becomes a net contributor to HMRC (not counting VAT and other consumption taxes) is a gross income of £62k, ie at that point you pay more in tax than you get in state pension, assuming the full £12k new state pension.  I have to say that does seem a little high to me.

Cobbler_tone

I know people like to panic over things they have no control over. However, I wouldn't spoil your cornflakes. There are tons of iterations to go through before anyone thinks of taking your state pension away. Increases to pension age, increased taxation, taxation of the super rich etc etc, by which time you'll probably need an undertaker as opposed to a pension.
As for the above. Unless they took a retiree in isolation, they would be ill advised to approach it via the tax bands. There have been enough people absolutely hammered due to the stagnant 40% limit. Another 500,000 this tax year, taking it to over 7 million. It's almost like a 'salary cap', e.g. "You can have a maximum of £50k a year in retirement and then we are going to hammer you", the knock on impact of that would be huge and change the entire landscape of work and everything leading up to retirement.

BlackKnightMonty

Triumph13 said:

Back-door, partial means testing via taxation would definitely be a simpler and more palatable route.  It's hard to make a rational argument why pension income, above a certain level, should be taxed more generously than earned income, as is the current NI situation.  Although I'm sure views would vary on what that level would be and what level of tax would be 'fair'.

Currently, the point at which a pensioner becomes a net contributor to HMRC (not counting VAT and other consumption taxes) is a gross income of £62k, ie at that point you pay more in tax than you get in state pension, assuming the full £12k new state pension.  I have to say that does seem a little high to me.

How much tax you pay is irrelevant without considering the services and benefits you receive.

something like 85% of all pensioners are Net recipients after all taxes paid and all benefits/services received.

https://www.ons.gov.uk/generator?uri=/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2021/8a4a4e33&format=xls

Triumph13

BlackKnightMonty said:

Triumph13 said:

Back-door, partial means testing via taxation would definitely be a simpler and more palatable route.  It's hard to make a rational argument why pension income, above a certain level, should be taxed more generously than earned income, as is the current NI situation.  Although I'm sure views would vary on what that level would be and what level of tax would be 'fair'.

Currently, the point at which a pensioner becomes a net contributor to HMRC (not counting VAT and other consumption taxes) is a gross income of £62k, ie at that point you pay more in tax than you get in state pension, assuming the full £12k new state pension.  I have to say that does seem a little high to me.

How much tax you pay is irrelevant without considering the services and benefits you receive.

something like 85% of all pensioners are Net recipients after all taxes paid and all benefits/services received.

https://www.ons.gov.uk/generator?uri=/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2021/8a4a4e33&format=xls

I didn't say anything about other services received, where we would expect children and the elderly to end up net recipients generally.
 In a discussion of potential means testing of the state pension I think it is perfectly valid to look, in isolation, at the point where income tax effectively claws back the whole of the state pension and to question whether or not that seems a reasonable level.

Exodi

af1963 said:

Exodi said:

The triple lock is not just for the current recipients, it is for future recipients as well.

This is such a common response I see and frankly it boils my blood - mainly because I think a lot of the people that parrot it either do so naively or disingenuously. 

s this. At some point in the future, the mechanics of the state pension/triple lock have to be adjusted -  ...

The question is what and when - not if, and that's why this view particularly frustrates me, because you either know this (and want to deceive younger working people to maintain the status quo that they are unlikely to receive themselves) or you live in Utopia where you believe above inflation/earnings increases can continue ad infinitum.

I'm possibly one of the ones you've seen saying this.  And I'm not naïve enough to believe the triple lock can or should go on forever, even though the politics of scrapping it will make it difficult to change.

But even if or when triple lock is eventually scrapped, the increases that it has delivered *up to that point* will remain as the baseline for future pensions.  The biggest beneficiaries of these increases will be the people who receive these higher payments for the longest period, and that's younger people who still have their entire retirement in front of them.

An 80 year old can expect to receive their triple-lock-increased pension for a further 10 years because their life expectancy is 90.   A 90 year old can expect it for 5 years. 

A 30 year old can currently expect it for 20 years because their pension age is 68 and their life expectancy is 88.

Double and triple lock was *intended* to gradually increase the value of state pension, relative to wages, to catch up on the years when it fell behind generally rising wages.

I totally understand that branch of the argument - as I mentioned earlier it's made ad nauseam by current pensioners, but I still disagree with it.

The reason is you make an assumption that after X time the government will decide to scrap the triple lock and move to inflation or earnings linking or what have you, sustaining and cementing the increases of the past.

But you don't know this is what will happen.

Many could just as likely believe that consecutive governments will take too long to address this issue (knowing it's a politic hot potato) and when there is no more spending to cut and they are forced to address it, will they finally deal with it. The problem with this is it could be in a fair few decades time, the government of the day are standing up in the commons giving a speech along the lines of "For too long our predecessors have ignored the unfair state pension system, that sees wealthy pensioners get richer all the while poorer hardworking people are left to pick up the ever-increasing bill. It can not continue, we will not let it continue. From 2070 those with adequate pension provision will see their state pension reclaimed via tax, much like Child Benefit is reclaimed from better off families. We will also scrap the unsustainable triple lock."

Or just continuing to increase the state pension age. A young person might prefer the triple lock be scrapped ASAP if it would mean they wouldn't need to be deep into their seventies to receive it. Obviously an older person would rather it not be scrapped as they receive it today.

Of course, these are just assumptions too - the reality is, we don't know what will happen.

The problem I have with your conclusion (that a 30 year old would be the winner of continuing the triple lock for as long as possible compared to a 80 and 90 year old) is that the 80 and 90 year old are immediately reaping the rewards - they are not beholden to the possibilities of the future. A 30 year old on the other hand, who is told to prop the triple lock up for current pensioners, is beholden to the whims of future political changes, and you don't know that they will be better off because of it.

From an emotional perspective, pensioners encouraging young people to prop up the triple lock for as long as possible is infuriating to them - you only need to look at a comment section on any recent article postulating about increasing the state pension age further while maintaining the triple lock. Many see it as deeply unfair.

Andy_L

Triumph13 said:

Back-door, partial means testing via taxation would definitely be a simpler and more palatable route.  It's hard to make a rational argument why pension income, above a certain level, should be taxed more generously than earned income, as is the current NI situation.  Although I'm sure views would vary on what that level would be and what level of tax would be 'fair'.

Currently, the point at which a pensioner becomes a net contributor to HMRC (not counting VAT and other consumption taxes) is a gross income of £62k, ie at that point you pay more in tax than you get in state pension, assuming the full £12k new state pension.  I have to say that does seem a little high to me.

Pensioners can't claim most of the contribution based benefits that NI entitles you to