Gov launching pension age review

Lowtrawler

Brenster said:

I am 45, and think it will be at least 70 before my age can access state pension.

Its definately a political grenade, especially with all the government F-ups which we all have to foot the bill for, and the ever increasing population increase. 

You would think with higher population, this would lead to higher tax income, and therefore help to pay for the state pension, unless of course the population increase isnt contributing to the system.

It's a Ponzi scheme ever since they decided not to actually create a pension fund from the National Insurance contributions. So long as more people are joining and contributing than those taking pensions, the scheme is financially viable. With baby boomers now retiring and people living longer, like any Ponzi scheme, it is starting to collapse.

Long-term, the only way for a Ponzi scheme to carry on is for an ever increasing number of people contributing and for at least a portion of their contributions to be put into a pension fund i.e. we need an increasing population of workers paying a higher contribution rate. That points to a need for more immigration and higher National Insurance rates.

eskbanker

Successive governments have committed to the principle of a minimum of ten years notice of any changes to SPA, so if the current administration chose to differ (as is their right) then that would be pretty toxic:

The Government remains committed to the principle of providing 10 years notice of changes to State Pension age, enabling people to plan effectively for retirement. All options for the rise to the State Pension age from 67 to 68 that meet the 10 years notice period will be in scope at the next review.

https://www.gov.uk/government/news/state-pension-age-review-published [2023]

dunstonh

BlackKnightMonty said:

HappyHarry said:

BlackKnightMonty said:

Lowtrawler said:

BlackKnightMonty said:

Personally I don’t think I will ever see a state pension. So I am planning for that outcome. Does make me quite bitter though. Over 30 years of National Insurance Contributions…

If you have over 30 years NIC's, you will be within 20 years of state pension age. I think it unlikely you will not receive any state pension given that timeline. Many things could happen that will reduce the value of the state pension you receive.

Fully replacing the state pension with an equivalent private pension would require individuals to save an additional £0.25m through to retirement. That may not be unreasonable for those planning with 40 years to go but it would be completely unreasonable for those closer to retirement. The government would also face an issue encouraging people to make personal provision for retirement if, by doing so, the £0.25m state pension was taken from them. This is what makes it unlikely any government will completely remove the state pension.

I think it will become means tested.

It already is.

Non-taxpayers get all the state pension, basic rate tax payers get 80% of it and so on.

Not really. The state pension and personal allowance are roughly equal. So it’s pretty much tax free.

If you have a non-earner, they get all or most of it tax free.
If you have someone who is a basic rate taxpayer through private provision, then they only get 80% of the state pension.
If you have someone who is a higher rate taxpayer, then they only get 60% of it.
Those earning over £100k start losing their personal allowance and give you an effective 60% tax.  So, the state pension is only 40%.
Then move into additional rate......

BlackKnightMonty

dunstonh said:

BlackKnightMonty said:

HappyHarry said:

BlackKnightMonty said:

Lowtrawler said:

BlackKnightMonty said:

Personally I don’t think I will ever see a state pension. So I am planning for that outcome. Does make me quite bitter though. Over 30 years of National Insurance Contributions…

If you have over 30 years NIC's, you will be within 20 years of state pension age. I think it unlikely you will not receive any state pension given that timeline. Many things could happen that will reduce the value of the state pension you receive.

Fully replacing the state pension with an equivalent private pension would require individuals to save an additional £0.25m through to retirement. That may not be unreasonable for those planning with 40 years to go but it would be completely unreasonable for those closer to retirement. The government would also face an issue encouraging people to make personal provision for retirement if, by doing so, the £0.25m state pension was taken from them. This is what makes it unlikely any government will completely remove the state pension.

I think it will become means tested.

It already is.

Non-taxpayers get all the state pension, basic rate tax payers get 80% of it and so on.

Not really. The state pension and personal allowance are roughly equal. So it’s pretty much tax free.

If you have a non-earner, they get all or most of it tax free.
If you have someone who is a basic rate taxpayer through private provision, then they only get 80% of the state pension.
If you have someone who is a higher rate taxpayer, then they only get 60% of it.
Those earning over £100k start losing their personal allowance and give you an effective 60% tax.  So, the state pension is only 40%.
Then move into additional rate......

Why is the SP at the top of your income calc rather than the bottom?

it’s tax free because it is on the bottom of the earnings pile.

If you are getting over £100k in private pension a year; you really don’t need the SP.

mebu60

BlackKnightMonty said:

HappyHarry said:

BlackKnightMonty said:

Lowtrawler said:

BlackKnightMonty said:

Personally I don’t think I will ever see a state pension. So I am planning for that outcome. Does make me quite bitter though. Over 30 years of National Insurance Contributions…

If you have over 30 years NIC's, you will be within 20 years of state pension age. I think it unlikely you will not receive any state pension given that timeline. Many things could happen that will reduce the value of the state pension you receive.

Fully replacing the state pension with an equivalent private pension would require individuals to save an additional £0.25m through to retirement. That may not be unreasonable for those planning with 40 years to go but it would be completely unreasonable for those closer to retirement. The government would also face an issue encouraging people to make personal provision for retirement if, by doing so, the £0.25m state pension was taken from them. This is what makes it unlikely any government will completely remove the state pension.

I think it will become means tested.

It already is.

Non-taxpayers get all the state pension, basic rate tax payers get 80% of it and so on.

Not really. The state pension and personal allowance are roughly equal. So it’s pretty much tax free.

But then it pushes any other income / pension fully into the next tax band and maybe into the one(s) after that.

If people are going to be further penalised for having made their own provision on top then many simply won't bother. 

m_c_s

The 2017 State Pension age (SPa) Government review proposed a change to bring forward the rise to 68 to 2037-39. This was never put into law so current legislation allows for the increase in SPa from 67 to 68 to be between April 2044 and April 2046. I would imagine the 2017 review proposal would now be taken up with a possible transition starting in 2035 or 2036 which would allow the Government to claim that they have given at least 10 years notice.

Introducing a new SPa to come into force in the next 9 years would be political suicide and only a stupidly desperate Government would contemplate that. Also one would imagine with the current Government being unable to get any meaningful welfare/pensioner type policies through parliament at the moment then probably 2035/36 would be the target date  for change if any. 

I suspect the new review will also look at dates to transition to SPa 69 and 70 with a 10 year transition starting in 2045.

BlackKnightMonty

mebu60 said:

BlackKnightMonty said:

HappyHarry said:

BlackKnightMonty said:

Lowtrawler said:

BlackKnightMonty said:

Personally I don’t think I will ever see a state pension. So I am planning for that outcome. Does make me quite bitter though. Over 30 years of National Insurance Contributions…

If you have over 30 years NIC's, you will be within 20 years of state pension age. I think it unlikely you will not receive any state pension given that timeline. Many things could happen that will reduce the value of the state pension you receive.

Fully replacing the state pension with an equivalent private pension would require individuals to save an additional £0.25m through to retirement. That may not be unreasonable for those planning with 40 years to go but it would be completely unreasonable for those closer to retirement. The government would also face an issue encouraging people to make personal provision for retirement if, by doing so, the £0.25m state pension was taken from them. This is what makes it unlikely any government will completely remove the state pension.

I think it will become means tested.

It already is.

Non-taxpayers get all the state pension, basic rate tax payers get 80% of it and so on.

Not really. The state pension and personal allowance are roughly equal. So it’s pretty much tax free.

But then it pushes any other income / pension fully into the next tax band and maybe into the one(s) after that.

If people are going to be further penalised for having made their own provision on top then many simply won't bother. 

Gosh how awful to have so much pension income you must pay tax on it!

HappyHarry

BlackKnightMonty said:

dunstonh said:

BlackKnightMonty said:

HappyHarry said:

BlackKnightMonty said:

Lowtrawler said:

BlackKnightMonty said:

Personally I don’t think I will ever see a state pension. So I am planning for that outcome. Does make me quite bitter though. Over 30 years of National Insurance Contributions…

If you have over 30 years NIC's, you will be within 20 years of state pension age. I think it unlikely you will not receive any state pension given that timeline. Many things could happen that will reduce the value of the state pension you receive.

Fully replacing the state pension with an equivalent private pension would require individuals to save an additional £0.25m through to retirement. That may not be unreasonable for those planning with 40 years to go but it would be completely unreasonable for those closer to retirement. The government would also face an issue encouraging people to make personal provision for retirement if, by doing so, the £0.25m state pension was taken from them. This is what makes it unlikely any government will completely remove the state pension.

I think it will become means tested.

It already is.

Non-taxpayers get all the state pension, basic rate tax payers get 80% of it and so on.

Not really. The state pension and personal allowance are roughly equal. So it’s pretty much tax free.

If you have a non-earner, they get all or most of it tax free.
If you have someone who is a basic rate taxpayer through private provision, then they only get 80% of the state pension.
If you have someone who is a higher rate taxpayer, then they only get 60% of it.
Those earning over £100k start losing their personal allowance and give you an effective 60% tax.  So, the state pension is only 40%.
Then move into additional rate......

Why is the SP at the top of your income calc rather than the bottom?

it’s tax free because it is on the bottom of the earnings pile.

If you are getting over £100k in private pension a year; you really don’t need the SP.

It matters not - the effect is that the additional income received from the state pension is taxed according to the individual's marginal rate.

As an example:

If an individual had £20,000 gross annuity income (only) they would pay income tax of £1486 per annum and have a net income of £18514.

If that individual then started receiving £12,000 of state pension per year then their total income would now be £32,000 gross pa.

That individual would now pay income tax of £3886 per annum and so have a net income of £28114.
This would be an increase in net income of £9600 pa.

So the individual who is a basic rate taxpayer only receives 80% of the state pension.

BlackKnightMonty

HappyHarry said:

BlackKnightMonty said:

dunstonh said:

BlackKnightMonty said:

HappyHarry said:

BlackKnightMonty said:

Lowtrawler said:

BlackKnightMonty said:

Personally I don’t think I will ever see a state pension. So I am planning for that outcome. Does make me quite bitter though. Over 30 years of National Insurance Contributions…

If you have over 30 years NIC's, you will be within 20 years of state pension age. I think it unlikely you will not receive any state pension given that timeline. Many things could happen that will reduce the value of the state pension you receive.

Fully replacing the state pension with an equivalent private pension would require individuals to save an additional £0.25m through to retirement. That may not be unreasonable for those planning with 40 years to go but it would be completely unreasonable for those closer to retirement. The government would also face an issue encouraging people to make personal provision for retirement if, by doing so, the £0.25m state pension was taken from them. This is what makes it unlikely any government will completely remove the state pension.

I think it will become means tested.

It already is.

Non-taxpayers get all the state pension, basic rate tax payers get 80% of it and so on.

Not really. The state pension and personal allowance are roughly equal. So it’s pretty much tax free.

If you have a non-earner, they get all or most of it tax free.
If you have someone who is a basic rate taxpayer through private provision, then they only get 80% of the state pension.
If you have someone who is a higher rate taxpayer, then they only get 60% of it.
Those earning over £100k start losing their personal allowance and give you an effective 60% tax.  So, the state pension is only 40%.
Then move into additional rate......

Why is the SP at the top of your income calc rather than the bottom?

it’s tax free because it is on the bottom of the earnings pile.

If you are getting over £100k in private pension a year; you really don’t need the SP.

It matters not - the effect is that the additional income received from the state pension is taxed according to the individual's marginal rate.

As an example:

If an individual had £20,000 gross annuity income (only) they would pay income tax of £1486 per annum and have a net income of £18514.

If that individual then started receiving £12,000 of state pension per year then their total income would now be £32,000 gross pa.

That individual would now pay income tax of £3886 per annum and so have a net income of £28114.
This would be an increase in net income of £9600 pa.

So the individual who is a basic rate taxpayer only receives 80% of the state pension.

No, the state pension goes at the bottom of your earning tower, not at the top.

eskbanker

Seems to me that (in the context of multiple income streams) state pension is neither "tax-free" nor "taxed at marginal rate" as such, it's just a component of total taxable income and any allocation of tax liability within that total is arbitrary (even though PAYE only applies selectively).