Gov launching pension age review

Silvertabby

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.

There appear to be two schools of thought on this issue, but I'm with HappyHarry.  The State pension is taxable income whichever way you look at it, and your total tax due is determined by your overall income.

As soon as I started to draw my State pension the tax deducted from my RAF pension increased by over £200 per month.  

No, I'm not complaining - I'd much rather be in this situation than not be liable for tax at all.

eskbanker

BlackKnightMonty said:

Increasing the state retirement age whilst maintaining the triple lock for current recipients is deeply deeply unfair.

Are you suggesting that there's an alternative that would be fair to everyone?  The status quo obviously results in winners and losers, and I seriously doubt that anything else would avoid that....

SouthCoastBoy

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

BlackKnightMonty

eskbanker said:

BlackKnightMonty said:

Increasing the state retirement age whilst maintaining the triple lock for current recipients is deeply deeply unfair.

Are you suggesting that there's an alternative that would be fair to everyone?  The status quo obviously results in winners and losers, and I seriously doubt that anything else would avoid that....

I don’t think you can just look at moving the retirement age as a single item. Perhaps scrapping the triple lock might make it more sustainable long term? So why is that off the discussion table? 

The SP liability is something like 230% of UK GDP and rising. Better to take a holistic view now rather than emergency changes later. Maybe if there were more compassionate voices from the SP voters we could explore different options.

Brenster

If they increase the pension age, they have to take away the triple lock.

In the 1980's, when i was a kid the older generation used to say ' you kids dont know how easy you have it' (to be fair thatolder generation had lived through world war 2 and had a point) , now 40 years on it is amazing how quickly things have turned around when i look at the older generation thinking how much easier they have it now than the younger generation will have in the future.

HappyHarry

BlackKnightMonty said:

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.

It doesn't matter whether you put it at the top or the bottom. The net effect is that the state pension is taxable, therefore higher rate tax payers receive less benefit than lower rate or non-taxpayers.

eskbanker

BlackKnightMonty said:

eskbanker said:

BlackKnightMonty said:

Increasing the state retirement age whilst maintaining the triple lock for current recipients is deeply deeply unfair.

Are you suggesting that there's an alternative that would be fair to everyone?  The status quo obviously results in winners and losers, and I seriously doubt that anything else would avoid that....

I don’t think you can just look at moving the retirement age as a single item. Perhaps scrapping the triple lock might make it more sustainable long term? So why is that off the discussion table? 

The SP liability is something like 230% of UK GDP and rising. Better to take a holistic view now rather than emergency changes later. Maybe if there were more compassionate voices from the SP voters we could explore different options.

So are you suggesting that there's an alternative that would be fair to everyone?

BlackKnightMonty

eskbanker said:

BlackKnightMonty said:

eskbanker said:

BlackKnightMonty said:

Increasing the state retirement age whilst maintaining the triple lock for current recipients is deeply deeply unfair.

Are you suggesting that there's an alternative that would be fair to everyone?  The status quo obviously results in winners and losers, and I seriously doubt that anything else would avoid that....

I don’t think you can just look at moving the retirement age as a single item. Perhaps scrapping the triple lock might make it more sustainable long term? So why is that off the discussion table? 

The SP liability is something like 230% of UK GDP and rising. Better to take a holistic view now rather than emergency changes later. Maybe if there were more compassionate voices from the SP voters we could explore different options.

So are you suggesting that there's an alternative that would be fair to everyone?

I think fair left the room a very long time ago. Probably when the SP age increased from 60.

The only option now is for all to hurt a little; as we work towards something more sustainable.

BlackKnightMonty

HappyHarry said:

BlackKnightMonty said:

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.

It doesn't matter whether you put it at the top or the bottom. The net effect is that the state pension is taxable, therefore higher rate tax payers receive less benefit than lower rate or non-taxpayers.

No. It’s the additional private pension earnings which are taxed, as these are added to your state pension earnings.

This is why someone only on as state pension does not pay tax on it (or on the margins) due to the tax free allowance. Whereas someone who also receives a private pension income will be taxed on that.

wrf12345

I think a rise to 70 is imminent, perhaps in April. I also think they will grab some pensioner income to pay for social care. say 5-10 percent on income over 20k as NI is not paid after 66/67.

Replacing the SP with universal basic income is another option - it would have to be limited to British nationals and EU Brexit cohort - but that would mean the whole of welfare and income tax allowances gone, paying 18-70 year olds 4-5k and pensioners 12k and kids 2k, and then all income taxed at a flat rate with no NI. Tax rate would be around 30 percent, perhaps less, to give a budget surplus over current spending/tax. There would have to be a direct link between UBI and the income tax rate to fend off corrupt politicians. There would be nothing for foreigners and nothing extra for the welfare crowd, they would have to work to some extent.