pension increase

tosca211

The old age pension is due to increase next year with the new state pension due to go above the £12500 tax free allowance to over £13000. This means that if the government keep their word that people receiving the New state pension will in effect have their tax free allowance increased by over £500 . However people like my wife on the old state pension with a small add on private pension which takes her to around the same amount of around £13100 will therefore pay around £120 tax.The gap between the old and new pension gap increases every time there is a percentage increase and thus making old state pensioners less well off than the New ones. .If the New pensioners get a tax free allowance up to £13000+ then this should also be the same tor us receiving the old one

Ayr_Rage

Wait for the autumn budget before throwing your toys out of the pram.

la531983

If pensioners get £13k tax free, so should everyone else. How's that for a can of worms?

FatherAbraham

There is a governmental pledge not to levy income tax upon pensioners whose only source of income is the state pension.

Taken at face value, that creates an extreme cliff edge, where getting one penny of, for example, savings interest exposes one to income taxation.

dunstonh

Yes, it's quite pathetic policy-making on the fly. The proposal that only people on the new state pension shouldn't pay tax was a bad one. Hopefully, the government will see common sense and tax people accordingly

SnowMan

When the original amount of the new state pension was determined in around 2016 it was set at a rate that meant broad cost neutrality relative to keeping the old scheme in place for eternity.

The triple lock had been in place for many years when they set the initial amount, so they took into account that the whole of the full new state pension of £155.65pw increased with the triple lock whereas only the basic state pension of £119.30 per week was subject to the triple lock with the additional pension getting CPI increases.

Of course they could have set up the new state pension scheme with only the first £119.30pw getting triple lock increases and the rest CPI. They didn't do that for reasons such as simplicity and interactions with the benefits system in retirement. But had they done that they could have set the initial amount of the new state pension at a higher amount and still achieved cost neutrality.

You imply your wife is losing out because she gets the triple lock on only the basic state pension rather than her full pension but that doesn't stand up to scrutiny for the reasons above, albeit it is an understandable misunderstanding. It's much more complicated than that.

There are significant winners and losers under the new scheme. And some who reached SPA pre 2016 might have done much better or much worse under the new scheme had it been in place rather than the old scheme.

What is clear is that the new system was a brilliant development (if only simplification like that happened with the tax system). It is much easier to understand than the old system, especially when you understand the broad concept of the transitional arrangements and having a starting amount (that encapsulates all the complications) which you can build on.

One of the main reasons the move to the new state pension system worked was the inability for the average person to work out if they were winners or losers. In fact many of the winners thought they were losers and many of the losers didn't realise they were losers.

On the separate issue of the tax concession for those whose income is pushed just above the personal allowance by the increase to state pension and the personal allowance freeze, we will find out what will happen in the budget. It is not sensible to guess what the outcome of that will be and feel aggrieved until if at all after the budget.

Exodi

https://forums.moneysavingexpert.com/discussion/comment/82138407#Comment_82138407

It's also incredibly short-sighted.

With the personal tax thresholds frozen until April 2031 and no appetite from the political parties to scrap the triple lock anytime soon, the decision to exempt new state pensioners from tax will become increasingly harder to justify the higher the SP goes above the PA.

I don't want to stray into political discussion so as the others say, wait until the budget on 28th October, where we will be able to discuss strategy and make decisions based on actual policy rather than speculation.

p00hsticks

https://forums.moneysavingexpert.com/discussion/6683494/pension-increase

You can't make generalisations about how much better off thsoe on the new state pension are compared tothose on the old - my mother got nearly £100 more a week under the old scheme than I get under the new one.

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/82138587#Comment_82138587

And the most common error made is those that compare the basic state pension to the new state pension whilst disregarding SERPS and S2P and making out that they are hard done by despite that fact that they could end up with far higher state pensions (or contracted out entitlements).

Big winners were the self employed.

Silvertabby

https://forums.moneysavingexpert.com/discussion/comment/82138636#Comment_82138636

I class myself as a major winner under the new scheme - maximum possible contracted out service (1978 to 2016) but enough time between 2016 and SPA to accrue the full new single tier pension, mostly by buying voluntary Class 3s, as I retired at 60.

The complaints from other public sector pensioners, who reckon they have been 'robbed' of a full pension because they were 'contracted out without their knowledge/approval' really set my teeth on edge.

Lorian

Topic was mentioned on Martin's TV programme last night