Tax Misery for State Pensioners

terryw

dunstonh wrote: »

I think a lot of people dont realise just how little the state pension alone and pension credits are. If you told a single person that doing nothing means that they will be earning around £6800 in retirement by doing nothing that would switch them on a bit more. Whether its still enough of a "scare" to do something about it now is a different matter.

It is the state pension which is "Little". Pension Credit gives a couple £195 or so a week in the hand plus HB to cover rent and exemption from Council. Tax. Plus the other passport benefits. Many younger couples can only dream of £195 per week after housing costs. With Pension Credit, a single person receives about £130 after housing and council tax has been accounted for.

terryw

EdInvestor

terryw wrote: »

At age 60 I currently receive a pension of £200 per week on which I have to pay tax and council tax. If I had not bothered paying into a pension scheme I would receive £190 or so tax-free pension credit, plus HB and CT exemption.

You would only receive 190 or so if you were married. If you are married, then you need to factor in your spouse's pension to compare like for like.If single the pension credit rate is around 127 pounds a week, which is quite a bit less than 200 pounds a week.

EdInvestor

margaretclare wrote: »

The people who are worst-off, apart from low-paid workers that is, are the people who've been led to believe they can retire on a pension at age 60. They are being taxed as if they were still at work. The age-related higher tax allowances don't kick in until age 65.

These people are all women of course. Do posters think the age allowance should be given from the time of state pension eligibility?

You could make a case for it IMHO as these women are not only being disadvantaged by the removal of the 10% tax band, but are also not receiving the benefit of the 30 year rule reducing NI conts for the basic pension, which comes in post 2010.Many feel aggrieved about that.

krisskross

margaretclare wrote: »

I completely disagree with you.

I have been 'so stupid' because I could have saved a lot more!

The people who are worst-off, apart from low-paid workers that is, are the people who've been led to believe they can retire on a pension at age 60. They are being taxed as if they were still at work. The age-related higher tax allowances don't kick in until age 65. To that extent, I can sympathise with them. I don't agree with the not saving and claiming benefits philosophy of life. Not at all!

I don't believe in relying on state benefits, never have claimed anything and never will.

What I am saying is that after paying into an occupational pension for many many years I am no better off financially than my neighbour who has never worked, especially when income tax comes into the equation. She pays no tax because part of her income is derived from benefits (pension credit). I pay tax because my income is all from pensions.Plus I pay council tax while she doesn't on very similar income if all her benefits are taken into consideration.

Could you honestly blame today's workers with families thinking that the £100+ monthly that they pay into their pension today would be better off in their pocket because the State will compensate them for a poor income in their retirement with benefits?

jem16

EdInvestor wrote: »

These people are all women of course. Do posters think the age allowance should be given from the time of state pension eligibility?

Yes I do.

It's not going to affect me as I have to wait until I'm 65 to get my state pension anyway but I don't see why women aged from 60-64 should be disadvantaged.

bigheadxx

If You Only Have A State Pension Ie No Other Pension Then The Only Way To Pay Income Tax On Your State Pension Is Via Self Assessment As It Cannot Be Deducted At Source. Anyone In This Position Is Likely To Have An Income Of Less Than 7,000, Not Really What Self Assessment Is Intended For.

terryw

EdInvestor wrote: »

You would only receive 190 or so if you were married. If you are married, then you need to factor in your spouse's pension to compare like for like.If single the pension credit rate is around 127 pounds a week, which is quite a bit less than 200 pounds a week.

Wife does not receive any pension. Gross income after saving for private pension is £200 per week taxable. Couple on pension credit receive £195 plus HB and no council tax.

I did mention single people in my last post. On pension credit receive about £130 per week plus HB and no council tax. Many younger people who work long hours in dreadful jobs would love to have £130 after housing and CT costs. Don't forget the passport benefits of PensionCredit.

Pension Credit is a real disincentive to provide for one's old age. Basically you need a very very good pension or none at all. Anything in the middle is wasted money.

terryw

margaretclare

I've heard this 'no better off than my neighbour' many many times and I still don't agree with it. You either feel that way, want to live your life that way, or you don't. I can sympathise with your point of view but it's not a way of thinking I ever want to embrace.

To put it another way, what you're saying is: if I could go back in time, go back to the beginning of my adult life, would I do things differently? Well, there are many things I'd do differently, but paying full NI contributions and joining the occupation pension scheme are things I would still do. I know many women who had that opportunity, chose not to take it, and it's quite likely that they are the ones on pension credit now and getting all those means-tested benefits. I don't envy them.

Apart from personal relationships, which I'd handle a lot differently, the only other thing money-wise I'd do differently would be to save more and waste less. There are a lot of missed opportunities and wrong decisions there. But I'd certainly still pay into pension schemes if available. Who ever imagined that pension credit would be invented - years ago state pension was considered to be enough to live on, even if living modestly! Who can predict that pension credit will always continue?

I think it's probable that DH and I are doing all right because there are two of us and we each have our own full NI pensions and a few other bits and pieces. We're probably 'in the middle' as terryw puts it, but we think that's the best place to be. Not poor enough for pension credit, we pay our own way, but nowhere near rich enough to have to worry about IHT and who to leave our assets to.

Jennifer_Jane

Agree with Krisskross and terryw.

Re the tax position, I'm now 61 and cannot afford to retire, but when I do, I won't receive the full state pension and will only get a small Company pension. So from the above, it indicates that I need to do a self-assessment tax form until I get old enough to get above the allowance?

Gordon Brown's/Darling's removal of the 10% tax rate is designed to make poorer tax payers even poorer! I just don't understand why it was done (especially by a Labour Govt who should be looking out for the poorer sections of the community - appalling!).

I won't be able to get pension credit, but will still have Council Tax taking out about a quarter of my income.

Jen
x

margaretclare

Jen, no one can understand why this was done. It was introduced by GB as Chancellor and it was he who removed it. AFAIK he has never given a good explanation of either decision. Possibly it's because he needs to find extra tax revenue from somewhere - maybe he thought he could afford it and then found he couldn't? 'Nuff said.