Will new S Pension cause resentment?

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  • bowlhead99 wrote: »
    Generalising, all pensions (state or workplace), welfare benefits, salaries, asset price rises etc etc, are potentially a source of resentment from those who will receive less. That happens if people are envious and resent what they don't have for themselves, and it is a personality trait which is held by many.

    My dad has the state pension for those reaching the requisite age pre April 2016. I will get the one for those reaching the age after April 2016 and it may change again before I get there (currently slated for age 67, while Dad was at 65 and Mum at 60).

    If I was allowed to retire under the old rules I would have had a bigger pension than under the new rules because under the new rules I won't be able to get more than £155ish (in current year terms) even if I have 50+ years of non-contracted-out contributions, while under the old rules I would have been able to get to £200 plus.

    Will my Dad be resentful of me for being landed with a deal that only allows me to get a smaller amount of money from the state per week than he was allowed to get, and from a later age? Seems pretty unlikely that he would resent me getting that deal, because I'm getting less. Maybe he will instead be resentful that I might get to live longer than him because of improving healthcare and longevity through the generations. Should I take action to worsen my health to make sure I don't?

    Probably we are better as a society if we don't resent what others have. Instead focus on making the best of what we have and helping others rather than being envious of others.

    Ok I'm confused now, I had researched my position and read that those currently in their 50's & 60's who have paid higher levels of NI and therefore qualified for additional state pensinon would be able to keep their entitlement under the rules of 'protected payments' :huh:
  • greenglide
    greenglide Posts: 3,301
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    If you were working during 2015-16 your state pension level won't be available until around November or December this year because that's when the 2015-16 earnings are included. If you weren't working that year the ones now should be OK.
    I reached SPa in May this year and claimed my nSP this month (deferred for 20 weeks to ensure I don't pay higher rate tax this year) and my award was calculated in full. The earning data for most people for 2015-2016 seems to be available - in line with what people see on the online pension forecast facilities.
    Ok I'm confused now, I had researched my position and read that those currently in their 50's & 60's who have paid higher levels of NI and therefore qualified for additional state pensinon would be able to keep their entitlement under the rules of 'protected payments
    Anyone who has an SP entitlement which is above the new State Pension standard rate gets to keep the extra as the Protected Payment. This is inflation linked by the CPI (currently) while the nSP itself is indexed by the triple lock.

    There are no proposals that I have ever seen to change
    the Protected Payment.
  • Using myself as an example:
    Worked since 16 - mostly contracted out with two jobs, so two reasonable pensions.
    SP under the old system would have been £122 pw.
    If I contribute NI until age 66, my SP will be £155.

    Should anybody be resentful? Certainly not me - I've already worked over 40 years but paid a reduced rate of NI. Anybody else resentful - Over the next few years I'll be paying for my increased SP through my NI contributions.

    My situation is I suspect similar to many others, so cause for resentment by anybody? Don't see why.
  • hyubh
    hyubh Posts: 3,526
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    Sleazy wrote: »
    My situation is I suspect similar to many others, so cause for resentment by anybody? Don't see why.

    Obviously not yourself because you're one of the winners! In a parallel universe however your doppelgänger, who was contracted in all the time, has found his state pension accrual to have come to a premature stop. With his NI not having fallen in recompense, he is reading this thread and quietly seething at the 'moaning minnies' (as he puts them) with their fat final salary pensions...
  • jamesd
    jamesd Posts: 26,103
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    molerat wrote: »
    There will be loads of recalculating of foundation amounts right up until April 2023, the cut off date for purchasing 2006 - 2016 missing years.
    True, though not a lot compared to doing it every year for everyone! I just hope that it's made really clear to people whether they can affect their foundation amount at all by buying those years.
  • jamesd
    jamesd Posts: 26,103
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    I had researched my position and read that those currently in their 50's & 60's who have paid higher levels of NI and therefore qualified for additional state pensinon would be able to keep their entitlement under the rules of 'protected payments' :huh:
    That's right.

    But it's also a misleading. The higher amounts will be included in the foundation amount calculation. If that's above the flat rate, you keep the part that's over and get no more increases for paying in for extra years. If it's below the flat rate it reduces the number of years of paying in that you need to get to the full flat rate.

    The result is that at younger ages you effectively lose the higher amount of money because all it does is mean that you reach the flat rate sooner and stop accruing more sooner.

    It's those who are relatively close to state pension age now and already above the flat rate level who get well protected. The higher above the flat rate level you are and the closer you are to state pension age, the better off you are from the transitional protection.

    This sort of thing is also why those who were contracted out a lot are likely to be winners. They start out with a lower state pension in their foundation amount and can just pay in for the extra years to get to the flat rate cap, when their peers who weren't contracted out just hit it and stop gaining sooner.
  • jamesd
    jamesd Posts: 26,103
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    Sleazy wrote: »
    ...mostly contracted out with two jobs, so two reasonable pensions. ... SP under the old system would have been £122 pw. ... If I contribute NI until age 66, my SP will be £155.

    Should anybody be resentful? Certainly not me... so cause for resentment by anybody? Don't see why.
    Certainly not you because you're one of the big winners from the change!

    You get to keep the private pensions that the reduced contributions paid for and also get to pay in for the extra years to get to the full flat rate when your peers who weren't contracted out will already have stopped getting any more increases.

    You illustrate one group that could be unhappy: those who weren't contracted out, particularly a large proportion of private sector workers.

    Those in the public sector in general end up as big winners from the change because their schemes normally were contracted out.
  • OldBeanz
    OldBeanz Posts: 1,400
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    Presumably some of those affected will be those public servants who retire this financial year on £120 pa while those retiring in 7 years time will receive £155 or be able to pay contributions to reach that amount.
  • hyubh
    hyubh Posts: 3,526
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    OldBeanz wrote: »
    Presumably some of those affected will be those public servants who retire this financial year on £120 pa

    If they have pre-97 service, they get their GMP fully indexed for life. I struggle to feel sorry for them :)
  • bowlhead99
    bowlhead99 Posts: 12,295
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    Ok I'm confused now, I had researched my position and read that those currently in their 50's & 60's who have paid higher levels of NI and therefore qualified for additional state pensinon would be able to keep their entitlement under the rules of 'protected payments' :huh:

    It is true, the extra pension you have from paying higher levels of NI (the serps/s2p type stuff) may give you a higher "starting amount" versus the new method at April of this year, and if it does, you can keep the high starting amount.

    However, my situation which will not be uncommon is that I've paid higher levels of NI, nd under the old system those higher levels of NI *would* have helped me get to well over £155 assuming I carried on working and carried on paying into the system. However, I'm a long way from my 50s or 60s and haven't exceeded the magic £155ish figure yet. I'm only around low 120s based on a forecast a while back that didn't include 2015/6.

    So when I get my "starting amount"which is the higher of old system and new system it gives me low 120s. Then in a few years of paying NI going forward from now, (accruing 1/35th of 155 for each year worked), I will be in my mid to late 40s and have already got to the £155 maximum and then it will stop accruing, even though I have another 20 years of paying NI on a hopefully high salary, to go before I reach state retirement age.

    If I was older and my "higher of new system and old system" had already got to £200+, they wouldn't take that away from me and I could keep it. But instead, I was perhaps "well on course" to get that level but now I'm not allowed, I can only accrue flat rate - with no premium for high NI payments - until I hit the limiter and then I stop.

    I even have a couple of missed years from when I was out of the country working overseas, but it's not worth bothering filling out any paperwork to try to claim the missed years under a reciprocal arrangement, or paying out any cash to simply "buy them back", as I have no need for them, as I'll already be at £155 with 20 years to go.

    In terms of what that "costs" me: under the old system I could have had £50-100 extra per week for the same lifetime contributions. £50-100 per week from retirement age 67 to 97 is in the order of £78-155k. Ow.

    By contrast, there are some people who have been contracted out, paying lower NI contributions all their lives while their excess NI money was buying them a sweet personal or employer pension on the side. They might be at around £110 a week now under the "best of both methods" rules, and their NI over the next decade is allowed to accrue them 1/35th of £155 each working year, even on a relatively low salary, until they max out at the £155 level like me. But they have an entirely separate pension pot on the side that was funded by contracting out and paying discounted NI rates.

    So, clearly there are winners and losers under the new transitional arrangements as we move to a new system that is worse for high earners and better for low earners and various special interest groups, but overall apparently broadly cost-neutral for the country.
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