How could we theoretically means test the state pension?

[Lauriefairycake]

There is a generation of pensioners who have benefitted from massive house price increases and who are now living in very expensive properties and have good pensions plus the state pension to fund it.

I generally do not think that it is fair that for example my dh's grandparents (sahm, one really minor civil servant income) had basically an extra £750,000 to downsize and spend on their retirement.

They really do not need the state pension however we have to consider doing something about that means that people may not save for their retirement

and this problem seems particular to the baby boomer generation and it may never happen again

But if one of our goals as a country is to bring down house prices then surely 'forcing' people to sell their properties will gradually bring the prices down?

[GooseyLoosey]

The basic state pension is funded through National Insurance contributions, you have to have a full contributions history (which means contributing for around 40 years) to qualify for the full benefit. Those who receive it have paid for it.

If you do not have a full contribution history, the benefit can be topped up, but the top up is means tested (it looks at the rest of your retirement income).

A country that forces people to sell properties is not one in which I would wish to live.

[Lauriefairycake]

I don't mean 'forces' as in tells people, that's why I put it in inverted commas. I mean 'forces' in the sense of they would have to, to fund their own retirement as they had benefitted from massive house price rises and are sitting on free money.

Why are we paying people £80 a week when they live in million pound properties? I'm only asking that we consider what, if anything, to do about it.

it is very inequitable. And we have screwed subsequent generations.

[Lauriefairycake]

Also it's not funded through NI contributions - that's a red herring, there isn't enough money in the pot for that, people are living much longer than they have contributed for.

We are paying for it now with out taxes - contributions from them does not cover it.

[GooseyLoosey]

I agree that it is funded on a pay as you go basis rather than from reserves, but if you like, part of the contract between worker and state was that a specific proportion of NI contributions would be used to fund such benefits.

It is widely recognised in the industry that people are not saving enough for their retirement. However, rather than penalise those for who the system worked, the approach which has been taken by this government and the previous one is to compel people to save for their retirement.

People will not in the future have the high level of retirement incomes that have been seen in the past, but that is because of the collapse of employer final salary schemes and the understanding that they cannot be funded in the long term.

We cannot penalise the current generation of pensioners simply because economic conditions mean that things are bad for everyone else.

[Lauriefairycake]

Well, we are all suffering the effects of the economic problems apart from this quite large sector of people.

There is a whole generation of people who won't be able to buy somewhere to live, who will be paying off student debt for a long time, who will work til 70 (probably).

We can't really just leave the money at the top

[dreamingofsun]

agree with goosey - i wouldn't want to live in a country that forced people to sell their houses in this way. i've stayed in a job i don't like so i get a final salary pension and we will have paid over 80 years of NI between us when we retire, plus saved - so i don't see why i shouldn't have a decent retirement - and stay in my house if i wish.

you can't judge pensioners generally by looking at a civil service pension as these seem especially generous. i think these need to be re-evaluated as we can't afford them - which is obviously being done now.

local income tax - which many people on mumsnet seem to agree with - would make this situation worse and encourage old people to live in big houses all by themselves.

[Believeitornot]

Keep the state pension. It'll cost too much to means test.

Perhaps introduce tax breaks so people are encouraged to downsize, if it's housing you're worried about.

[SlobbyBOB]

And which generation caused the massive house price inflation.

Goosy makes some very vaild points.

[Chil1234]

The full state pension for a single person is not even £70/week. People paid for that £70/week throughout their career in the form of National Insurance stamps. They are entitled to it. Many people on the basic pension qualify for top-ups such as pension credits so that they can have a reasonable standard of living in retirement. Those that not only paid their stamp but also went without so that they could invest in private/employment-related pensions, property or savings have a better standard of living. They made good decisions.

BTW I really think all of this 'pensioners have it far too cushy' stuff is horrible. Rather than being bitter and twisted that someone else made good decisions in the past, everyone should look to their own retirement plans. Start saving, buy a property, take out a private pension etc.

[Lauriefairycake]

But that's the point - they didn't make 'good decisions'. They benefited from stuff out of their control. We have gone from a semi in the south-east costing £3000 to it being sold for £750,000 - this has benefitted no one apart from one family,

Lots of people can't buy property now because of the huge increase in house prices.

Now both adults in a family usually have to work to support a smaller family.

It is much different now than 30/40 years ago.

I also think that people shouldn't be either bitter or twisted but that we need to look at how we are going to fund an increasingly elderly generation in a sensible way.

according to the Mail today pensions are costing the same as the entire children/schools/families budget.

I'm really surprised that we are not thinking about means testing the pensions I thought loads of people would have some thoughts on it rather than just 'not do it at all'

[Chil1234]

"There is a whole generation of people who won't be able to buy somewhere to live, who will be paying off student debt for a long time, who will work til 70 (probably)."

And there are also large numbers of people within that generation who have parents who have worked hard, saved wisely, got properties they can sell and who can afford to help them out financially. Many parents are stumping up for tuition fees and deposits on properties already. In due course, any money their parents have accrued will be inherited by them (less any IHT)... so it is not 'lost' to the next generation.

[mumblechum]

I think the difference is that means testing pensions, ie a payback for an investment (which it sort of is, assuming that the pensioner has paid into the NI fund for 40 or 50 years), is different from means testing benefits, where there is no expectation that the claimant has made any contribution.

I personally don't blame pensioners for house inflation. The reason house prices have increased is due to a lack of affordable new stock, and selling off council houses.

And they have, after all, paid mortgages on those properties.

[Chil1234]

No-one could predict the huge rise in property prices but it's been true for decades that property values always go up. It was true when my parents bought their first house in the fifties and it's true now. They agonised, in 1964, whether to buy a house for £2000 or really stretch themselves and go for one costing £2200. Where I grew up it was quite normal for both parents to work and for families to be small... this is the seventies we're talking about.

The state pension, even though it is linked more closely to earnings is still a pathetically low amount. Could you live on £70/week?.... Lots of people working today have opted out of SERPS as it is. I think you're making a big deal out nothing.

[Lauriefairycake]

I don't blame pensioners either - I blame the economic policies that have allowed this to happen.

I'm not convinced that saying it will be passed on in inheritance is quite true or fair either.

There are lots of ways to avoid having to sell your home to pay for your care so that you can pass it on to your children - I don't think that is necessarily 'fair' either. I have always said that my home should be sold to pay for my care and that it shouldn't be a burden to the next generation - I came into this world with nothing, happy to go out with nothing.

[foreverastudent]

What could happen in the future is for all benefits (inc state pensions) to be means-tested and to count equity in the home as capital. People will probably have to keep working/ not get a pension until a doctor signs them permanently off sick.

[Lauriefairycake]

I'm talking about it 'making a big deal' out of it because it's an ever-increasing amount.

It's a large percentage of our outgoings.

And it's not whether someone 'could' live on £70 a week - it's more complicated than that - for starters we expect people on JSA to live on £55 a week - that's one individual too.

[Chil1234]

@Lauriefairycake.... you may wish to exit the world with nothing and there are plenty who agree with you. Some spend their retirement taking lavish holidays and end up leaving nothing to their families. But some of us work hard & save hard so that we can not only take care of ourselves but also help our kids have a good start in life and help them out with things like further education, getting on the property ladder and so on.

[dreamingofsun]

laurie - your idea about means testing pensions doesn't sound too far removed from robbery to me. people have paid for a pension for years via NI - its just not acceptable to then not provide a pension in return.

Inheritance tax is a good thing as it reduces the number of people with loads of money who haven't earned it.

[Lauriefairycake]

Are we talking at cross purposes

I did not say I was going to take lavish holidays - I said that money accrued during my lifetime should be used to pay for my care.

Why should I piss away my retirement on cruises and expect the state to pay for my care just because I'm elderly. Why should I not be forced to sell my assets to pay for it.

The argument about child benefit was that it was inefficient to stop it as it cost just as much to give it to administrate it - is that what we're saying about pensions? Is it easier to give everyone £70 a week rather than means test?

We are giving people winter fuel allowance who don't need it - is that also because it costs more to administrate than give it?

[TheCoalitionNeedsYou]

NI does not 'entitle' you to anything. NI is just tax.

Peoples record of NI contributions are used to ration benefits.

[GooseyLoosey]

For me it is not about means testing.

The Government deducts NI from my salary each month. I have an understanding of what that contribution is used to fund. It is different from the income tax which they also deduct - they also do whatever they want with that.

Clearly, going forward, a Government can change what NI funds all they like, but what they cannot and should not do is change what the NI contributions I have paid to date have secured. That would be cheating me out of benefits I have earned.

Many married woman who did not pay suffient NI contributions made additional lump sum contributions to buy back their rights to state pension. Would we now tell them "thanks for the money but actually, we are no longer going to provide you with the benefits"? I cannot see how any Government could do that, it breaches all of the rules of fairness and natural justice.

[TheCoalitionNeedsYou]

NI has never gone into a special NI fund out of which Pensions and Unemployment are paid. it goes into a big pot with all the other money.

[Chil1234]

Of course NI pays for other things than the old-age pension. It is not ring-fenced. But the people contributing to the NI pot were, from the outset, specifically told that it would entitle them to a decent state pension at the end. The less NI you put in, the smaller the pension you got out. That's the difference between NI and the other tax we all pay.

[TheCoalitionNeedsYou]

If the Government that introduced it really wanted it to be guaranteed they should have put steps in place to guarantee it instead of counting on their successors to work it out.

[dreamingofsun]

laurie - i fully intend to spend spend spend when i retire. i've worked hard enough for my retirement, whilst many laze around doing nothing. And under the current rules a person does have to sell their house to pay for their care.

i would like to see free bus passes and winter fuel payments restricted to those on minumum pensions. with families currently bearing the brunt of spending cuts i don't see why better off pensioners couldn't do their bit as well and it would be cheap to administer.