What will eventually happen with the State Pension?

[BrainInAJar]

Hello,

I recently turned 40 and have been reviewing my finances.

A lot of stuff online factors in getting the State Pension. I'm trying to be on the safe side though and factor in that I might not get it, not the full thing anyway and maybe not until a much older age than earlier generations.

Just out of interest, what do you think will happen? Will any Government be "brave" enough to make sweeping changes? How much notice will we get? Who will be the first generation, if any, not to get a state pension?

Thanks

We're reasonably well off and have only one DC but by the time we have paid for his university expenses and hopefully given him something towards a house deposit, there is no more left unless we leave ourselves short for our own retirement.

Plus who knows what age he would be allowed to access it, and if it would impact any state pension at that time (50+ years away) I'd rather give him the tools to set himself up in life, than try to second guess what's likely to happen in the future.

It really isn’t fascinating psychology.

People - I’m sure it’s not limited to the British - will have a range of views on means testing as a general concept, depending on what it’s for and the precise details of individual applications.

In this case, though, basic pensions have never been presented as subject to means testing. The concept has very much been that all who have the means to do so pay in and all - without exception - are entitled to benefit at a certain point in time. Not sure in which culture people just shrug at the removal of something they’ve been led to expect (in this case, in return for paying for others).

People who are less than thrilled at the prospect of losing a valuable benefit of this type are hardly psychological oddities or ‘entitled’ as some posters insist.

Why does anyone think that pensioners shouldn't be taxed?

I'm not paying tax on my pension contributions now, I'm deferring that until later. Overall I'll pay less tax as I won't be earning as much in retirement.

It would be scandalous to withdraw it or make it means tested. It absolutely is something that people "pay in" to. Otherwise how would it be possible me to make top up payments for missing years?

Many, many millions of people have planned their retirement around an expectation that they will receive it.

By all means, change it for the future - people could reinvest equivalent sums privately instead. But don't withdraw it from people who have an entirely legitimate expectation of receiving it.

Much will depend on global economics, governments etc. Impossible to predict.

For the last couple of years there has been a real push to get people with partial years or missing years to pay voluntary contributions to increase their state pension. I have chosen to pay 3 years to get a full state pension because it’s a good deal. To then means test so I don’t get the full pension would not go down well with a lot of people. How do you address that?

Life expectancy is apparently falling (ONS) and this feeds into reviews of normal pension age (NPA). Whilst there is an outline plan to increase NPA this is subject to review.

Increasing women’s NPA from 60 to 65, then 66, 67 etc. is saving the government c£60k + for each woman pensioner. I know older women may not have a full pension but it is still a saving. Increasing the retirement age by 1 year saves ££ and those who are eligible can claim means tested benefits. It’s also cost effective vs means testing.

As a pp points out people with private pensions pay tax, so means testing state pension logically would see a fall in tax receipts. The cost of administering means testing and the savings must therefore be more than the tax lost.

Care costs, those who would be means tested are usually full or partial self funders if they need care. Means testing of state pension could see an increase in the state/LA funding care costs. I know the vast majority of people don’t need residential care but pensioners with disposable income may buy in care, be it cleaners, gardeners, handymen, companions etc. Means testing state pension may impact the demand for these services reducing tax & NI receipts. Ironically these personal services are likely to survive AI.

There is a lot more considerations I could add, so any government needs to be sure means testing state pensions doesn’t create a shortfall somewhere else in the tax system.

Nobody thinks pensioners shouldn’t be taxed. Obviously pensions should be subject to the same taxation as any other income.

I'm a bit torn about taxing pensions... I have paid tax on my earnings once, and now paying again because my pension (that I saved for) is taxable.

I do see how it's still income tax, but I feel I'm being taxed up to my eyeballs

But you're not taxed on pension contributions?

Does that make it ok?

I’ve just turned 43 & felt for many years that there will be no state pension for my generation, one of the first. No reason other than it’s not financially viable. There will be no NHS either. Social care will be either a luxury or a shite state system (worse than now). Work till you drop or have a good, adequate private pension.

Because it's not double taxed. You've not paid your tax on that part of your earnings already - you don't pay the tax until you receive it and that may be at a lower rate than when you were earning so you're quids in.

If we need to get rid of things we can’t afford there are many areas that could be looked at for all people
The high level of benefits and top up fraud
The huge problem with tax avoidance
Long term unemployed
Short term unemployed
and so much more…………………..!

If you like the communal living as you have suggested for the elderly then rather than it being an age related suggestion everyone that gets the Govn to pay their rent should also be corralled into communal living. Anything else would be ageist and discriminatory.

Yes
Its an income over the tax free rate that everyone has to adhere.

You won’t have paid tax on it when you put it into your pension so it’s fare

Yes. You can’t have it both ways. Pension contributions are tax free. You can take 25% of your pension as a tax free lump sum and you pay tax on the income. Why wouldn’t you?

It's effectively means tested anyway.
Quite a high percentage of people end up on means tested sickness and disability benefits long before they hit official retirement age

People once they are in late 60s really just aren't fit enough to work full time.

It has been said in this thread and conveniently just under your post! I'm not sure if people just don't understand or don't agree?

While I don’t disagree that it’s just a giant Ponzi scheme, it would take a radical approach to overhaul and no Government is brave enough to do so. Currently.

But on the other hand I’ve already paid in 43 years of contributions and will continue to do so. I’m at the age where I would hope they can’t change the age of receiving state pension which for me is 67. By then I will have paid 50 years of contribution towards my pension, accepting I know it doesn’t actually work like this.

There is something inherently wrong though that some others who haven’t contributed this much still benefit in the same way. I would be mad as hell at being means tested.

What % are currently working at each age 60-70?

My relatives stopped work at 55. So already a 25y retirement. For 39y work
If people work till 68 from say 21 after uni thats 47y work for say 12 retirement

Realistically are people mentally all there enough to work at nearly 70.
But also my generation most parents didnt fund uni for their kids at all.

Maybe the gov need to start ring fencing pension contributions as they cant expect people to work till 70 while other people retire at 50.

Hi everyone, thanks so much for all your thoughts!

Good point about the voluntary NI contribs - choosing to make up your missing years. Although we don't have a choice re paying NI from our wages, it would be most disingenuous for the Government to be encouraging people to make these additional payments and then completely remove the State Pension.

Interesting point also that most people won't have paid enough into the system to actually "merit" their State Pension. That figure about needing a 250k pot to support £10k/year.

2 thoughts come to my mind:

1. it's as well I enjoy my job as I might be doing it til I drop dead!
2. I recall reading somewhere that "retirement" was originally just mean to be the last year of your life where you got your affairs in order.

I pay into my NHS pension, currently part time but intend on going full time once kids are up to try and really bolster my pension. My retirement age is 67 and I’m not sure how I’ll continue working in nursing till that age, I think the new style nhs pension I’m on means I can no longer buy out and retire early which is what I would like to do and bank shift when I want to

@BrainInAJar state pensions were first brought in on 1908. In 1908 it was inly compulsory to be in school until aged 12. So I think whatever the original idea behind the state pension when it was first introduced is now irrelevant. It was a long time ago and life was very different.

@AlaskaThunderfuckHiiiiiiiii all of those doing manual type jobs are supposed to retrain. I ma in my late fifties and did retrain, but getting employers to take you on and support your career progression is very hard. I am seriously considering just going for an easier minimum wage job.

I think the state pension will remain but the level it's paid at will eventually be frozen, similar to what has happened with the tax thresholds over recent years. So everyone who currently qualifies still will, but year on year it will be worth less, until it reaches a level which is deemed 'affordable' to the public purse.

Pension credit or some similar means tested system will remain, to top up to a basic minimum.

The state pension a couple of years ago was increased. Older pensioners get far less than new pensioners.