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

Do you work in the pensions industry?

@Moier - exactly - it’s a Ponzi scheme in plain sight - it’s a shocking public policy failure

So it would be a shit show. Loads of people in their forties and fifties would leave the workforce. Basically anyone with a private pension that would pay about the same or less than state pension would retire early and spend their private pension.

again - I repeat - pensions are funded by the taxes of current workers. Why don’t people want to minimise the amount they are taking de
these other people as an ethical position ?

Well @Hmmmmaybe if that’s the case then they can lower my contributions right now and pay me back every penny I have put in. Obviously you are on the wind up or ridiculously well off.

@asrarpolar well if they’re not enough th replace then the means test would
not apply. You can have graded means testing

Well, the current level of benefit is unsustainable in the face of demographic shifts that mean fewer workers contributing relative to older people collecting pensions. None of the possible solutions are politically palatable, so expect it to be undermined by degrees.

means testing would massively undermine popular buy-in, and would quickly lead to an erosion of benefits. It might happen, and is maybe the most likely mechanism for addressing the funding shortfall, but I don’t think it would be in anyone’s benefit.

personally my planning assumes no state pension (mid forties now), and have been contributing to a private pension since early 20s. Was discussing with husband whether it made sense to pay make up contributions for years I wasn’t working, and it just doesn’t feel like a good investment given likelihood of benefit erosion and our income level would probably put us on the wrong side of any means testing scheme.

@Hmmmmaybe who would gamble on that? I am sure if the government did this the means test would originally be high, then would be lowered. So fuck if the government do this I am retiring tomorrow and spending my private pension. And I will not be the only one.
Private pensions only work if the government does not change the goalposts, otherwise I am a retiree and will claim my state pension anyway.

@Butterflyrainbow12 its not if that la the case - it IS the case

if you’re still working a huge portion of your taxes I’ll be going to fund pensions - some of which will be being paid to peole with lots more money than you

the current system is simply unsustainable as there are more old people and people live longer

this is not ideological - it’s just a fact

so major reforms are needed to create a sustainable structure for people’s retirement to be funded

And there would literally be no point for anyone who was not well off contributing to a private pension. Overnight you erase any benefit to a private pension for lots of the population. Because most of us do not end up with large private pensions. So what is the point. Why risk our state pension? May as well just spend our money now.
And i started paying into a private pension at 22 but I have always been low paid. But I tried my hardest to be responsible so my retirement will be reasonable.

@asrarpolar but at some point in time there will simply not be enough money. So you can spend your private pension but the the public repusrces to support you will be scant

And yeah I want my NI contributions back as well.
Fuck it this would be political suicide for any government.

I know that’s how it works therefore when I am at pension age I will receive mine in the same way. They cannot take years of money from people and not provide the pension. I honestly think there would be a class action lawsuit to reclaim the money taken for this purpose.

@Hmmmmaybe so what? My private pension is not enough to have a good life, it is about the same as the current state pension and can only get it at 67. I may as well cash it in and have some really fun years even if I will be poor afterwards.
If the state was going to muck about like this then I do not trust them at all anyway so may as well just live for today.

There are lots of problems with means testing @Labraradabrador but it can work well enough

but this is what fascinates me about British psychology on means testing

it outrages people because they’re so worried someone will get something they wont

but it’s not free ‘money! It comes from other tax payers - for a system to work where there is a safety net for pensioners society as a whole
has to buy in to the idea that they’ll only do that if they really need to. Otherwise it is not sustainable

so major reforms are needed to create a sustainable structure for people’s retirement to be funded

Then these reforms will probably have to start with 18 year olds now so the system changes for the future, not for older people who have planned their futures on there being a state pension, whether you like it or not everyone who has paid their contributions is entitled to a state pension.

@Hmmmmaybe Very true! My DCs generation simply won’t have the number of working age people to support the the pension system. The birth rate has been below replacement for a long time but people don’t seem to be worried about this and how it will affect society!

@asrarpolar in Australia the means test is graded - ie so you can get different levels of state pension according to how much private savings

@Hmmmmaybe You are talking rubbish. The government gives tax breaks for well off people. They can bloody give me my state pension.
And any government that tried to do this would be voted out. There would be outrage.

it outrages people because they’re so worried someone will get something they wont

No what outrages people is that the govt have falsely taken money from them with the promise of a state pension later in life and then they change the goal posts.

@Hmmmmaybe and the government would not change those levels so in reality any savings and private pension at any level would mean a reduction in your state pension.
As I said it makes sense to cash in private pension and retire early.
Also all Australians get a state pension. The extra is more like the pension credit benefit that exists in the UK. Australia does NOT do what you are suggesting.

Australians get their state pension at an earlier age than British people do as well.

At the moment and for another 10-15 years our pension spending and healthcare spending will be massively under strain and then that strain will drop as the baby boom generation die off.

Fubdamentally we are at a predictable time of high spending and low income as a society (as are many other societies) and like parents who are encouraged to see high childcare costs as a blip in the lifetime cost of parenting and not rush into drastic action maybe to live frugally/borrow money etc we just need to hang in there.

Unfortunately we’re a bit like the parents who didn’t consider childcare costs until they had to go back to work which has left us in more of a crisis but still there is light on the horizon.

There is no point cutting out the state pension, by raising the age you hold off a few people while we wait for the natural rebalancing that is 10-20 years ahead.

Yes. This. If the government fancies playing political suicide / oblivion. A large proportion of the social contract between our government and ordinary people is that we put up with being taxed and then being taxed again via NICS in order to receive a state pension when we are old enough. If the government then decide they don't want to do this anymore, then I want my NICS back.

it outrages people because they’re so worried someone will get something they wont

No it enrages people that they pay tax to fund other peoples pensions (on top of other benefits) yet wouldn’t be entitled to any pension themselves, don’t think that will be a vote winner somehow.

@NewKingontheBlock its not about whether I like it - it’s what will be possible

of course there are huge issues of fairness to people already in the system. If people
have been told one thing and relied on that it would be unfair to change it

but that shouldn’t shut down the conversation on reform which is needed - the outrage on this thread shows hiow that happens.

The current system is totally unsustainable. Major change is needed and needs to happen as soon as possible. Any changes should Be fair to people who are near pension or on a pension.

it should not be controversial to say that. The fact that it is a real problem for Britain’s long term prospects