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

The very obvious thing will be to decouple it from inflation or wages; this was what happened in years past. I understand what's being said about private pensions and saving, but reliance on state pension alone is a ticket to poverty. It's very common now for pensioners to be struggling on state pension alone; working people are able to improve their circumstances even now, and it's something everyone should do.

There is simply no reason a government couldn't change the state pension radically.

There are more millenials than boomers right now

There really aren’t.

https://www.statista.com/statistics/281416/birth-rate-in-the-united-kingdom-uk/

"It’s really annoying that successive governments haven’t planned for this"

Trouble is our electoral system is based around 4-5 year policy making, with much of the voting power in the over 60s who regularly turn up or send in postal votes. It would be electoral suicide to make the policy decisions that would favour the younger working generation over the older one.

And you get the "howls of anguish" when a government HAS planned for it, i.e. by raising the state retirement age, which is a perfectly sensible policy to help deal with the problem. (And of course, equality of pension age between men and women to remove the cost and inequality of women getting their state pension sooner than men despite, on average, living longer). Cue the wails of anguish!

Margaret Thatcher did a lot of terrible things, but I believe that Right To Buy was one of the worst. It got her a lot of votes but not allowing councils to build to replace lost housing stock was a disaster. Council houses are rarer than rocking horse shit.

Have you a similar graph showing immigration and how that is affecting population and particularly the population over state retirement age??

Birth rates don't show the full picture.

Whilst I agree, you have to wonder why Blair/Brown didn't make such a relatively simple change to the law in their 13 years of power to allow councils to invest in buying/building new council housing stock??

Because it was too late. Those changes should have been made decades earlier and all at once. It took two goes in 1996 and 2011 and disproportionately affected a relatively small number of women. And the problem still isn’t solved.

https://www.statista.com/statistics/528577/uk-population-by-generation/#:~:text=Millennials%20surpassed%20the%20Baby%20Boomer,5.5%20million%20people%20in%202020.

And of course, equality of pension age between men and women to remove the cost and inequality of women getting their state pension sooner than men despite, on average, living longer

Women were given a lower retirement age as it was assumed they would have caring responsibilities.

l wonder if the care sector would be in the state it’s in now if one person in a couple could retire early to care for someone? What’s more expensive?

Thank you for that. It’s genuinely surprising.

This doesn't just affect young people. I'm 63 in a couple of months and I don't qualify for my state pension until I'm 67 😏

if It becomes means tested what would be the incentive for a lot of peopel to save

The means tested amount will only provide a basic standard of living. If people want fancy holidays, decent cars, etc., then they have an incentive to save, don't they??

How? As long as the state pension remains lower than the personal allowance where are those people without occupational pensions getting the extra money from?
my state pension will be about £14,200 a year from April - this is the old-style basic plus SERPS plus graduated something or other, and deferring it for 2 years. Apart from a small cash ISA, it is all I have to live on so, though my income tax will be a small amount, every penny counts. I own my flat and don't claim any other 'benefit'. I wouldn't have minded paying NI when I carried on working for 2 years as I'd been used to the deduction - it seems daft that pensioners don't have to.

But very few people will have the means to save enough to have a pension that gives fancy holidays and decent cars. For many people the most they are likely to be able to afford from private pensions will be a fairly basic standard of living, even if they save a reasonable percentage of income into a pension for years. If you are in that position you will have no incentive to save if you lose your state pension. No doubt the system will be changed but any change will have to reward people who save for themselves, even if those are small amounts.

@user1497207191 not if all they can save will provide a basic standard of living similar to the state pension

Workplace pensions for 35 working years will provide a pension far in excess of state pension which is why they're now obligatory and include the employer having to make contributions in addition to the employee. Currently the total is a minimum of 8% of wages, which over 35 years with compound interest (or other investment returns), will produce a decent pension.

Any young people who opt out of workplace pensions are insane!

There will be massive issues with the state pension in coming years, because people won’t have paid sufficient NI and they won’t have good private pensions.

In recent years lots of unscrupulous employers have been falsely classing employees as “self employed”. They’ll hire them on short term rolling contracts through an agency which specialises in helping employers to fiddle the system. This means the employer doesn’t have to pay sick pay, holiday pay, maternity pay, pension contributions, etc. Employees have put up with this because they’re desperate. But it means they don’t have a private pension and they don’t pay sufficient NI to qualify for a state pension. All so the greedy employer can keep money in their pocket.

It’s rife in the public sector, which has used this approach to cut their salary budget (because due to government budget cuts they need to reduce spending). It’s also rife with shitty employers who pay very little, and can be used as a fiddle to pay less than minimum wage.

I think it will be means tested too. Though that will adversely affect us, I think it’s probably the right thing to do (she says with a grimace 😁)

There are a lot of pensioners and they vote. They are considered an important demographic in elections.

Young people in the U.K. vote much less.

The current pension amt is protected by the triple lock. So it rises by the highest of either

CPI
Average earnings
2.5%

www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-the-triple-lock-pension-and-how-does-it-affect-me

So at the moment it is guaranteed to rise at least 2.5 per cent per year.

There are plans to raise the age that people can access the pension at and I would expect these to go ahead.

Occasionally the government suggests getting rid of the triple lock and there is massive furore so I don't see it going in the next few years, not while pensioners have such a big vote.

Means testing the basic state pension is unlikely to happen - there is a lot of sentiment in the U.K. along the lines of I paid in so I expect to get my pension and any government trying that would get voted out in short order.

There are additional benefits for pensioners that are means tested - pension credit etc - and I would expect those to still exist.