To think the govt should just scrap state pension

[DexyMidnight]

... For new entrants.

Everyone born after say, 2006, should pay less NICs and be mandatorily enrolled in an Australian style pension where you must pay 9.5% of your pre-tax salary into a pension fund. Even part-time, term-time, ad hoc workers.

I worry often about whether the state pension will exist when we are older. Will it be means tested? Can it go on with an ageing population?

A solution along the lines of the above would let the younger generation know where they stood.

Sorry I meant to say you do still get state pension in Australia but its means tested and most people in future won't qualify because they'll have built up a good nest throughout their working lives. I think it's a good system.

The rate at which the goal posts are being moved means that soon most people will be in their 80s before they get it.
If you have a private pension the state pension goes straight to HMRC anyway.

I think this is the way we are going with auto-enrolment anyway. I wouldn’t be surprised if they withdraw it for people born much earlier or at least don’t give it if you have already saved “enough”. I sometimes wonder why I am bothering saving for this very reason!

If young people pay less National Insurance then how would State Pension be paid for those older people who are eligible for it?

Bit of a catch 22 situation as if there is less collected in NI that makes it even harder to pay the pensioners.

If you have a private pension the state pension goes straight to HMRC anyway.
Is this true?

There'll be no state pension for anyone under 50 today. That's the truth and we need to get used to it and make our own provision.

@goodfornothinggnome
No that's not true.

Erm you can have a private pension and claim your state pension.

If you go over your tax free allowance then you’ll have to pay tax at the appropriate rate.

Aren’t you proposing National Insurance without NHS cover essentially?

The Singapore system would be better - your NI contribs go into your private pension pot which you can top up .

Of course if we do away with pension, who will be supporting those who have never worked, or had reduced working?

The problem with the pension system is the mantra "I worked for it, its mine, I want it" - well no ones NI goes into their personal pot , todays workers fund todays pensioners, just as my children will fund mine. no one said to 65 year ols in 1946 'no you cant have a pension you haven't paid in' .

That said we live too long, that's the long and the short of it. When the State pension was created I think people roughly lived 4 years past retirement age, now they averagely live 20+ years and in some cases will be drawing a pension for 30, 35 even 40 years. And the number of pensioners has exploded whilst the birth rate has decreased.

The number of retirees is increasing as the population bubble ages, and also people are living far longer than expected when the state pension was conceived. Successive governments have know about the adder in the basket - that contributions will not keep up with payout - but failed to do anything about increasing the age until very recently.
When I left school I thought I'd be retiring with a state pension at 60, currently that is 68, expecting it to increase further due to the baby boomer generation creating such a huge bulge of costs - both social services and NHS as well as pensions. It isn't benefit cheats or immigrants that concern me it's the number of other pensioners draining this country's resources. We need immigrants to work and pay tax to the UK to pay for us lot to get old! Somebody has got to pay for it.

If you have a private pension the state pension goes straight to HMRC anyway.
Is this true?

You have to pay tax on your pension income so I think PP simply meant that the state pension is now so low it's potentially equivalent to the tax on private pension income.

no you get state pension however much your private pension is (provided you have enough NI contributions) but pay tax on the 4K above your personal allowance at no point to do you lose your state pension
basically allowance is approx 12K so as state pension is 8k any private pension at or less than 4K is tax free, above that you pay tax on what is over the limit so if your total pensions are 36K you pay tax on 24k etc etc

@Teacupdrama when do you pay the tax? When is yr tax taken? When you claim yr pension or when you make yr contributions ?

It doesn’t go straight to HMRC. It counts as income and you have the normal personal allowance, so you pay 20% tax on all income over £12,500. If your occupational pension is more than £4k, you pay tax on it. You’d have to have a private pension of over £50k and be a higher rate tax payer to pay the tax equivalent of your state pension.

@endofthelinefinally how so?

State pension £8767 pa.
To owe that amount in tax, you need an income of approx £52,000 at age 75. (example is simpler age 75 as no NI to consider).

So for your full state pension to to be equivalent to the amount you pay back in tax, you need a private pension of approx £43,000.

Just how many people reading this thread do you think have a private pension of that amount?

And of those that do, I’m sure they’re perfectly happy that their state pension is “paying” their tax liability.

@Alsohuman loving the crowded post - your over 50K, my approx 52K 🙌🏻

The increasing retirement age is going to affect people who are unlucky with their health.
I paid into a critical illness policy for 30 years only to find that the condition I developed wasn't on their list.
I have a tiny work related pension, won't get state pension for another 5 years ( that is if they don't change it again). My colleague has to work until she is 67, which is a bit tough in nursing.

@Ellisandra - I was pretty impressed with that too! 😉

When the State pension was created I think people roughly lived 4 years past retirement age

Yes because the state pension age was 70...

Pretty impressed that we managed to get beyond 10 posts before slating the baby boomers Ariela “draining the country’s resources”. Might remind you that baby boomers have also contributed to the country’s resources over a lifetime of working (and this isn’t the same as thinking immigration is wrong, no-one even mentioned immigration so I’m a bit unsure why you felt the need to mention it)

I remember someone getting very upset with me when I said the state pension is a Ponzi scheme.

The current recipients are relying on the contribution of the new entrants.

why compulsory?

I also don't believe the state pension will exist when I get there, but I should be allowed to save the way I want to for my future.

9.5% would mean a lot of people couldn't pay bills. for the better off, it would mean taking away from other savings that could pay for retirement in future. What kind of pension fund are you proposing we be "forced" to put into? How does it run and why don't I get a say in how my money is invested?

quite terrified of these ideas tbh. The amount of jip I got for opting out of the company pension.

my cousin had the best excuse though - his life expectancy is low so he was able to tell HR "I don't need your pension because I will be DEAD". They are so annoying about chasing people on their fucking auto enrolment it gave him great joy to say that.

if you need to pay tax on a pension it can be via tax return if multiple pensions but mostly likely it will be taken at source by your private pension provider once they have the info about how much state pension you get so they deduct right amount
a bit like if you have 2 jobs you have to tell the other employee whether all or just part of tax allowance is used in first job or not
so if job A pays 13K a year all of income at job B would be taken at 20% however if Job A was 8k your remaining personal allowance of 4.5K would be used at Job B

"There'll be no state pension for anyone under 50 today. That's the truth and we need to get used to it and make our own provision"

It depends - if people feel strongly enough about it, political parties will have to respond to pressure from voters and keep it. But I suspect that they may not feel strongly enough to make it politically impossible to abolish the universal state pension. Introduction of means testing of universal benefits is often quite popular with a significant number of people (child benefit, tv licences etc).