Means testing State Pension

[CuriousMariette]

Do you think the time has come for this to be introduced? I don’t think the current system is sustainable as many people are living too long. I know it’s not fair and would be political suicide but Pensioner’s didn’t even suffer a 80% furlough during lockdowns. I say this from a place of having “paid in” as people say for 30 years plus already and would likely not receive a State Pension in this scenario.

MIRAS was nowhere near as valuable as people seem to think. In particular, it had a pretty low upper limit, so you only got relief on some of your interest.

@user1497207191

MIRAS was nowhere near as valuable as people seem to think. In particular, it had a pretty low upper limit, so you only got relief on some of your interest.

Well it was all but gone when I just graduated and might have been looking.

A friend and I did a little bit of research into buying a house together. The only clear cut decision we came to was to avoid endowment mortgages as they were clearly a scammers paradise.

From memory around £40K could have bagged a decent semi around Woolwich. We were looking at a starting salary of £12-15K each and worked out it could just be done on a multiplier of 2.5x joint. However those a couple of years older than us probably did best.

This was peak Yuppie - just after the City of London "Big Bang".

@GreenRobot

Yabu. Most people with big private pensions in retirement will have paid huge amounts of tax and NI throughout their working lives. What's the fairness in penalising them with giving them no state pension at the end of it all?

Also, I suspect wealthy pensioners probably spend all their state pension on 'luxuries' like eating out and shopping, which help with employment, so it's not exactly an issue is it.

Maybe question why people get to retirement age without having saved enough money over the 50 years of working life?

Or raise the retirement age, which would be sensible now that life expectancy is so much higher than in the past.

Indeed - or like my parents, are very generous to their children and grandchildren. All of these nasty generalisations people make seem to assume everyone operates in their own little vacuum - but that's surely the exception not the rule.

From memory around £40K could have bagged a decent semi around Woolwich. We were looking at a starting salary of £12-15K each and worked out it could just be done on a multiplier of 2.5x joint. However those a couple of years older than us probably did best.

This was peak Yuppie - just after the City of London "Big Bang".

But within a couple of years shortly after the abolition of double MIRAS all of that cohort of first-time buyers were deep in negative equity and paying 15% on their mortgages after the big housing crash of the early nineties. In some cases it took ten years to get back to where they were. They were stranded sharing tiny flats they co-owned with people they really no longer wanted to share with.

[quote user1497207191]@Lockdownbear

It is also when they had YTS schemes and kids working for two years for a pittance.

I appreciate "some" employers took advantage of cheap labour, but it worked very well for a lot of youngsters who got their first feet on the employment ladder, got valuable work experience, got on the job training, etc.

One of my closest friends left school with barely any qualifications, and got a place on a YTS scheme at the local chamber of commerce doing menial filing, tea making, etc. She impressed and got taken on full time, did various training courses etc and got regular promotions over the years. She's currently the managing director of that same Chamber of Commerce. She often says she owes her career to the YTS scheme![/quote]
Whilst I am sure that some companies took advantage of the YTS scheme, many did exactly what it was designed to do and provided participants with skills and experience which strengthened their chances of securing better jobs. I had numerous colleagues who started in YTS and went into long term employment with us, several progressing into jobs which otherwise required degrees (back in the day when a much smaller percentage of people went to uni).
Too many sweeping generalisations on this thread.

Maybe question why people get to retirement age without having saved enough money over the 50 years of working life?

Err is this a trick question? 😆

But within a couple of years shortly after the abolition of double MIRAS all of that cohort of first-time buyers were deep in negative equity and paying 15% on their mortgages after the big housing crash of the early nineties. In some cases it took ten years to get back to where they were. They were stranded sharing tiny flats they co-owned with people they really no longer wanted to share with.

Yeah. It's almost as if they didn't understand what they were doing isn't it ?

I remember the look of disbelief on the agent’s face when I told them I didn’t want to see any repossessions in 1991. That’s how many there were.

[quote user1497207191]@Lockdownbear

It is also when they had YTS schemes and kids working for two years for a pittance.

I appreciate "some" employers took advantage of cheap labour, but it worked very well for a lot of youngsters who got their first feet on the employment ladder, got valuable work experience, got on the job training, etc.

One of my closest friends left school with barely any qualifications, and got a place on a YTS scheme at the local chamber of commerce doing menial filing, tea making, etc. She impressed and got taken on full time, did various training courses etc and got regular promotions over the years. She's currently the managing director of that same Chamber of Commerce. She often says she owes her career to the YTS scheme![/quote]
There were more young people taken advantage of by the YTS scheme than benefited.
Some employers were great and would probably have taken trainees / apprentices on anyway others used it to access cheap labour. I know a kid who spent a months brushing the floor before moving on.

@DGRossetti

But within a couple of years shortly after the abolition of double MIRAS all of that cohort of first-time buyers were deep in negative equity and paying 15% on their mortgages after the big housing crash of the early nineties. In some cases it took ten years to get back to where they were. They were stranded sharing tiny flats they co-owned with people they really no longer wanted to share with.

Yeah. It's almost as if they didn't understand what they were doing isn't it ?

Isn't that more because the withdrawal of MIRAS caused a peak in demand and therefore drove up house prices as people rushed to buy a house to get their MIRAS? Inevitably, an artificial peak would lead to a crash in house prices due to lack of demand immediately after the deadline.

So everyone who works for years to provide for those who don't get nothing? Those that put a bit by if they can receive nothing? They will just spend it.
Fuck that.
Did you not notice the thread that everyone is sick to death of working?

Isn't that more because the withdrawal of MIRAS caused a peak in demand and therefore drove up house prices as people rushed to buy a house to get their MIRAS? Inevitably, an artificial peak would lead to a crash in house prices due to lack of demand immediately after the deadline.

I think it's more because everyone had been convinced they were a Getty or a Rockerfeller with all the share giveaways of BT, British Gas etc, and felt the era of the free lunch had finally arrived.

My DF came to Britain with fuck all, and if there is only one thing I learned from him, it's that there is no such thing as a free lunch.

Weirdly my friend (that I was house hunting with) had a father that was a millionaire. But he had also drilled the cost of money into him. So we both never believed in free lunches.

The only places you get free lunches are when you're an MP. Something folk would do well to remember.

Did you not notice the thread that everyone is sick to death of working?

I think there may be some qualifications around that sentiment.

@Enzbear

So everyone who works for years to provide for those who don't get nothing? Those that put a bit by if they can receive nothing? They will just spend it. Fuck that. Did you not notice the thread that everyone is sick to death of working?

But people don't pay tax/nic only for a state pension do they? They pay tax/nic for public services, health, emergency services, education, security, roads, transport, etc etc.

No one pays any "ring fenced" tax for any particular service. It all goes into the pot and public service spending comes out of the pot (and more).

There was a time when we had SERPS and S2P where there was a formal link between some of the money paid as NIC leading to enhanced state pensions, but that's long gone and we're back to simply number of years of "credits" which you gain either by working or claiming certain benefits, but with no correlation between how much you pay in tax/nic against how much your state pension will be, as that is simply down to number of years, not amounts paid (if any).

The qualifying years for a state pension make the link with NI contributions pretty strong psychologically.

My preference would be to put a cap on private pensions and use that to fund a better state pension. No pensioner should be raking in more than 20k per year. Any annuity or drawdown from a private pension above this should be confiscated.

Alternatively/also you could have a rule whereby state pensions are only provided to top up whatever someone has earned in a private pension. So if someone retires with a private pension which can buy an annuity of £100 per week, this gets topped up by the state to state pension levels. Again, it would be a good idea to have a maximum private pension level, it's offensive that a pensioner could have an income higher than the average working person after tax.

@Blossomtoes

The qualifying years for a state pension make the link with NI contributions pretty strong psychologically.

Indeed, but it's a tenuous link as the number of qualifying years requirement has changed over the years, as has the state retirement age, as has the amount of state pension.

We've also had the introduction of state pension credit which provides an additional "pension" for people who have low state pension entitlements and no other income, which breaks the link between qualifying years as you can still get a lower state pension (due to too few years) being "topped up" by pension credits.

And of course, we now have the obligatory workplace pension which aims to get everyone investing into their own private pensions, in the hope that people will make their own provisions and be less reliant on state pensions.

At the end of the day, it's all a mess of mixed messaging, especially as the state pension rules have changed numerous times over the past few decades.

@MorningStarling

My preference would be to put a cap on private pensions and use that to fund a better state pension. No pensioner should be raking in more than 20k per year. Any annuity or drawdown from a private pension above this should be confiscated.

Alternatively/also you could have a rule whereby state pensions are only provided to top up whatever someone has earned in a private pension. So if someone retires with a private pension which can buy an annuity of £100 per week, this gets topped up by the state to state pension levels. Again, it would be a good idea to have a maximum private pension level, it's offensive that a pensioner could have an income higher than the average working person after tax.

I think you'll have a bit of a problem with doctors, dentists, teachers, higher band nurses, etc., where it's apparently only the attractive pensions that make the job viable in the first place. There are lots of doctors and dentists on pensions of £50k and lots of younger ones looking forward to receiving similar when their time comes! A rule like that and you're just going to push vital staff abroad!

What I'd counter is expanding the scope of NI to include occupational pensions, or scrap NI and increase income tax, so that those with above average occupational pensions pay more tax (and or NI) into the pot.

A rule like that and you're just going to push vital staff abroad!

more vital staff abroad.

There will just be even more division. If they are thinking they need to increase the age to 70 sooner rather than later despite life expectancy starting to decline those that have the means will retire early & others will just work till they die.

@MorningStarling I hardly think a private pension above £20k per annum is raking it in.
If that cap was put in place I'd likely stop working now ( early 50s) as no point working for longer not to get any benefit from it.

By all means scrap the tax benefits from higher rate contributions if that's not already happened, but punishing people for contributing to their own retirement so they can have a decent standard of living is grossly unfair.

I think you'll have a bit of a problem with doctors, dentists, teachers, higher band nurses, etc., where it's apparently only the attractive pensions that make the job viable in the first place. There are lots of doctors and dentists on pensions of £50k and lots of younger ones looking forward to receiving similar when their time comes! A rule like that and you're just going to push vital staff abroad!

Tbf the attractive pensions & earlier retirement option may attract people. I would encourage any young person to chose a job with an excellent pension

I moved into the public sector a few yrs ago just for the pension.

I would encourage any young person to chose a job with an excellent pension

Because it has every chance of being there in 45 years time ? Stuff that. I imagine a lot of people got jobs at The Mirror for that reason.

And surely, if we've learned one thing these past few decades, it's how easy it is for policies to change and people get shafted ?

Fair point but I think public sectors schemes are a bit more secure than other ones although I'm sure they will also see more revisions.