Pensions… again

[GoodnightAdeline]

https://amp.theguardian.com/money/2024/apr/08/uk-state-pensions-benefits-changes-april-triple-lock-rise

Another pension increase we can’t afford when working people are grappling with the cost of the country.

What will be the endgame in all this? Where will we be in 20 years?

We’re skint because 1 in 5 working age people are economically inactive, our public services have swelled due to a longer living and needier public plus the cost of covid, Brexit, lack of productivity and general western decline.

Carers are included in the economically inactive stats You do know that. What you really really dont want is every unpaid carer phoning Social Services en masse and saying they cant care for the person they care for anymore or taking the person they care for to their local Job Centre or A&E and leaving them there cos then you really would have a tax rise to moan at

@WearyAuldWumman So sorry for your loss.

Thank you.

I was still working full time until 6 yrs ago, so I’m better off than many. I pay the Scottish intermediate tax rate - same as the basic rate for the rest of the country plus 1 per cent. I’ll be okay.

However, I know others who have been having a much harder time.

Its just offensive to me that some younger folk are complaining about how easy all older folk had it.

There are people in all age groups having a hard time. Certain politicians must be laughing their heads off when they hear different groups attacking one another.

I’ll just add that I have retired friends who are going to bed early because they are scared to put on their heating. No, the cold weather allowance doesn’t cover it.

Thank you.

What could and should be done is to tax away the state pension for those pensioners in a higher income bracket so smaller amounts are given to those over the 40% tax band say and tapered away above.that to zero - a bit like child benefit.

It would be much cheaper to administer than means testing and the threshold would be high enough not to deter saving for retirement. Tapering it through taxation could probably start below £50,000 and still not be a deterrent to pension savings, I am sure there are some clever policy people who could look at this and find the right level. It would be complex to design and avoidance-proof but relatively straightforward to administer.

That would avoid wealthier pensioners being given a benefit they really don't need and perhaps help generational harmony?

I think at some point the triple lock does need to be looked at - which is not the same as saying I don’t think state pension should increase.

I also think it would be a good idea to cap State pension at the annual allowance, as it is going to be an admin nightmare if you suddenly get a lot of extra people needing to do tax returns. Pension credit could make up the shortfall for people with no private pension income, but with some way of providing that if you have saved for a private pension you’re better off than someone who hasn’t saved.

Isn't that what happens anyway? Pensioners pay tax at the same rate as working people, which seems fair enough. Whether the state pension is enough is a separate issue, but there is no reason why pension income shouldn't be taxed. I can't see why it should be taxed at a higher rate than earned income, though, nor why the SP element should be tapered. If we all pay in we should all get back. I also think that when budget announcements say how much the triple lock has added to a basic pension they should say what this means in real terms to pensioners on various incomes. Minimum wage equivalent and average wage equivalent would be a start. An 8% rise won't seem anywhere near as generous when tax is taken into account even on those fairly meagre figures.

Pensioners pay tax at the same rate as working people, which seems fair enough

Tax, yes, but of course they don’t pay NI.

Which means that a pensioner on £25k will have a higher net income than a working age person on £25k, assuming neither of them qualifies for additional benefits.

God this thread is so ageist.

A pensioner has paid 35 years of NI! Or thereabouts by the time they receive their meagre state pension.

Exactly, an alternative could be that pensioners continue to pay NI.

But I still think there comes a point where income is sufficient and the state pension should be tapered away. Those with high incomes have had tax relief at higher rate for pension savings. When this is drawn as pension income a substantial amount will only be taxed at 20%. Or maybe if state pension is to remain universal do away with higher rate relief on contributions but that would be harsh on those who are some way from retirement

That applies to all passive income. Rental income isn’t subject to NI either - and don’t tell me all landlords are pensioners because we all know that’s not the case.

True, but most pensioners don't work, and I think the reason they don't pay NI is that it is basically their pension contribution, and you can't contribute to something you are claiming. I'm pretty sure that you can't do that with private pensions either (ie both claim and contribute at the same time).

I think we also need to look a bit more at taxation of passive income (and wealth, actually) - but that’s separate to the state pension!

I honestly think that all income, regardless of source, should be taxed under the same conditions - so an income of £25k should be the same after tax (and NI is a tax these days) regardless of whether it’s from salary, pension, dividends, rent…

You can but there are different limits, or at least there used to be!

NI isnt just for pension contributions, though. And with the NHS and social care the way they are (and pensioners may well use both in the future), I think it would make sense for NI to continue - at least on earned income, if the government don’t want to put it on pensions.

What is a 'sufficient income'? Does it just apply to older people, or should there be a cut-off on salaries when people reach 'sufficiency'? I can't see that being a popular choice, but it would probably mean that everyone could have a decent standard of living if we all just got a 'sufficient' income, with nobody in poverty and nobody having more than they need. I'd love to know how it would work though.

Pensioners will only reach higher levels of pension if they have made higher contributions, so why penalise them for doing that? Currently, all workers pay in, but many people (eg SAHPs) don't, and get their contributions paid by those in work. Presumably people who can afford to choose not to work have 'sufficient', so would you stop that subsidy too?

Maybe the government could put NI on share dividends.

Good idea

Those figures inc SAHM's, Students, the Sick and early retirees (Figures are actually in line with long term averages, despite what Hunt says)

But sure, Brexit has screwed the UK, as has Austerity - which has led to low productivity.

Other western countries have good public services, decent pensions and higher productivity, despite longer life span and hence public services......

How come UK is such a basket case?

Echo this. I am your age and my story is the same. I would have made provision, if I had known.

Never seen just 3 candidates on a GE ballot paper, there may only be 3 or 4 who can realistically win but plenty of others to vote for.

Better to vote Monster Raving Loony Party than spoil a ballot paper.

I’m glad Hunt is in the process of phasing out NI. He’ll never get chance to see it through for obvious reasons. NI is just tax, the ring fencing of NI for state pension is long gone, it’s just a record to track your entitlement. I see no good reason why earned income should be taxed twice when investment income and pensions, including the state pension are only taxed once.

OP the minimum living wage is £21840 so how can anyone think the state pension is too generous or we can’t afford it. YABVU and selfish

@ShyMaryEllen
"but there is no reason why pension income shouldn't be taxed."
ALL Pension income is taxed, including the State Pension.
It is True, that pensioners do not pay NI (so will not benefit from the recent cut in NI). Similarly those on less that 12,570 a year do not pay NI, so, A pensioner on just the state pension would not pay NI, anyway. (they would probably be entitled to some extra benefits).
I should add that the State pension is Less than the personal allowance, and there is no provision for collecting income tax via the state pension. Instead, as you would only pay income tax if you had an additional personal pension, then the state pension is taken into account on your tax code.
I personally think they could abolish the 10.00 xmas bonus introduced in 1972 (and not changed since), on the basis of the administration. In My opinion it would be better to have this as part of the state pension.
Similarly ther is a winter fuel allowance, which is paid to the household. (So, if two state pensioners in the house, 50 percent is paid to each).
I think the admin on this is not worth it, but once given it is hard to take something away. And if it is added to the state pension, then it becomes more difficult, as I said a single household pensioner gets the total amount, presumably on the basis that it is meant to help with heating, so it is heating one house/residence whether 1 or 2 people live there.
Also, it should be noted that the xmas bonus and the winter fuel allowance, I think are NOT taxable.
I still think they should be absorbed into the pension, and avoid the admin of the extra benefits.
I think this was introduced on the basis that elderly people find it more difficult to regulate their body temperature, and are also less active and unable to generate their one heat.
What people do not realise is that the pension rules have changed over the years, and it was not until the 1980s that one could have a portable personal pension. Before that the pension remained with the company, and in sone cases (before reforms), the company embezzled money from the pension funds, leaving the employee with nothing (see Daily Mirror, Maxwell, etc).