To think the idea of NI contributions is a farce

[OneAmberFinch]

Or: "No, you haven't paid in..."

Off the back of the WASPI whining issue, but a more general point about pension entitlements. I'm continually astounded in every thread that there are people who honestly believe the state pension is one that you "pay into". People go on about years of contributions and stamps as if it has any meaning at all. Why?

Firstly, it's a defined-benefit entitlement that you get regardless of how much you and your peers contributed - it's funded by today's taxpayers.

Secondly, you can get "stamps" for all sorts of things that don't bear any relation to "paying in", including literally being unemployed on JSA?!

Thirdly, if somehow you didn't bother doing any of that, you get that defined benefit anyway regardless of whether you even contributed, because pension credit will top you up to exactly the same amount!

I think it's a real problem that we use the language of contributions and paying in to describe what is effectively a bog-standard universal benefit. I've got a lot of respect for many older people in my life and I'm not begrudging the genuine contribution they did make to society and people around them. But what is the point of pretending that the state pension and NI system is tracking that? All that time, money and effort just to give people an incorrect and actively misleading impression?

AIBU to think we should scrap all this tracking and just be honest that it's a benefit?

Great point OP but one which seems hard for some of the posters on this thread to grasp.

IMO Thatcher reinforced this type of belief by attempting to convince the electorate of the lie that running a country’s economy was just a more complicated version of running a family household.

Yes but you only get pension credit if you've no other money.

If you manage to save enough private pension to get £11,000 per year and have paid 30.years of NI contributions you get another 11k in state pension and you have 22k - enough for a nice retirement assuming you have paid off your mortgage.

If you have a private pension of 11k.a year and only made 15 years of NI contributions you only get 5k a year in state pension and no pension credit. Total 16k. Not as comfortable. Many people are in this position.

This is why the pension age is being raised every couple of years. So that people work for longer while they are healthy and our individual benefit bill is lower.

This. With bells on.

Then you're even dafter than her, since there's even less reason to think this is a thread about abolishing the state pension than there was when she wrote it. And there was sod all then.

But actually often worth more than full state pension now that PC entitles you to Winter Fuel Payment, council tax reduction etc. Pension Credit is a ‘gateway benefit’ in the way that state pension is not.

One doesn’t imply the other?

The first pensioners to receive it had not 'paid in' anything either, The tax payers of the day funded it. It's always been like that.

My whining millennial self fully expects not to get a state pension and my retirement planning is based on this.

Does it piss me off? Of course. But as a generation we've been dealt a shitty hand of financial cards and we're kinda used to it by now.

I don’t expect a state pension to exist by the time I hit an ever extending pension age.

certainly not expecting to retire and enjoy tropical holidays and carefree lives for years such as family currently retired.

The New State Pension for anyone who reached retirement age after 2016 is not £169, it is around £221 a week, I quoted DWP figures in my previous post. Younger pensioners get around £50 a week more than older retirees if they are on a full state pension. This has been the case for 8 years now.

So PP's point is even stronger!

Exactly. I never imagined my NI payments were being invested somewhere for me to live on in old age. I wouldn’t have wanted that.

I liked knowing I was paying in and the money was being immediately used to pay pensioners. The pensioners in each generation were being funded by workers whose pensions would be paid by the next generation etc etc. Good system, good feelings.

When did this become such a grudge? People seem to resent it now. Is it the long-term effects of selfish, unco-operative Thatcherist thinking, no such thing as society, everyone for themselves?

I get your point, however, people still pay voluntary contributions to top up gaps in their NI record. This is explicitly referred to in government literature as 'topping up your state pension.' It's reasonable to argue that people pay these solely to qualify for pension years, as why else would anyone pay VCs? You could reasonably argue that you should get a refund of your VCs if the state pension becomes means tested in the future, and you don't qualify.

There's no convincing pensioners that all their contributions were spent years ago and not put in their own personal pot.
Patronising sentence of the day goes to @BibbityBobbityToo

Since auto-enrolment pensions were rolled out, I expect anyone who will have been entitled to an auto-enrolment pension from say age 18 will no longer have a state pension (or it will be means tested).

I'm 50 now, but have been assuming since my 20s that the state pension is unilkely to exist by the time I come to retirement age (along with all the other things I've 'lost' - mortgage interest relief, winter fuel allowance, child benefits, university tuition fees, university grant funding, assisted place funding, VAT on private school fees...).

I'm not moaning, I've been able to plan accordingly, but I do think there is a constant lack of recognition of the change in financial landscape.

I also agree NI is a terribly structured tax, and should be abolished - Torys will never do it as it affects too many of their heartland (investment-income and pensioners), and presumably Labour won't do it in this term due to their manifesto of not increasing income taxes. HOWEVER, they could spin it as a reduction in income taxes if they were sensible about it - by rolling NI into income tax rates, they could then increase the personal allowance or tax bands in a way that actually made the working population better off. However, I think a complex tax system benefits governments as so few people understand them.

Agree @EmmaStone but I think your last sentence is unfortunately true.

Employer NI in particular is a government's dream because you can tax working people without them even realising you're doing it. But that's another story!

@EmmaStone my DC and their partners think like you. They are not counting on the state to give them pensions. They have always worked and contributed to their own pension funds. Although they benefited from free university places, their children won’t. But we didn’t get Child Benefit for the oldest DC for a number of years, as until 1979 (I think) it was only for second and subsequent children. Mad really, the first always costs the most, and we were poor! The DC have had it at some point for the DGC, but then it was means tested, and they were excluded. Winter Fuel Allowance started in 1997, so pensioners haven’t always had it. But be heartened, we still get £10 Christmas Bonus!

I’m now waiting for my bus pass to be removed. The irony is, if DH and I decided to live separately, we’d both qualify for Pension Credit and all the add ons. As a married couple pooling resources as we’ve always done, our income is over the threshhold.

I agree it isn't the same as a private pension.
It isn't a universal benefit though and how much you get does depend on how many years NI contributions you have made.
I had to buy an extra 6 years to get the full state pension.

Originally, NIC wasn't earnings related. You (or your employer) used to buy a "stamp" which was put on your "card". It was a relatively small amount per week.

When that changed to being based on earnings, that's when the entire system morphed into something completely different, but your state pension was still a fixed amount, regardless of how much you paid in!

The waters were muddied further with SERPS and S2P which promised to provide a higher, earnings related pension.

It's all been a right mess for about 40 years!

Sad to see that people on this thread have such a poor understanding of how NI works. It is intrinsically linked to pensions and you can buy "top ups" to ensure a full SP. While it's not a literal pot of money it does function in a similar way to many government investments eg premium bonds. There is an inherent promise from the government to the contributor that they will benefit from a sliding scale pension depending on how much they have paid.
Does anyone seriously believe that premium bond monies are kept in gold bars somewhere and aren't used by the government for spending? No, so why is this old chestnut thrown at pensioners?
It's very sad to see people moaning about pensioners- it's bizarre and ageist. As if people would rather die than have the privilege of ageing and a dignified retirement guaranteed by the state. Yeah in the 1970s people bought houses for 7k. They didn't have central heating, or two cars or foreign holidays or vegan cheese.
Times change, it was hardly their fault.

Really, I thought every generation understood they are paying towards the generation above them and once they reach pension age you get people will pay for them.

I don't think we can talk in terms of generations believing things, as there's so much variation in any age cohort. There are plenty of people who don't understand that those retiring now are a larger demographic cohort than the generations they paid for or the ones who'll be paying for them, though. Wouldn't say it's necessarily an age thing either. I know younger people who don't get it.

I tell my adult DC to not rely on getting a State Pension and to pay as much as they can into their private pensions before they have DC because once they are paying nursery fees they won't be able to put so much away. I'm only 4 years away from claiming my State Pension and I'm not even sure it won't be means tested by then. I'm just glad I've got a decent private pension but If I'd known I would not get a State Pension too I'd have saved more into my private pension.

The amount of state pension has no link whatsoever to how much NIC you've paid. You gain "credits" for each year, but they can be "gained" from working, being a carer, being unemployed, being part time earning more than the lowest limit but not enough to actually pay NIC, or by "buying" years. But the state pension is the same however you've gained your years worth of credits. The only variation in state pension now is the number of years. You get a smaller state pension if you've not got enough years' worth of credits. There's no "benefit" in paying more once you've reached the maximum qualifying number of years but you can't opt out of paying them. There's no "benefit" in paying a shed load more NIC due to higher earnings compared with someone who's getting "credits" from low earnings, or other benefits, etc.

So, no, there's no link at all between the amount of NIC you actually pay and the level of state pension you ultimately receive. It's ALL based on years' worth of credits.

There used to be links to earnings, i.e. graduated state pension, SERPS, S2P, etc where you could "earn" a higher state pension depending upon your own earnings (and NIC contributions), but those schemes are no longer in force.

It is now a binary "yes or no" as to whether you're entitled to state pension based only on number of years of "credits".

(Except of course for some legacy benefit of the old earnings related schemes which aren't relevant to younger people at all, only older ones now retired or close to retirement).