Page 4 | To think the idea of NI contributions is a farce

OneAmberFinch · 2024-12-18T17:25:10+00:00

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?

taxguru · 20/12/2024 11:02

caringcarer · 19/12/2024 16:29

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.

Excellent advice, and that's something I tell everyone who'll listen to do too. Due to the "compound" nature of interest and investment returns, the sooner the money goes into the "pension pot" (or even just other savings earning interest such as ISA etc), the better. Even if you do have to take a break from contribution, the money already invested is busy working away earning money in the background.

I have some illustrations somewhere showing the difference between saving for 40 with compound returns, compared with saving double for just 20 years and the difference in ultimate fund value is staggeringly huge, despite the same amount of capital being invested from the outset.

The earlier the better.

No sane young person today would rely on the state pension for their old age. It's blatantly obvious as to the direction of travel with the deterioration in the nation's wealth, the ever increasing population, etc., that state pensions in a few decades time will have to be means tested and no longer universal. They'll bankrupt the country otherwise.

caringcarer · 20/12/2024 15:18

taxguru · 20/12/2024 11:02

Excellent advice, and that's something I tell everyone who'll listen to do too. Due to the "compound" nature of interest and investment returns, the sooner the money goes into the "pension pot" (or even just other savings earning interest such as ISA etc), the better. Even if you do have to take a break from contribution, the money already invested is busy working away earning money in the background.

I have some illustrations somewhere showing the difference between saving for 40 with compound returns, compared with saving double for just 20 years and the difference in ultimate fund value is staggeringly huge, despite the same amount of capital being invested from the outset.

The earlier the better.

No sane young person today would rely on the state pension for their old age. It's blatantly obvious as to the direction of travel with the deterioration in the nation's wealth, the ever increasing population, etc., that state pensions in a few decades time will have to be means tested and no longer universal. They'll bankrupt the country otherwise.

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I agree with you absolutely but some young people bury their heads in the sand and like to spend everything they earn. I'm glad my adult DC are sensible with pension, ISA's and savings. I just wish this advise was taught in school from a young age so no one could say they didn't know.

Seymour5 · 20/12/2024 18:06

taxguru · 20/12/2024 11:02

Excellent advice, and that's something I tell everyone who'll listen to do too. Due to the "compound" nature of interest and investment returns, the sooner the money goes into the "pension pot" (or even just other savings earning interest such as ISA etc), the better. Even if you do have to take a break from contribution, the money already invested is busy working away earning money in the background.

I have some illustrations somewhere showing the difference between saving for 40 with compound returns, compared with saving double for just 20 years and the difference in ultimate fund value is staggeringly huge, despite the same amount of capital being invested from the outset.

The earlier the better.

No sane young person today would rely on the state pension for their old age. It's blatantly obvious as to the direction of travel with the deterioration in the nation's wealth, the ever increasing population, etc., that state pensions in a few decades time will have to be means tested and no longer universal. They'll bankrupt the country otherwise.

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Those in their early 20s benefited from the Child Trust Funds set up by the Blair government in 1999, which they can access at 18. Families on means tested benefits were given £500, others £250. A small start to encourage saving for later life. My older DGC got £250, and will soon be able to access their funds, but I hope they don’t. The youngest was born to late to qualify.