Tories and Labour mooting possible means testing of State Pension

[Turmerictolly]

www.theguardian.com/politics/2025/jan/17/kemi-badenoch-pensions-triple-lock-means-test-alarm-tories

I would be so gutted if this happened but there's noise from both parties about this recently. I think it might be inevitable. What will happen to those of us nearing 60 who have made plans that include the full state pension we've paid contributions for?

Same for ageism in the work place.

If we need the economy to grow and to reduce the impact on public spending, then there needs to be a push to look at the modern workplace and employment practices so people who want to work aren't facing barriers to employment.

I beg to differ. Until 2016, NI was payable at 2 different rates. The people who paid the higher rate paid the difference into SERPS ( later S2P. ) In the 1990s the Conservative government allowed people to take their SERPS contributions out and put the money with a private pension fund. A few people, including my husband did this. After advice from a FA he later rejoined the SERPS scheme.
Today this pension is worth a very significant amount.
As Baroness Altmann says, if people are going to be means tested on their savings, what is the incentive to save?
I personally, think now that the pension is at a decent level, we do not need the triple lock. Most people would settle for keeping place with inflation.

We can’t go from current universal state pension to means-testing overnight and I really take issue with Australia comparisons. In Australia, everyone pays minimum 15% contribution (split between employer and employee) into a DC fund. People have their own named account - it’s their money that gets invested. So with this system the means-tested state pension is effectively an equivalent of pension credit in the UK, intended for those who haven’t worked sufficiently or at all to have a sizeable pension account. So if we introduce this here, fair enough , but you can’t just take “means testing” without the other part which is not getting g mentioned at all by the advocates of means testing. The whole pension system in the UK is fucked - gold-plated unfunded public sectors pensions are the biggest problem of all and will keep growing. A lot of problems with public finances can be fixed by moving to insurance style solutions for healthcare, unemployment, social care etc similar to majority of our European peers like Germany, Netherlands, Scandinavia, France.

It links to a broader problem around the social contract breaking down - trying to make changes is going to focus attention on the elephant in the room, which is wider social unrest if unpopular changes are made, even if they are necessary.

Using gateway benefits as a marker for eligibility sounds like a logical idea. But as PP have already pointed out, there are sizeable numbers of people who have never worked and will probably never work. This isn't debating the rights and wrongs of the state safety net - people who need help, including if that means they cannot work, should get help. But the volume of people not working is not sustainable.

Someone who has worked all their life, with earnings that take them just above the gateway benefit threshold, is likely to be understandably unhappy if they are then told that their SP is to be means tested. But equally a young person entering the workforce, with its now-inherent insecurity, eroded protections, and diminishing returns - you can understand why some of them think "why bother?".

I think the state pension is the canary in the coalmine for a much wider problem which needs root and branch change of our economic system including taxation and social benefits. People should not be penalised or financially dis-incentivised from working. Likewise, companies should not be able to set up elaborate corporate structures which result in them paying artificially low rates of corporation tax.

That would be a fundamental change. Is it fair that it should be applied retrospectively?

Where did I say that? I'm saying that the government working with employers to find ways to enable more disabled people to work would be a good thing. Many disabled people COULD work, but don't, not because they don't want to but because there are unnecessary blocks in place to them doing so.

Looking at the maths of the state pension:

So the average UK salary is £36k on which you would pay £7k in tax (£4.5k income and £2.5k NI)
The current state pension is £11,500.
There are currently 3.6 workers for every one pensioner in the UK (and this ratio is dropping, estimated to 2 to 1 by 2050).
So 3.6 workers raise £25,200 in tax revenue, the share of this tax spent on the state pension (£11,500) is 45%.

So nearly half of all employment taxation for an average worker gets spent on state pensions.

Whatever your politics- this is not sustainable.

I think it’s inevitable this will happen at some point, but not for today’s 50+ year olds. It will be those currently in their 20’s & 30’s who will suffer.

Yes - but your interpretation of them was made up! How do you get that 80% of the welfare benefit spend is made up of pension payments when, by any reading of those figures, it doesn't? So I think I will stick with "not reading".

This is before you even take into account all the other benefits that pensioners get. massive amounts claiming Attendance Allowance, which then makes them eligible for Pension credit in many cases which then means they get all their council tax and rent paid ( no wonder councils are bankrupt). It's completely unsustainable. I think unless you work in this area ( I do ) people don't realize just how much pensioners are getting. The press have us believe that most pensioners are surviving on £220 a week. Some are but the vast majority have way more than that. It has been an absolute eye opener working in my current job for a charity for the elderly. Even the pensioners themselves are gobsmacked at whet they end up getting and ask me to check I'm correct when I give them the figures.

This is interesting on UK Government income and spending

A brief guide to the public finances - Office for Budget Responsibility

£151 million on pensioner spending (an income of £1148 million of which £478 million of that income is from income taxes)

Attendance Allowance is not means tested. Anyone can get it if they qualify for it - and it's not that easy to put a claim in for.

That's separate to Pension Credit - but when you get Pension Credit, you do get access to other benefits.

Pension Credit: Overview - GOV.UK

• You get Housing Benefit if you rent the property you live in
• Winter Fuel Payment
• Support for Mortgage Interest if you own the property you live in
• a Council Tax discount
• a free TV licence if you’re aged 75 or over
• help with NHS dental treatment, glasses and transport costs for hospital appointments, if you get a certain type of Pension Credit
• help with your heating costs through the Warm Home Discount Scheme

Great summary of UK’s problems. I always said I’d never leave London and the UK. Sadly, it makes it financially irresponsible for me and my family to stay for exactly the reasons you outline. I am liquidating all my assets and moving abroad. The financials of this country do not add up and I just refuse to have my taxes misspent any longer. My taxes (and people like me) will be a big loss to this country and at some point there will be a tipping point of exodus and not enough base of remaining tax payers. This will happen sooner rather than later given that 53% of the population are already net beneficiaries and people like me contribute to 30% of all income tax. Before all the VAT from our spending.

Receiving Attendance Allowance hugely increases the chances of becoming eligible for Pension credit especially if living alone.
It is a benefit which is awarded very easily.

How does receiving AA increase your chances of getting PC? I don't understand your logic.

And you did see my other post later yes?

Where I actually copy and pasted the data?

Or did you just read the first page of the thread and go off to Mr Google ? 🤣

If you receive Attendance Allowance, then you need it because you have needs that need paying for - and that's not means tested.

Pension Credit - this has the details in it.

I am not sure that if you are very wealthy, how easy it is to claim Pension Credit if you claim AA.

But if you claim Pension Credit, then claiming AA can potentially give you more Pension Credit above the minimum guarantee

Pension Credit

No. Pensions need to be planned decades in advance.

But while I sympathise with the people who are saying I have paid in so I’m entitled to it, that mentality just leads to politicians not dealing with the problem because it’s a vote loser.

I’d rather plan for people who are say younger than 30, set it up on a sustainable basis rather than ignore it until drastic change needs to happen overnight when pension funding is in crisis. Same with the NHS but that’s for a separate thread.

I am in my 50s and have worked in the private sector. It wasn't like it is now where you are entitled to pension contributions. Even though I have earned above average for the last 25 years, but not before that and have lived frugally and been a taxpayer that has paid in to supporting today's pensioners, it would be galling to have it means tested when I get there.

There is a risk of it putting people off from saving. It broadens the gap even more with the state sector. It would be fairer for the state sector to have to shift to defined contributions.

Someone who lives alone and is in receipt of a disability benefit and no-one claims carers allowance for looking after them becomes eligible for a severe disability premium on the pension credit calculation. This increases the threshold by £81 a week. So someone on a basic state pension of £222 a week then gets £81 added to the Pension credit calculation meaning they would get around £77 Pension credit in addition to the Attendance allowance which is £73 or £108 a week depending what rate they get. then getting any amount of guaranteed pension credit gives them all council tax and possibly all rent paid.
I think the average person has no idea how much some pensioners are getting.

The bill is only going to go up surely with more and more people unable to get onto the housing ladder and so needing rent paid if they are on pension credit

That's interesting, I wasn't aware of that, thank you.

Yes also a lot of pensioners that have been on these interest only mortgages for years and now the banks are demanding the mortgages are repaid and they have no t enough equity to buy another property. Whilst these people may have some equity from the house sale to private rent for a few years, this money will inevitably run out. This is another ticking timebomb !

“Banks are demanding”? Interest only mortgages have to be repaid at the end of the term. People in this position knew what the signed up for.

It's interesting to see what you expect from the state though. I think we need a National conversation of what we think the State should provide.