To be angry with people who describe the old age pension as a "benefit"?

[FlubandSlub]

When I started my working life, aged 16, I entered into an agreement with the government for them to save my pension money for me. It was stated that it would be until I turned 60 which would be when I could starting drawing my old age pension. Even though I made my FULL pension payment contributions by the time I turned 51 the government has decided it will not abide by the original agreement and that it is going to keep MY money until I am 67. Probably hoping I will die before then.

Consider this, not only did I contribute to my pension, my employer did too. It totalled 15% of my income before taxes. If you averaged only £15 000 p a. over your working life, that's close to £220,500. Read that again. Did you see anywhere that the Government paid in one single penny?

We are talking about the money that I and my employer put in a Government bank to ensure that I would have a retirement pension. It was not money that the Government had any right to spend on other things! Upon reaching the age to take it back they've started to call the money we paid in a "benefit" !

If you calculate the future invested value of £2500 per year (yours & your employer's contribution) at a simple 5% interest (that's less than what the govtpays on the money that it borrows from overseas), after 49 years of working you'd have
£892,919.98.

This money was supposed to be in a securely locked box, not to be used as part of the Government's general funds.
Successive governments borrowed the money to spend on other things but that doesn't make my pension some kind of charity or handout!! If a private pension company did this we would sue them. Unfortunately the Government can legally rob us blind and get away with it

IT'S MY MONEY! IT IS NOT A BENEFIT!!

Also remember that ultimately these private pension providers have no obligation to actually return anything at all. Yes, there are laws and regulations and all that nonsense. But at the end of the day no matter how badly a pension fund was run, the government - whether explicitly or not - underwrites them all.

Then you have to remember that these funds are building up under the economic headwinds of decades. If you've had 3 decades of poor to no growth, then your pension funds likewise will provide poor to low growth.

When I were growing up, it was received wisdom that stocks and shares were a long term winner as you'd only get a stock market crash once a generation;

With that in mind, I setup a S&S ISA (amongst others) in 2000. Which managed to see the 2001 crash and the 2008 crash and return almost what had been paid into it in 2011. (I think it was about £20 in profit).

I didn't have much time for financial advisors before that, so they hardly redeemed themselves.

Best performing investment I ever made was the (checks) £8000 that came from a little research I did into an investment platform that I would never suggest to anyone (and indeed one that MN would hide this post for if I mentioned it).

Very true.

Workplace pensions can usually be accessed at 55 or 58, which i assume is what the op is talking about with 15k pa? very few people would pay that much national insurance.
Workplace pensions usually can be accesed much earlier- i could access mine at 55, nothing to do with the state pension

I think previous poster probably means carers premiums on pension credit. When both of a couple are on disability benefits and claiming to be carers for each other like this the pension credit can add up to huge amounts even with full state pensions. This is in addition to the attendance allowance as well. The amounts are crazy and I fully expect this to be culled when someone properly starts looking at cutting the welfare bill in the not too distant future.

That wasn’t the intention at all. It’s always been paid in recognition that at some point you have to stop working, regardless of health. Before 1940 it was paid at age 65 for both men and women, although it wasn’t called state pension and was funded differently - a mix of employer/employee/state contributions. It was reset in 1940 at age 60 for women and age 65 for men, to ensure that married couples could receive the married pension rate as soon as the husband reached 65.

The National Insurance Act of 1946 legally defined it as contributory benefit, paid from the NI fund, which pays other benefits and partially funds the NHS. The Pensions Act 1995 defined the legal framework for equalising the pensionable age for men and women and enabled government to enact subsequent rises.

Just as an aside. You say if you want a ‘cushy’ retirement you need to plan, which is fair enough, but if you sell assets like your home, where are you supposed to live and what happens when you need care and the LA comes along and refuses to fund it, accusing you of deliberate deprivation of assets to avoid care fees ?

Except that’s not what happened at all.

You paid tax on the understanding when you reached pensionable age they’d give you money. Nothing was saved by them in any “government account”. The money you paid (as a form of taxation) was spent on schools the nhs defence welfare etc etc.

No one ever said or thought that it was going to be ring fenced for you. Sorry I think you are slightly ill informed to be thinking in these terms.

@Rosscameasdoody exactly, it was meant for the time when you absolutely can’t work anymore.
Downsizing from a house to a 1-bedroom flat or cottage and living from the proceeds (keep your lifestyle) is not deprivation of assets.
Deprivation of assets is for example making large gifts or extravagant, out-of-character spending when you already reasonably know you need care.
Assets are literally there to fund you if you need funding.

@SerendipityJane

With that in mind, I setup a S&S ISA (amongst others) in 2000. Which managed to see the 2001 crash and the 2008 crash and return almost what had been paid into it in 2011. (I think it was about £20 in profit).

Over the long term, stocks and shares have far out performed such as bank savings.

You help your ISA for only 11 years, which isn't really "long term". If you'd held onto it to today, you'd almost certainly be showing a healthy profit.

Plenty of people "opted out" of SERPS in the 1980s and now have pension funds worth a hundred or two hundred thousand pounds, due mostly to the NIC rebate of 2% of earnings and investment growth - even those who only paid in a nominal amount of their own contributions such as £20 per month!

They key is not to sell/cash in when the stock market is down and wait it out until the stock market bounces back, which is always does.

IYou can’t claim carers allowance with state pension unless your pension is below what’s payable on carers allowance - currently £83.30 a week, so any entitlement to CA would only top up the pension to that level Then because they both claim AA they would be entitled to pension credit which would top up to the level of state pension, and add in £46.40 per week each as a carers premium. That’s if they’re actually entitled to pension credit because the poster said they both had private pensions, so that would also be counted and deducted. So, no, not huge amounts. At the most it would be around £2700 a month for them as a couple, assuming full pension credit entitlement.

@Rosscameasdoody

Just as an aside. You say if you want a ‘cushy’ retirement you need to plan, which is fair enough, but if you sell assets like your home, where are you supposed to live and what happens when you need care and the LA comes along and refuses to fund it, accusing you of deliberate deprivation of assets to avoid care fees ?

If you downsize your house and have a few holidays, cruises, that ISN'T deprivation of capital unless it's in the knowledge of you needing care imminently, i.e. a diagnosis just before you do it. A general "winding down" of selling assets/investments to provide you with a decent standard of living, holidays, a new car, etc., isn't deprivation of capital - it's exactly what you've been saving for retirement to do!

Deprivation of capital is transferring your house to your son/daughter, or giving them tens of thousands/hundreds of thousands of pounds of your savings, with no obvious logic/reason other than avoiding care home costs and/or IHT etc.

When you see it you see it. If it walks like a duck, quacks like a duck, it's a duck - and the same applies with deprivation of capital. Using your assets/investments to benefit yourself is what normal people plan for in their retirement, and certainly not deprivation of capital!

It’s actually not the knowledge of ‘imminent care’. It’s the expectation of needing ‘future’ care at the time the transfer or sale is made. And the LA use age as a contributing factor, regardless of the state of your health.

Some years ago our LA put a relative and their immediate family through hell because she downsized her home in her mid sixties when her husband died. She bought a small flat and upgraded her old banger of a car and had a couple of holidays, including one in Oz to see her sister, which turned out to be for the last time.

The family sold the flat to fund a care home when she developed vascular dementia but when her funding pot fell below the threshold for the LA to provide funds, they initially refused after investigating her finances stretching back over some twenty years. They alleged that because of her age, she had a reasonable expectation of future care when she downsized and spent the money left over after buying the flat - even though there was no indication of dementia at the time.

The family had legal representation and argued that although her age was an indication of increased risk of needing care, the funds were not deliberately intended to reduce liability for care funding. Eventually the LA accepted it, but it took time and expense to sort it out. I wouldn’t take anything for granted where social care is involved, based on the ruthlessness with which they pursued our relative.

@Rosscameasdoody

Eventually the LA accepted it

Precisely, as I said, you can use your assets for your own life/enjoyment. The fact that the LA finally accepted that proves the point really.

See my post above.

Pity they couldn’t do that without putting the family through months of worry and the cost of legal representation. Not to mention nearly losing them the place in the care home. That’s why I don’t trust them. They pursued it ruthlessly - went through the finances with a fine tooth comb over the previous twenty years and tried to say that at 65 she had a reasonable expectation of future care and shouldn’t have spent the money. Nothing to do with being ill at the time as there was no sign of dementia. I dread to think what would have happened if the family hadn’t been able to afford legal advice.

That's todays advice, It most certainly wasn't prior to 2000. True, there have always been warnings about investments may do down as well as up. However (as I rather pointedly recounted) all advisors only every suggested that was a once in a generation event (e.g Wall St. Crash). Not an almost annual event that would drag on for decades.

And if you're 65, waiting another 15 years for the markets to make good doesn't really appeal. It is at best sub optimal.

A key problem (mysteriously unmentioned here, or indeed anywhere else) is that when things were instigated, there was an expectation that people own savings would fund their old age. Of course what happened very quickly is people turned their savings into property which instead of funding the costs of the aging made it's way into the pockets of their offspring. A privilege that previously only a few rich families per country could have indulged in. (One of the reasons why ironically the aristocrats of Britain disliked Mrs. Thatcher intensely).

Rinse and repeat and work out how much money has been extracted from the supply side of the equation whilst at the same time piling up the demand side. But sometimes knowing the truth isn't enough. Good luck trying to square that circle.

State pension is still a benefit, by the way.

Typically I see people started discussing my point immediately after I wrote nobody had 😀

It is a benefit - it is paid for by taxpayers, and for the majority of recipients the value of their pension is out of all proportion to the amount they contributed during their working life. You don’t even need to contribute anything in tax to qualify for a basic state pension. So yes, it’s a benefit and a privilege the younger generations probably won’t have.

The State Pension has been described as a benefit since the National Insurance Act 1946, which introduced the basic state pension from 1948 and classified it as a benefit within the social security framework. This legislation created the National Insurance scheme, funded by contributions, that provided the basic State Pension as a "benefit in return for contributions".

I’m in the Teachers’ Pension Scheme, and they call the pension money they pay out “benefits”. It’s a “defined benefit” scheme. Is a different word used for a “defined contribution” scheme’s benefits? I mean what would you like it to be called, OP? Wages?

As others have said it is a benefit and always has been.

the question is should it be going forwards? Should the government simply hand a few grand to each baby born from 2026 and told to invest it in a pension and add in your own money. Compounding over 65 years should lead to a decent pension. No reliance on the state.

What if a pension company goes bust ?

Very unlikely but possible. The state pension is a relatively small amount of money compared to many people’s private pensions and so this is a risk for many people as we speak. Heavy regulation would be needed and a variety of providers to spread risk.

You're being rather silly. Have a look at the gov website where you can see your NI contribution history, which includes details of exactly how much you have "paid into" National Insurance. I have little doubt you'll discover that the amount you have paid in is nowhere near enough to cover what you can reasonably expect to receive in the form of State Pension over the coming years. And that's disregarding anything you might have already received in the past in the way of benefits, sick pay or NHS treatment etc. Your contributions while working were entirely spent (and then some) paying for the pensions of previous generations of workers.

Put simply, the State Pension is a benefit, paid for almost entirely from current taxation. Get over yourself.

Does rather put the phrase "benefits scroungers" into perspective doesn't it ?

Well if that’s so, you can add a fuck ton of interest to it over 45 years. Also your pension contributions are not intended for sick pay, NHS etc. what cobblers.