Pension credit only £3 less than State Pension

[SpanishBaguette]

Maybe it's been obvious to others but I've only just found out that Pension Credit will top you up to no less than £227 per week which is only £3 less than the state pension.

AIBU to be hacked off that I need to pay 35 years of contributions to end up with a near identical pension to someone who gets it for free. WTF?

@Allthings you’re absolutely right!

Here is reality, DH is 80 soon, and that brings an automatic increase! 25p a week, we can hardly wait. In the same vein as the £10 Christmas bonus. Outdated and no longer meaningful. When my DM got her £10 in 1972 it was actually worth something. The State Pension was about £6 a week.

We are a couple with just enough between us in pensions to take us over the PC threshhold, but well below the income level to qualify for the Winter Fuel Allowance. £200 will be gratefully received this year. (DH’s birthday is a couple of weeks after the qualifying date for the extra £100 payable to octogenarians).

No you don’t, support looking after the most vulnerable, you’re tarring everyone with the same brush!
Gosh, the bitterness, in your comment, is so obvious.

I don’t think it’s bitterness. It’s pointing out the unfairness of the current cliff edge system where someone on pension credit ends up being better off than someone just over the threshold due to PC being a gateway benefit.

It depends what level of pension is being recieved There are two levels of state pension. .

I think most younger people are unaware that the old basic state pension (pre 2016 retirement) is around £50 a week less. Currently its £176.45. Pension credit makes a big difference to those older people with little or no other income.

But it also ends up making them better off than someone who gets the full old basic state pension due to it being a gateway to other things. Not paying council tax, rather than a 25% discount for a single person is worth well over £1K a year and more likely nearer £2, that is before any help with health costs, warm home discount etc etc. Then a number of visitor attractions or venues offer discounted or free entry for those on benefits including pension credit. Someone on PC can end up being better off by at least a couple of thousand pounds a year and there lies the issue and highlights the unfairness of the system.

The big difference OP is you can have a fair amount of savings, pensions on top etc - those getting pension credit are somewhat restricted on this front or they wouldn’t get it

The two systems are unfair to many. So much depends on individual circumstances.

The problem of injustice and unfairness lies with people who only have the state pension and little in the way of savings and are just above the PC cut off point. It’s that cohort of people (often women on their own), who end up worse off.

But then again, you may not. Unlless you have a large amount of savings and private pension, there is little point in having any.

DM's friend doesn't have a full state pension and is topped up by pension credit plus a host of benefits.

DM, as a widow, would have a very small NHS pension and a small amount from DF's private pension. Alongside the old state pension, this would take her over the limit for PC, but would not give her an income equivalent to friend's benefits.

@Cyclingmummy1 and there are lots of women especially in a similar, or even worse position as some only have their state pension with no private or widows pension.

Less than £200 a year better off than someone whose pension is topped up by pension credit, but unlike those on pension credit, they have to pay full council tax (minus single person discount), NHS health costs, warm home discount etc etc.

Completely mad system @Allthings

DF, as the holder of the larger private pension, would be financially fine as a widower.

It seems wrong that even with her own PP and half of DF's, DM would be the worst off of all.

This reply really got me thinking.

Pension credit is meant to ensure a reasonable standard of living for every elderly person in our society. I believe in this as a morally laudable endeavor.

Inflation has really eroded the value of pensions for those who have worked. So many, who have worked their entire lives, now find themselves financially worse off than others who are able to avail themselves of pension credit.

It is unlikely they will increase the state benefits for all retirees... Pensions are already the single largest drain on the public purse.

The more likely scenario is a decrease in the payments and benefits associated with pension credit.

Would you be happier seeing your DMs friend get less?

If the amount DM would have is deemed sufficient, then yes, PC should not give access to additional benefits leaving the recipients better off. Not paying council tax equates to an additional post tax income of £100 a month, how can that be fair?

It's a hypothetical as DF is a widower.

Fairness isn't the same as equality. Anyone in receipt of PC will have no savings so, as I understand it, they may receive a bit extra every month so a household repair doesn't swing them into abject poverty. Yes - the earner has to dip into their earned savings but that's what they are for. If they didn't have savings they'd presumably be able to access many of these benefits too.

I don't personally understand a race to the bottom.

@Livingincanadaafter19yearsinlondon You are incorrect. You can have significant savings and still claim pension credit.

My mother gets pension credit. She has savings, goes on holiday, buys far too much junk, has a car, owns a house which she keeps toasty warm.

It really isn't abject poverty - not even close and she would know it - she grew up with no inside water and 5 in a bed.

@Livingincanadaafter19yearsinlondon savings up to £10,000 is ignored and if you have more than £10,000, every £500 over £10,000 counts as £1 income a week.

I don’t think the issue is with the pension credit bringing up income to a certain level, it’s the additional extras such as not paying council tax, warm home discount, help with health costs etc and are nothing to do with household repairs. Some of the cohort on pension credit can be significantly better off than someone on a basic pension and may also have more savings.

This is true. But you've also spent the majority of your life at work. Some people say they find this fulfilling but I'd be much happier having time to make music and read interesting stuff. And actually not have to choose between going to the gym or having a couple of hours to relax after a long day.

Obviously, some people can't work and I'm more than happy to contribute towards helping them as you never know what could happen to you.

Let's assume neither party has savings (though it's possible to have savings on PC). The person who has a small PP, hence can't access PC, is worse off than the person on PC. That's hardly equality, is it? Nor is it fair on the person who has tried to protect and plan for their future.

I don't think you understand the scale of benefits PC allows you to access. It's not 'a bit extra', it equates to thousands of pounds per annum.

The savings cap is 20K. It's not massive.

The reality is that very few people are actually net contributors. Their is this great cognitive dissonance in the UK where people talk about how they've worked without giving any thought to how much tax they've actually paid. The have nots are angry at the have even less.

Based in current rates the salary people would have to be earning (every year of their working life) to make an NI contribution equal to the current state pension is approx £71,000. And that salary has to rise with the triple lock each year... I mean... How many people come close to that?

Gross salary needed (with employer NI counted): ~£71,000

Employee NI: ~£3,430

Employer NI: ~£8,550

Total NI ≈ £11,980, matching full State Pension

Removing the employer contribution (as that's gone up in recent years) the gross salary an individual tax payer would have earned to make an NI contribution equal to the current state pension is a whopping... £498,000 per year. This is based on an 8% contribution between 12,571 and 50,270 which then drops to 2% thereafter.

The system is completely unsustainable and clearly broken.

I don't want to see any elderly person in poverty in old age. What bothers me about this thread is that everyone who is complaining is (most likely) massively subsidised much much higher earners. As I can't imagine anyone making 498K a year living just off the state pension...

Instead of being upset others have more, perhaps people should be grateful they live in a country with such wealth redistribution.

In a country like ours...all people who work subsidize those who don't....some just subsidise more than others.

I do see your point actually and did some research. A big part of the issue with pension credit is linked to an efficiency in services - if an individual qualifies for pension credit this unlocks other benefit. This means DWP, councils, housing benefit, etc don't have to run separate assessments for each of their benefits. This streamlining of services saves money - even as it creates this strange cliff edge for people who have worked all their lives.

To me, a few thousand pounds per year is no reason to turn on one another. The only solution is an overhaul which would then require all pensioners to provide income data to access additional benefits - thresholds need to be decided... And eventually a Mumsnet thread with this data and look at this household, why should someone with 100k in savings get state pension?!! I see means testing everyone for the basic state pension in our future.

If that happens, there will be no point in saving or paying into an occupational pension unless you can afford to achieve a pension significantly higher than the level at which the means-test kicks in. That would, at a stroke, keep those on low incomes poor, with no incentive or opportunity to try to improve their lot. Those on (or with access to) high incomes will be fine, and those who haven't worked for whatever reason will get a means-tested pension, paid for by those who have.

If anyone can explain to me how that is fair, I'd love to hear it. To me, it seems like a form of serfdom.

You've hit the nail on the head. I imagine mandatory pension contributions will be used to shore up the narrative that "you'd been advised to save".

The tax dollars of higher earners are already subsidising those choosing not to work and availing themselves of other benefits. I really can't see why pensions won't be next.

A poster on here was talking about her mum living a spoiled life on pension credit... But ok, what if it didn't exist? Who would support her? Her daughter? Care home? Do we leave her homeless?

Human behaviour is complicated. Some people won't work if they have welfare, for others it sets an internal fire to escape that life. Some people won't work if they have wealthy parents, for others it's a head start in a long life of work.

The problem with Britain is that people feel disincentivised to work now... across all ages.

People plan retirements for decades and the government is blowing up many people's plans with changes to tax free allowance and IHT. So yes, what is the point?

The reality is that very few people are actually net contributors.

True but if you have worked (in any fornat) you have not just continually taken out of the kitty like those on long term benefits. For that reason, I think Penion credit needs to be removed BUT it needs to be a staggered approach to give citizens time to prepare. If they don't, we'll that was their choice. No excuses.

I understand the frustration but what do you suggest we do with elderly people who haven't worked then? Maybe they were born disabled, maybe they spent early working years caring for parents and later years caring for children, maybe they had a mental disability, maybe they had a low IQ and were manipulated into crime and were unable to gain employment after, maybe they didn't know any better as they were from a family who had only known life on benefits.

There are plenty of countries without a safety net for the elderly, disabled and other vulnerable segments of society. Homeless on the street, elderly begging, women and children actively and openly in prostitution... People commit petty crime to have a place to sleep for the night or a prison to look after them. I understand and appreciate the financial cost of benefits. But I think many people don't appreciate the greater cost we would bear if we didn't have them.

I had friends visit me in London recently, from Canada. Huge homeless crisis there, and lots of issues with drug use. They were asking me why we don't have homeless people everywhere. When I explained how our safety net worked they were like... "But homeless people won't take up housing if you give it". The health service in Canada is constantly dealing with ODs and people taking up beds, prisons overflowing etc.

Perhaps you believe anyone who ODs shouldn't be given emergency care? But what if they had been injected and not self dosed? We let them die because ...

Random musings for a Wed morning. Gotten off topic I think