Pensions

[newwave]

I am going to hate myself for this but the new pension proposals look to be very good. Tough I know those on high SERPS payments will lose out but overall it seems very good for the less well off pensioner and no means testing.

As it is a Tory policy I am sure there is a catch but I cannot see it.

It's for future claimants only at some unspecified point ahead. Still a long way to go.

But I'm cross that it's being promoted on the SAHM/carer card - have the Coalition never heard of HRP? If they don't understand the important protections already in place for NI credits to recipients of certain benefits, is there anything else important about the system they have similarly overlooked? It is hard to have confidence in an administration which is essentially misselling the benefits.

2015 I believe, sorry for being dumb but what is HRP

HRP is Home Responsibilities Protection (though I think it was renamed recently). This is the NI credit which all recipients of certain benefits (Carer's Allowance, and CB up to youngest child turning 11).

It's been around for years - so the idea that SAHMs yet to retire have irreversible holes in their NI records is just wrong.

(There was a generation of women whose child-bearing years pre-dated HRP and who did see gaps in NI record as a consequence, but they have by and large already retired, so are not covered by these proposals anyway).

meditrina

Thank you, now I understand

Yes, I thought this looked good, too.

But the Tories won't be in power then, so they can promise what they like.

Mellow :o one can only hope

There is a catch. It's huge. So huge I think they "buried bad news" announcing this the same day as the NHS bill rethink.

It will mean the end of the National insurance system.

I'm writing a megapost, but meanwhile here's my previous post on it.

TIANC: Noooooooo!

Of course! NI is being abolished so we'll have to take out private insurance for pensions. It does all make sense, and fits in brilliantly with the privatisation of hospitals, schools, unis, etc.

Is there no end to their evil machinations.

The end of the National insurance system.

The three main purposes of National Insurance are:
? unemployment insurance
? incapacity-to-work insurance
? pensions

But the conditions under which the insurance pays out have been becoming narrower and narrower, and the cover it provides shorter and shorter

? Jobseekers Allowance only lasts one year and has incredibly narrow, byzantine stamp-contribution criteria (this week's contribution counts, that week's doesn't, etc).

? Incapacity Benefit/ESA has just been made one-year only, has similarly narrow stamp criteria, and the capacity criteria have been narrowed significantly (from "can't earn a living" to "can't do any economic activity however small".)

So the number of people benefitting from this insurance has plummeted.

Once the pension is made flat rate and severed from the individual's National Insurance record, the NI system will be practically redundant. Not worth the administrative cost.

NI will then be subsumed into general taxation under the flag of efficiency and no longer ring-fenced. Gideon is already floating this. (The single remaining requirement of 30 years' stamp/tax payments across a lifetime can be done through the tax system.)

There will still be pensions, and poor-people's subsistence payments, but the stage will be set for a huge shift in the narrative.

At the moment, Jo Public can rightly point to her contribution record and say, "I paid in, this is my payout." Sweep away the contribution record and you can redefine people receiving payouts as beggars on the state who were too feckless to provide for their old age/misfortune. And why should the hard-working, responsible, etc etc current taxpayer fork out for scrounging scum?

Gideon does, however, think that compulsory national insurance is a really good idea. So good, we should introduce it. With private, profit-making insurers. (Have lost this link but will post if I dig up.)

One more thing. There'll be a substantial transition period when we're paying massively higher tax, because it's "combined tax and NI premiums", but also paying private insurance premiums and pensions, because there are next to no NI payouts.

What a 100th birthday present.

National Insurance. 1911-2011. RIP.

Or wot Mellowfruitfulness said.

TIANC: I don't agree with you, but am worried about NI reform, because how will the employers' contributions be made up? And if NI is simply rolled into general taxation - what will happen to those currently not paying it - will they see tax rises of 50%? If you were receiving a medical, disability or other small early pension, you've already lost out in the abolition of the 10% tax rate (only those over a certain age got an allowance through tax code, rest - zilch): if NI were extended to all income (not just earned income), then it's a huge rise on a vulnerable population.

Also, if NI qualification for a UK pension is removed, who then will be eligible to draw a British pension. All EU nationalities?

Yes it is a good policy. As long as you aren't a woman between 55 and 57 in which case you have to wait an extra year or two.

Cage: evil though the tories are I don't think combining tax and NI particularly helps them be more evil or is evil in itself. I don't know if there was ever a separate place where NI money was kept for a different purpose from tax money but if there was it was a long time ago.

Combining tax and NI for individuals does not mean that employers should have to stop paying some sort of a payroll tax, whether it is called NI or not.

And there is no reason that all income has to be taxed at the same rate - it already isn't; savings, earned income, dividends all have different tax rates applied so there is no reason pensions income shouldn't too.

Mind there is also no reason that pensions income above a certain amount (thinks of Fred Goodwin - he's a banker sue me for saying that if you can find me) shouldn't be taxed at a higher rate than it is now...

Has there been any announcement on eligibility criteria? Or even what might be considered?

Are the different tax rate options really being considered? I thought a driving force behind all this was simplification.

And I thought interest from savings was taxed at the same rate as earnings - could you explain the differences or link something that does? Thanks.

Paul88: wrong.

National Insurance is hypothecated.

The hypothecation is important, but the narrative is equally important - or governments wouldn't spend a fortune on spin doctors.

For example, it would have been politically unthinkable a few years ago to target the sick and disabled. Spend a few years rebranding disability as a lifestyle choice and the sick as welfare cheats and you'll find Joe Public happily stating that incapacity benefits need urgent reform because of all them scroungers, "but don't worry dear it won't affect genuine claimants like you" (actually, it does).

Same story: take away the system in which people have rights and a contributory stake, and create a paradigm where welfare is the grudging charity of the virtuous rich to the feckless poor. You are then free to withdraw that charity.

As much as I hate to admit it, I too think the proposals are great. I would like to know what happens about the second state pension and SERPS. I opted out and my contributions are invested. Not sure if this is still the case as I heard that we would automatically go into the second state pension so need to find out about that.

Also whilst I would be good news for myself, higher state pens plus opted out plus recent company scheme. Someone who hadn't made any provision whatsoever is unlikely to gain. They may however, be eligible for HB if not home owners which I have never claimed so fair enough on that one.

An end to National Insurance would be fantastic.

Britain has a de facto top rate of income tax of around 65%, if you include NI. If the general public become more aware, the political momentum will be for lower and lower taxes for the foreseeable future.

Sounds fab!

I'm sure the catch is that those pensioners will loose all other benefit entitlements. there is no way, in my life time, the conservatives, or Lib dems for that matter, will ever do anything 'ok' for those who have not been able to afford to do things privately. That is what they do.

They always seem to be giving something more away, whilst always, always taking more and then some more again, back.
What ever happened to cammerons'big' idea that he banged on about pre-election, about pensioners having to save up £8k to help them through retirement...'for those who had done 'the right thing''? I have not heard a thing about that since they got in.
There is no way this will be 'good news', sorry but I just do not buy it.

The means tested pension is already around £130 per week plus housing. I don't think they will stop paying this to anyone who hasn't made provision themselves. As for not being able to afford private provision, I could really use my 4% contribution each month but struggle to pay it as my employer puts another 9% in so it makes sense. This is the first time I have had a company pension scheme that has been worth endeavouring to pay something for my retirement. Nice to think it might be worth doing rather than losing £ for £ in state pension.

Cage - thanks - interesting that it is 'nominally' hypothecated. But 20% goes to the NHS which also gets some general tax funding so it is rather blurry.

LFN - presumably you are including employers' NI in your figure. Since it is so easy for companies to avoid corporation tax it makes a lot of sense to tax the payroll.

You are wrong about what the majority of the public want - fortunately. Even the tories will be too scared of losing votes to cut the top tax rate.

Of course the public would like to pay lower taxes but the decent ones would rather keep social services afloat then to see tax cuts for the well off who dont use said services.

LFN, the weakness of most of your "arguments" is that you seem to think everybody is as lacking in empathy, unfeeling and cold hearted as yourself

newwave - actually it's a Lib Dem policy

Steve Webb is the pensions minister, and the citizens' pension has been his policy for a long time.

www.libdemvoice.org/steve-webb-writes-working-for-pensioners-now-and-in-the-future-23680.html

(NB I completely agree with the second comment on that article. Steve Webb has been able to do a lot at pensions in the DWP, but the LDs have too little influence over policy on disabled people, and doesn't it show.)

From MoneyMarketing:

"Pensions minister Steve Webb must be congratulated for persuading the Government that the huge benefits of a higher state pension are worth the huge costs involved. When Webb was appointed, we were quick to jump on strong statements he made in opposition suggesting the need for a higher and simpler state pension as the bedrock to all other reforms.

Many in the industry, including myself, were cynical that Webb had any chance of getting the coalition to support a citizens? pension and believed the best he could hope for was to have the plans added as a future aspiration. I?m glad it looks like I have been proved wrong."

I'd actually like to see NI scrapped and merged into a single income tax. NI has long been the sneaky way for successive governments to raise income tax without raising income tax.

The idea that there is some little "pot" which we've paid into for our retirement is frankly laughable. NI long stopped working like that. Nowadays, the income from NI wouldn't pay for the NHS let alone pensions & other benefits.

So let's be honest. Let's have a single income tax rate so people can see how much tax they are REALLY paying.

In general though I am liking the new pension proposals. A cautious thumbs up but I confess I don't know the details and often that's where the devil is.