State Pension - two-tier system . WHY?

[Haliotis]

On this morning’s BBC News, there is an article about next year’s increase in the state pension.   For men born after 1951, and women after 1953, the [New] state pension will rise to £12,000 next year.   For pre-2016 retirees [who may be eligible for a secondary state pension], the basic pension will rise to £9,000 next year under the old system.

Two questions:

1. Why have this two-tier system - there will be some pensioners who were born only a day or two either side of the cut-off date.  In practical terms, these people are the same age yet their pensions will vary dramatically, ans some will be financially hurt.

2. Since the Winter Fuel Allowance has been taken away from pensioners not entitled to benefits, does not this further “fiddle factor” suggest that pre-2016 retirees should be granted, say, 50% of the allowance?

As is typical with many government manoeuvres, they will hide behind their stock excuse that “there will be winners and losers”.  This is inexcusable - government payments to the general public should not be run like a betting shop. 

GB News has commented on the Winter Fuel removal, and pointed out that pensioners were once workers.  This is interesting, because, when the likes of Starmer say they are looking after the workers, his ministers never indicate at what level they consider pensioners to be.  Do they still see us as workers in retirement, or a group of over-privileged layabouts no longer useful to society, and therefore an unwanted burden?  Perhaps their spiteful meanness is because they resent our living so long, free from the treadmill!

[Graham47]

13 minutes ago, Haliotis said:

GB News has commented

Enough said !,

[Bper]

28 minutes ago, Haliotis said:

On this morning’s BBC News, there is an article about next year’s increase in the state pension.   For men born after 1951, and women after 1953, the [New] state pension will rise to £12,000 next year.   For pre-2016 retirees [who may be eligible for a secondary state pension], the basic pension will rise to £9,000 next year under the old system.

Two questions:

1. Why have this two-tier system - there will be some pensioners who were born only a day or two either side of the cut-off date.  In practical terms, these people are the same age yet their pensions will vary dramatically, ans some will be financially hurt.

2. Since the Winter Fuel Allowance has been taken away from pensioners not entitled to benefits, does not this further “fiddle factor” suggest that pre-2016 retirees should be granted, say, 50% of the allowance?

As is typical with many government manoeuvres, they will hide behind their stock excuse that “there will be winners and losers”.  This is inexcusable - government payments to the general public should not be run like a betting shop. 

GB News has commented on the Winter Fuel removal, and pointed out that pensioners were once workers.  This is interesting, because, when the likes of Starmer say they are looking after the workers, his ministers never indicate at what level they consider pensioners to be.  Do they still see us as workers in retirement, or a group of over-privileged layabouts no longer useful to society, and therefore an unwanted burden?  Perhaps their spiteful meanness is because they resent our living so long, free from the treadmill!

Hi Albert,It certainly does seem unfair that people born just days apart could see such different pension amounts. It’s understandable to feel that these minor differences shouldn’t lead to such big financial gaps.As for the Winter Fuel Allowance, it might be fair to suggest that pre-2016 retirees get a proportion of the allowance. This could help balance things out a bit.It’s also worth noting that retirees, who were once workers themselves, often feel overlooked by current policies. The lack of recognition for their past contributions can be frustrating, especially when policies seem to ignore their ongoing needs.Overall, pension policies should consider the long-term impact on all retirees and aim for fairness based on their contributions and circumstances.🙂

[FROSTYBALLS]

One of the differences was eligibility.

Prior to 2016 (old state pension), to get the full state pension one needed 30 years of National Insurance contributions. 

Post 2016 (new state pension), to get the full state pension one needs 35 years of National Insurance contributions.

At the end of the day there has to be a cut-off point between the old and new systems. Given your example there would have been some people who retired after 2016, who would have qualified for the full pension under the old system, but not under the new system due to their National Insurance record.

47 minutes ago, Haliotis said:

Since the Winter Fuel Allowance has been taken away from pensioners not entitled to benefits

The state pension is a benefit, not a right.

[Bper]

21 minutes ago, FROSTYBALLS said:

One of the differences was eligibility.

Prior to 2016 (old state pension), to get the full state pension one needed 30 years of National Insurance contributions. 

Post 2016 (new state pension), to get the full state pension one needs 35 years of National Insurance contributions.

At the end of the day there has to be a cut-off point between the old and new systems. Given your example there would have been some people who retired after 2016, who would have qualified for the full pension under the old system, but not under the new system due to their National Insurance record.

The state pension is a benefit, not a right.

It's been around for 116 years you think they would have enshrined this in law by now. It begs a question what would happen if they removed it.?

[Haliotis]

5 hours ago, FROSTYBALLS said:

One of the differences was eligibility.

Prior to 2016 (old state pension), to get the full state pension one needed 30 years of National Insurance contributions. 

Post 2016 (new state pension), to get the full state pension one needs 35 years of National Insurance contributions.

At the end of the day there has to be a cut-off point between the old and new systems. Given your example there would have been some people who retired after 2016, who would have qualified for the full pension under the old system, but not under the new system due to their National Insurance record.

The state pension is a benefit, not a right.

You are so wrong, Mike. The state pension is not a benefit -it is a right that is earned according to your years of contribution.  Don’t put in enough contributions and you get a reduced pension.  You have to claim benefits, and answer questions for a benefit to be given or denied.  Have you ever heard of a pensioner who has paid the necessary contributions being denied the pension because he isn’t entitled benefits?  Also, no matter how much you earn, the state pension is not means tested.  If it were a benefit, it most certainly would be.

[Haliotis]

On 8/24/2024 at 8:59 PM, Mjolinor said:

Far worse than people doing 30 in a 20 zone are people that do 20 in a 30 zone, 30 in a 40 zone and seem to drive cars that have a maximum speed of 35 unless they are on motorways.

 

There are times when conditions demand a lower speed - and often significantly so.  The speed limit is not a target speed that must be achieved at all times.  I know that a real dawdler can be an annoyance, but at what speed under the limit do you criticise a slow driver in front?  If someone is driving at, say, 27 mph in a 30 limit, a following driver would be in the wrong AND liable to a fine if that driver should deliberately harass the slower driver.    Again, it all comes back to patience.

[FROSTYBALLS]

3 hours ago, Haliotis said:

You are so wrong, Mike.

No - I'm not !!!

Not all benefits are means tested - for example Attendance Allowance, Personal Independence Payment, and Employment & Support Allowance.

[Haliotis]

11 hours ago, FROSTYBALLS said:

No - I'm not !!!

Not all benefits are means tested - for example Attendance Allowance, Personal Independence Payment, and Employment & Support Allowance.

There is a website, inews.co.uk, where the author argues that the state pension is a benefit, because pensioners take out more than they pay in.Not always true, of course, because some die before they reach pension age, or soon after.

But if you look on the gov.uk pensions website there is detailed explanation about the state pension, and nowhere does it refer to it as a “benefit”.  “Benefit” only gets mentioned where it refers to Pension Credits - for people who for various reasons have not been able to pay N.I. To earn their entitlement.

I don’t know where you got your information, Mike, but it seems that we are never going to agree on this.

[FROSTYBALLS]

My wife worked for DWP before retiring.

Eligibility for the current Jobseekers Allowance is also based on NI contributions -  as is the state pension. BOTH are benefits.

[Haliotis]

On 9/5/2024 at 9:37 AM, FROSTYBALLS said:

My wife worked for DWP before retiring.

Eligibility for the current Jobseekers Allowance is also based on NI contributions -  as is the state pension. BOTH are benefits.

Ok, I stand corrected.  Personally, I don’t regard it as a benefit, since the N.I. Payment is an obligatory requirement, and I have met the terms to qualify for the pension.

Once you qualify for benefits there are other benefits also available.  Those on benefits can keep the winter fuel allowance - we cannot, because we are not on benefits.  Funny how governments can call state pensions a benefit on the one hand, but not a benefit where the winter fuel allowance is concerned.

[Bos]

A regards 30 or 35 years to claim a full pension, some male pensioners who are in their late 80's could have paid into the system for up to 44 years ( in order to receive a full pension ) and still only receive the lower state pension!!

[Bper]

13 minutes ago, Bos said:

A regards 30 or 35 years to claim a full pension, some male pensioners who are in their late 80's could have paid into the system for up to 44 years ( in order to receive a full pension ) and still only receive the lower state pension!!

Is the cost of living any less for those on the lower pension,what an absolute disgrace.

[Haliotis]

16 hours ago, Bper said:

Is the cost of living any less for those on the lower pension,what an absolute disgrace.

It’s all a fiddle, Bob.  Somewhere along the line the government will have formed a strategy that is advantageous to the Treasury.  The “new pensioners” will have to wait longer before they can draw their pensions - I believe 68 has been mooted in the corridors of government - and current “old system” pensioners will be stuck with the lower figure until they drift off into oblivion.

From H&S regulations in the workplace, to the various welfare protection schemes over the years - dietary, anti-smoking, etc. - the government have created an increase in longevity for which someone has got to pay.  One of the easier targets is the group of doddery old coffin dodgers like us, who have the temerity to hang onto life and give the government a headache.  Progressive inflation and financial  constriction are among the plans that will soon take care of that !!!

[Bper]

Labour has maintained that they will keep the triple lock, the cost of the state pension stood at £124 billion in 2023-2024, according to estimates from the Office for Budget Responsibility (OBR). This figure is forecast to rise to £158 billion by 2028-2029 a £34 billion increase largely due to the triple lock.Suggestions have been circulating that the state pension could become unaffordable as soon as 2035 due to the shrinking ratio of workers to pensioners. There is discussion about removing the triple lock and potentially replacing it with a double lock. As you mentioned raising the pension age to 68 has been proposed, with some discussions considering a possible increase to 70 as the population continues to grow and age.😡

[FROSTYBALLS]

Some workers/pensioners will never get the full state pension if their workplace or private pension 'contracted out' of the additional state pension prior to 2016, regardless of their NI contribution record. Contracting out meant they usually paid lower NI contributions up to 2016.

[jthspace]

1 hour ago, FROSTYBALLS said:

Some workers/pensioners will never get the full state pension if their workplace or private pension 'contracted out' of the additional state pension prior to 2016, regardless of their NI contribution record. Contracting out meant they usually paid lower NI contributions up to 2016.

Full State Pension and Additional State Pension - two different pensions.

If one has paid the requisite number of NI years, the you will get the Full State Pension.  If you were not contracted out, you will get the Additional State Pension. If one was partially opted-out during the employment years one will get a reduced Additional State Pension.

In theory, contracting out of SERPS (The Additional State Pension also known as State Second Pension) meant that one was paying into a private pension - and the thought process was that the private pension would give a better pension at retirement than if one didn't opt-out. Balancing out and hopefully better for the employee.

I have a combination of both - some of my employers contracted out, some didn't so I get my basic state pension and a SERPs pension from the State and private pensions in addition.  I had 44 years of NI contributions when I got my pension - so I paid 9 years more than the minimum 35, but that's the luck of the draw.  I retired in 2019.

The sum of my State Pension and SERPS is just a few £££ below the tax threshold and the next triple-lock will push it into taxable income.

If you haven't retired then check the NI years and you can buy any missing years for not very much money - your pension will be far greater than the cost of the lost years subsequently paid.

[FROSTYBALLS]

SERPS was replaced by the New State Pension in 2016: 

• SERPS: The State Earnings Related Pension Scheme ran from 1978 to 2002. 
• State Second Pension (S2P): The S2P replaced SERPS in 2002 and operated in a similar way. The S2P was paid in addition to the Basic State Pension. 

 New State Pension: The New State Pension replaced the S2P in 2016. If you retired before April 6, 2016, your pension will be made up of both the basic and additional State Pension. If you retired after April 6, 2016, you receive a single payment that includes both elements. 

Extract from The New State Pension website:

"If you were contracted out, you will usually need more than 35 qualifying years to get the full rate of new State Pension."

https://www.gov.uk/new-state-pension/what-youll-get

[jthspace]

Putting aside money for retirement was instilled in me by a Manager at one job I had (1980 - 85) and I followed the advice throughout my career. Luckily I followed his advice - my Dad had died just as I was starting my career so I missed some parental guidance.

I know I'm very fortunate in having received such good advice where many don't and luckily I didn't enter the Silver Surfer years with "oh, it will be OK........"

Also - as I mentioned - check your Qualifying Years

CHECK YOUR PENSION FORECAST

 

[CassUK]

Seems like a bit of a lottery - I worked for 35 years, some with an employer who contracted out at some point and some years self-employed. I had 35 years full NI contributions when I retired and bought a further 7 years (the maximum I could get) making my total 42 years but I’m still not eligible for the full State Pension. I’m not far short but the irony is that the State Pension is deducted from your Personal Tax Allowance, hence your Tax Code is drastically reduced with the effect that you pay more tax on your Occupational/Private Pension, which is also taxed before you get it.

The online Pension Checker is pretty good and you will get a fairly accurate pension forecast of what you will receive as a State Pension. It seems disingenuous to now call it a benefit but if you bury history, sooner or later, history doesn’t exist.

My combined incomes now put me in the higher tax threshold, so I pay even more in tax. Yes I was fortunate to work in a service which had a very good pension scheme but I did pay 11% of my monthly salary for 30 years for the privilege. 

I don’t trust the current Government to uphold the triple lock any more than any government and the level of wasteful public expenditure will sadly continue. We can surely expect further tax rises and tinkering with the tax threshold on pensions pensions, whilst many who have never worked, and never will, get free handouts 🤷‍♂️

[Mjolinor]

The plan seems clear to me. Rob the old, they will never vote for that party again but as they can't keep warm they will all be dead by the time the next election happens so no loss of voters and no voters against them.

[Haliotis]

The tax allowance for my income is frighteningly low, but that is because the IR set it in such a way that it is my private pension provider that has to work out and pay my tax based on my total income, and I draw my full state pension without that being subject to any reduction.

[jthspace]

[jthspace]

2 minutes ago, Haliotis said:

The tax allowance for my income is frighteningly low, but that is because the IR set it in such a way that it is my private pension provider that has to work out and pay my tax based on my total income, and I draw my full state pension without that being subject to any reduction.

Agreed, but my State Pension is currently £12,535, just a few £££ short of the Personal Allowance, so if the triple lock gives me the rumoured £400 . . . 😭

 

[Puglet]

Throughout my working life the pension goal posts have moved a few times, which not only confusing but also plays havoc with so called 'retirement planning'. As mentioned thankfully I have some 'work' pensions and also a private pension to also rely on, whose terms and conditions have stayed constant thoughtout the years, good job to cos at least I can get at my private pension before my state pension retirement age, which thinking about it has also moved upwards in my working lifetime.