State pension rise

Curb my enthusiasm {sigh}

M0nica

Many of us will also be paying a large chunk back through income tax.

Remember the average pensioner household income is around £400 a week, £26,000 a year. Well above the tax free allowance (Note: average means roughly half the population of pensioners gets less than £400 and the other half get more.)

A household implies 2 people so therefore each one would be receiving £13,000 - only just above the PA.

Dinahmo

M0nica

Many of us will also be paying a large chunk back through income tax.

Remember the average pensioner household income is around £400 a week, £26,000 a year. Well above the tax free allowance (Note: average means roughly half the population of pensioners gets less than £400 and the other half get more.)

A household implies 2 people so therefore each one would be receiving £13,000 - only just above the PA.

I wondered. Thank you for explaining.

Also, how does 400X52=26,000? My math 400x52=20,800

Dinahmo Did you read my note about what an average means? there are many pensioner households where the single or combined pensions are considerably more than £26,000, The one I live in for one. Both DH and I will be paying standard rate income tax on every penny of our increased state pension.

It would be interesting to know how many pensioners are in fact paying 40% tax.
In the are I live, South Manchester, there are many wealthy pensioners.
I rush to say I am not one of them.

Area !!

M0nica

Dinahmo Did you read my note about what an average means? there are many pensioner households where the single or combined pensions are considerably more than £26,000, The one I live in for one. Both DH and I will be paying standard rate income tax on every penny of our increased state pension.

M0nica I read what you wrote, of course I know what an average is, however the bit you wrote makes no sense.

1. Since when is 400 x 52 equal to 26,000£ ?

2. Are you also adding 12,270 + 12,270 to equal 26,000£ ?

3. Precise sums matter to taxes. Falsehoods confuse.

400 x 52 equalled 20,800 when I went to school too.

My husband and I also pay income tax on every penny of our state pensions too Monica, as do many other pensioners.
It is disingenuous to say there’s no tax paid on state pensions, that’s only true if you don’t pay tax at all!
It’s also disingenuous to describe pensions as benefits. Pensions are not benefits, they are paid for through NI and taxation, paid by the very people who go on to receive them.

I have never understood why the idea of older people being comfortably off is so upsetting to some. As soon as pensions are discussed there are those talking about wealthy pensioners as though they have no right to live above a basic standard of living because they are older.

Occupational or private pensions are not free, and most people pay into the state system via NI. If someone is comfortable as a result of their own savings or pension contributions why are they seen as somehow undeserving? Yes, many pensioners are poor, and something should be done about that. But not by reducing the pensions of everyone else - a universal tax would ensure that there was enough to pay for everyone to have decent healthcare, education, housing and pensions. If we all pay in, we can all take out. Someone who has paid in more than average will take out more than average.

If we start reducing the SP for those with more than other people think they 'need' there will be no point in anyone paying AVCs or making contributions to occupational pensions, and everyone will end up on Pension Credit.

Great post, Doodledog.

Norah , my apologies, you are right, my figures are not clear. The £400 refers to the weekly income of single pensioners and the £26,000 to the income of pensioner households, which, of course includes couples.

Anyway I have rechecked my figures and the figure currently being given by the government for the income of a pensioner couple is £515 and £239 for a single pensioner, which multiplies out to £26780 a year for pensioner couples and £20,800 for a single pensioner www.gov.uk/government/statistics/pensioners-incomes-series-financial-year-2021-to-2022/pensioners-incomes-series-financial-year-2021-to-2022

This means that many pensioners will be paying back a lot of their increased pension back to the government in income tax.

There are so many figures to do with pensions.

This from Gov.uk

Pensioner incomes have increased since 1995
In FYE 2022, the average income for pensioner couples was £515 per week. This was more than twice that of single pensioners, who had an average income of £239 per week. This difference is statistically significant.30 Aug 2023

This from Pensions Age:

The average weekly pensioner income in the UK at the end of the financial year in 2022, after the deduction of direct taxes and housing costs, was £349, according to new statistics from the government.

This represents a £27 a week decline compared to the end of the financial year in 2021.

There is always a bias in presentation depending on what the writer wants to focus on.

Equally, there is sometimes a suggestion that much of the State pension may/could be paid in tax. The other side of this coin is the fact that, so far, basic State Pension has never exceeded Personal Tax Allowance. You could therefore say that only those who have additional income pay tax.

Also, is the "mean" average the most relevant figure? Couldn't it be more useful to know where the majority sit on the scale of pensions, for instance.

M0nica

Norah , my apologies, you are right, my figures are not clear. The £400 refers to the weekly income of single pensioners and the £26,000 to the income of pensioner households, which, of course includes couples.

Anyway I have rechecked my figures and the figure currently being given by the government for the income of a pensioner couple is £515 and £239 for a single pensioner, which multiplies out to £26780 a year for pensioner couples and £20,800 for a single pensioner www.gov.uk/government/statistics/pensioners-incomes-series-financial-year-2021-to-2022/pensioners-incomes-series-financial-year-2021-to-2022

This means that many pensioners will be paying back a lot of their increased pension back to the government in income tax.

Yes, average pensioner couples at £515 weekly might be paying some taxes, depending on the split of pensions, one could easily be under personal allowance with other person over. I'd imagine it to be rare that a couple has equal pension amounts.

However, (average) £239 for a single pensioner for 52 weeks equals £12428 and is under the Personal Allowance of £12,570. Thus the average single pensioner will NOT be paying more in taxes. Nor should they, in my opinion.

Your numbers may upset some, perhaps do a number check?

My pension is just over £800 per month (I have NO additional pension) I wonder how many of you who say the rise is too much would like to survive on this?? Yes l manage, just, but that means no holidays, no nights out, buying the basics so no luxuries and should my 8 year old car have any major problems l will portably have to give it up. So all of you saying its too much look at it from my view point and maybe think again.

Is anyone saying it's too much?

Caravansera

Another WASPI.

Next year’s increase is likely to be 8.5%.

www.pensionsage.com/pa/state-pension-set-for-substantial-increase-under-triple-lock.php

It may seem generous percentage wise. In real terms, for someone on the full rate on the new state pension (203.85 or £10,804 pa) the raise will be £17.32 a week before tax, £13.85 after tax. Many state pensioners do not receive the full rate.

By comparision, the latest government data, published in August 2023, reveals that the mean average UK weekly wage, excluding bonuses, is £613 gross equivalent to an annual pre-tax salary of around £31,876 ...

making the full weekly state pension around a third of average weekly wages.

Latest report from ageUK (June2023) shows that 18% of pensioners (over 2 million) are living in poverty.

www.ageuk.org.uk/globalassets/age-uk/documents/reports-and-publications/reports-and-briefings/money-matters/poverty-in-later-life-briefing-june-2023.pdf

The UK government spends a lower percentage of its GDP on pensions that other European countries, lower than Germany, France, Italy, Denmark, The Netherlands.

Thank you for explaining, so succinctly, why the increase is needed and why so many will not be paying any more in taxes. I'd suggest the personal allowance needs to rise along with the state pension. Just an opinion.

Keeping the tax allowance the same is definitely a stealth cut in pensions (and wages at the lower end) making increases sound more generous than they are. See also 'lifting people out of paying NI', which means that people on low wages are still working but not protected by sick pay or maternity benefits and are not making pension contributions. Again, it appears to be a concession, but it is actually a cut in protection (and much cheaper for employers).

It really isn't Just an opinion Norah, it's a reasoned suggestion and a good one.

Just to go back generally to complaints about the word "benefit". We get the "benefits" of a private pension set out for us and the "benefits" of an insurance policy. It's a perfectly reasonable word to use.

That's as maybe, but I can understand why people don't like pensions and benefits being conflated. For one thing, what are now called 'benefits' used to be called 'the dole' or National Assistance. They are associated with being unable to provide for oneself because of an inability to find work, whereas pensions are something that people are entitled to after a lifetime of work.

For another, it is a short step from pensions being an automatic universal entitlement to a means-tested benefit - that happened to Family Allowance after it became child benefit and was means tested. I think conflating the two things is fraught with danger, and should be resisted.

paddyann54

We still have the lowest pension in Europe and possibly much further afield,low pensions ,high taxes and cost of living crisis means life is very difficult for a lot of pensioners especially in areas like mine where people didn't have high paid jobs so no private pensions .
You may not need it but hundreds of thousands do and means testing is degrading and embarassing for many elderly people .This way treating everyone the same means that people in need dont have to claim for it and have the indignity of forms and appeals

But other countries don’t get things like free prescriptions, free eye tests, bus passes, benefits etc.

Look at the furlough scheme and the small business grants during covid then compare what places like Greece got. So many weeks on full pay then absolutely nothing so your extended family all had to chip in and help you out.

Doodledog

That's as maybe, but I can understand why people don't like pensions and benefits being conflated. For one thing, what are now called 'benefits' used to be called 'the dole' or National Assistance. They are associated with being unable to provide for oneself because of an inability to find work, whereas pensions are something that people are entitled to after a lifetime of work.

For another, it is a short step from pensions being an automatic universal entitlement to a means-tested benefit - that happened to Family Allowance after it became child benefit and was means tested. I think conflating the two things is fraught with danger, and should be resisted.

"Pensions" and "Benefit" are not interchangeable the "Benefits" are a result of the Pension or insurance scheme.

I understand what you say about "The Dole" or "National Assistance" but they seem a lot less appropriate than Benefit, whoever is receiving it. So surely we should get used to the fact that all insurance style systems, including state run ones, have benefits.

Can I just point out that some of these figures about average pensioner income are misleading?

The figure being quoted is income from all sources before housing costs, which includes council tax and rent/mortgage. Many pensioners don't pay rent or mortgage, so that's irrelevant, but for those who do it is relevant.

My total income from all sources (including housing benefit) after housing costs is £206.15 a week. Looked at superficially, many would think I don't pay income tax, but I do because my income from pensions is over the threshold. Therefore, I will lose 20% in income tax from any increase. I'm not eligible for Pension Credit.

DAR The figure you want, the most common value for pension income would be the mode and that does not seem to be quoted anywhere. The figure of £349 quoted by Pension Age seems to be the median income, ie half of all pensioners have incomes above that amount and half have income below that amount while the Government statistics take the average income. These two figures show that, while half of all pensioners have incomes of £349 a week or less, a significant proportion of pensioners have substantial pensions.

I take your point growstuff but in any group spending patterns will vary immensely. Some older people will need to pay for help around the house and in the garden, others won't. Over 25% of retired people rent their property rather than own it or have mortgages. assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1088802/EHS_Older_people_s_housing_2020-21.pdf so they will have housing payments.

Others have high energy bills, others live in super-energy efficient houses. Some will haave high maintenance charges associated with a property they own. There will always be immense variability in spending patterns, but in this case we are talking quite simply about whether people will be paying income tax on their State pension and the answer to that is that anyone whose total pension income exceeds £12,570 a year, £241.73 a week will be paying income tax on any increase in their state pension.

It's not "misleading" unless you misread it, growstuff.

You have quoted it accurately and have seen the aim is to look at a "average" pension from a different angle. And what was it to demonstrate? I put it in the next sentence.

There is always a bias in presentation depending on what the writer wants to focus on.

I honestly didn't think it was that difficult to understand the point I was making.