Higher and Lower rate of State Pension,. This really needs changing

You don't get less than £169.5 because you contracted out you just don't get SERPs or S2P.

Allira if your letter says that it is wrong. If you paid NI for the required years you get the £169.5. Your MP should help. If it says you didn't pay enough years you won't get it.

Chocolatelovinggran

Brahumbug, it is interesting that you know several pensioners on the old rate who receive £270 a week. I am on the old rate, and no one I know on this receives anything like that: not one person.
To make it absolutely clear, I worked for forty years, taking just a few months out with each baby.
And, I am not complaining, simply stating facts.

I work for a charity for older people and so I have access to the finances of a lot of people. I come across an awful lot especially men who have state pensions this high. I came across one last week who was getting £370 a week !

@RubyRoobs

Thank you. Many people have a blinkered view and don't understand how the system works. The higher rates if state pension are exactly why the government reformed the system to get rid of SERPS and S2P, in order to reduce the pension bill.

My state pension is £983.32, 40 years with Serps.

Poppyred

Those on the lower rate were able to retire 6years (!!)before the ones on the higher rate and are able to get pension credit if you don’t have an occupational/private pension as well.

We WASPIs had to work another SIX years for the same state pension and the higher amount reflects this. Imagine having to work for so much longer if you have ill health and struggling!!

Those on the lower rate usually started work at 15 years old. My previous tax paid work, totally ignored by DWP, and not able to claim for those years. As was my childcare years, again not able to claim, too far back. So their mistakes, my punishment, and how many others deemed the same. The fact some weren't able to claim , after TV and news around this, is not the fault of older tax payers.

silverlining48

We didn’t retire early, 60 was the women’s state retirement age for years. 65 for men.
Then it changed slowly a bit at a time, to reach equality at 65. My friend retired at 61.5 years another at 62.75 years etc.etc so it was gradual, no one jumped from 60 to 67.
I don’t understand this lack of empathy for those of us who worked and paid 45 years, yes me, yet get so much less. It’s not our fault it’s not yours, surely we should stick together.

I’m sorry to argue, but there are WASPI women who jumped straight from 60 to 66, I’m one!!

Sadly, while women are busy arguing that some are less deserving than they are, the powers that be are able to ignore all petitions and representations and leave us to fight amongst ourselves.

There is no 'higher' pension. The £221.4 is a maximum amount not an automatic entitlement. We are in transitional arrangements and we will be for decades. This means some get more than this due to SERPS and S2P. Anybody retiring after 2016 who was below the maximum can only increase their pension to the new maximum. Under the old system you could keep increasing your pension up to a maximum. If £218 a week on top of the basic pension. The new pension is designed to reduce costs for the government, not increase them.

Up to a maximum of £218 a week, that should read!

Retirement benefits are all based round the same figures.

The so called Basic Pension is just that. The calculations that produce the Basic, also produce the deferred years pensions and are the basis for the Pension Credit.

Deferred years could be claimed before, if you continued working and paying NI. Now the deferred years are mandatory. If you cannot work because of illness or disability you can get credits for NI and still get the higher deferred years pension.

It helps to remember that what you receive is an insurance benefit not a "pension" created from accrued and compounding interest as a private pension would.

PoliticsNerd

Retirement benefits are all based round the same figures.

The so called Basic Pension is just that. The calculations that produce the Basic, also produce the deferred years pensions and are the basis for the Pension Credit.

Deferred years could be claimed before, if you continued working and paying NI. Now the deferred years are mandatory. If you cannot work because of illness or disability you can get credits for NI and still get the higher deferred years pension.

It helps to remember that what you receive is an insurance benefit not a "pension" created from accrued and compounding interest as a private pension would.

I am not quite clear in what you mean in some of your post, but you are absolutely correct in that there is no individual pot for your pension,which what some people seem to think and that it is an insurance system. It is not based on how much you have paid in, but in the number of qualifying years you have completed, either through national insurance payments or credits for periods such as home responsibilities. As I have said before, given the low amount we pay towards it, the pension is actually quite generous.

We don't actually fund our State Pension and never have. It is what is called a Pay-As-You-Go system. The current working age generation pays for the current pensioners. This was not so difficult when it started; only men who survived 18 years past life-expectancy received it so the cost was manageable. It isn't today. If we were only giving pensions to those 18 years over life-expectancy we would be getting them at 100!

I expect us to move to a means tested pension at some point - similar to the Australian one. The introduction of the Workplace Pension seemed to be a forerunner of that. It could build on Pension Credit while phasing out new claims for State Pension.

PoliticsNerd

We don't actually fund our State Pension and never have. It is what is called a Pay-As-You-Go system. The current working age generation pays for the current pensioners. This was not so difficult when it started; only men who survived 18 years past life-expectancy received it so the cost was manageable. It isn't today. If we were only giving pensions to those 18 years over life-expectancy we would be getting them at 100!

I expect us to move to a means tested pension at some point - similar to the Australian one. The introduction of the Workplace Pension seemed to be a forerunner of that. It could build on Pension Credit while phasing out new claims for State Pension.

I agree with you that it will change, but I don't think it will go to means testing the current pension. There would be legal complications as the government had encouraged people to pay extra national insurance payments to top up their pensions. They undoubtedly will get rid of the triple lock at some point, possibly by linking the pension to average earnings. In coming decades the provision of private pensions will vastly increase in importance.

No, I agree, it is very, very unlikely to affect existing pensions. They would have to give notice of coming changes as they always do with changes to benefits. The "current" pension would then become a "legacy" benefit and dwindle naturally.

I agree that they might well move from triple-lock to average earnings but they would need to ensure that Pension Credit is set at a level that reaches a minimum income standard for pensioners - complex as Pension Credit is made up of a direct payment and other benefits. I don't envy them.

Charleygirl5

My state pension is £983.32, 40 years with Serps.

SERPS, while paid along side the state insurance based retirement age benefit, is not part of it. It was an attempt (a clumsy one) to encourage workers to have a pension pot rather than just the state insurance. We now have the Workplace Pension.

The trouble with SERPS was that it was a pay as you go scheme, the same as the state pension, the national insurance fund not being individual pots of money! Countries such as Germany are now struggling to pay their pensions as they are pay as you go schemes as well. The much higher pension contributions barely covering the existing pensioners with revenues set to decline.

It wasn't the same as the state pension Brahumbug. Pay as you go referred, re SP, to one generation paying for the previous generation. Serps was you investing in you own pension.

PoliticsNerd

It wasn't the same as the state pension Brahumbug. Pay as you go referred, re SP, to one generation paying for the previous generation. Serps was you investing in you own pension.

Sorry you are mistaken. SERPS was a state run scheme, running in parallel with the basic state pension, and unlike the basic pension was based on your earnings. The generosity of this was gradually reduced until it was replaced by the 2nd state pension, (S2P). You are confusing it with being contracted out of SERPS and S2P, when you paid less national insurance and instead invested into your own or workplace pension, either DB or DC .

Posted to soon!
Just like the basic state pension, there was no 'pot' for SERPS and S2P.

You're right Brahumbug. I must have been thinking of those who contracted out - or just not thinking!

SERPS was always a strange way of trying to get people to save more for a pension. The workplace pension is better but still underfunded.

PoliticsNerd

You're right Brahumbug. I must have been thinking of those who contracted out - or just not thinking!

SERPS was always a strange way of trying to get people to save more for a pension. The workplace pension is better but still underfunded.

Absolutely right. You often hear people saying that the UK state pension is amongst the lowest in Europe, but they forget about the earnings related part. Some European pensions are higher, but they pay a huge amount of tax towards them. Given how much we pay in NI, ours is quite generous.

I was just looking at Australia where they have a means tested pension. I've always felt that our governments are attracted to this and that this was why the "Workplace Pension" was brought in.

It seems that the base eligability figure for an Australian State Pension is £627.07 a week. In the UK the base eligability figure for Pension Credit is £218.15 per week. Of course, the Australian Government is not providing a state pension to anyone above this figure except, possibly, legacy benefits if there are any.

In order to bring down the numbers able/needing to claim they have "Superannuation". Although our workplace pension is thought to have mimicked superannuation, the employer pays a lot less in the UK. But then, I dont think Australian employers pay anything comparable to NI.

Triple lock will continue to raise the Pension Credit faster than the Basic SP because of the compounding on an already larger amount - a good thing in my opinion as more of the poorest Pensioners will get extra help each year. However, around 55% of social security expenditure currently goes to pensioners and that figure looks like growing - paid for by a dwindling younger generation. So, I am pretty sure governments will look at this.

NB: Please fact check and check the figures if you are able to.

Apologies. I thought the income test figure for age pension in Australia looked odd. It's actually says:

"Once income exceeds $212 a fortnight, the pension reduces by $0.50 for every additional dollar earned. From 20 September 2024, a pensioner couple can earn $372 a fortnight combined and still be eligible for the full pension of $1725.20 a fortnight, including all supplements."

So it is reduced or ceased depending on your existing income.

They also take into account asset values for the means tested pension. One thing that this shows is the importance of not relying solely on the state pension, it is a useful starting point but a workplace or private pension is needed as well.