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

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.

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

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.

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.

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

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.

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.

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!!

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.

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

@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.

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 !

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.

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

With the transitional arrangements I get more with the old state pension than with the new because of the years I have when I wasn't contracted out. I don't think it would be fair if people who had the benefit of contracting out now also got the new pension rate. Would they be willing to repay the contracted out money that went to their private pension,?

The old state pension is not £169.5 a week. That is the basic pension before SERPS and S2P is added on. If you are only getting the basic pension then you will have a private pension due to contracting out. The new pension is not £221 a week. That is a maximum figure and only 51% of those trying after 2016 get it. Some do get more due to protected payments that they earned under the old system.

growstuff

Allira

GranPepp

State pensions have become complicated and complex unfortunately but it isn't always advantageous to be on the newer "full pension" of £221 pw, as against £169.50 pw on the old "basic pension" (subject to differing NI contributions which are another area that is more complicated) than it needs to be. If you're on the £221, you're not entitled to pension credit. If you are on the £169.50, you get pension credit that top your weekly money up to £218 plus you get a load of other benefits such as free TV licence, council tax deduction, winter fuel payment, £25 every week the temperature is below a certain level for some consecutive days, you qualify for a social broadband tariff much lower than others pay, help with your fuel bills from funds fuel companies hold, free glasses etc). And someone on £3 more a week because they are on "full state pension" gets none of this. I don't think it's a coincidence the Govt set the new full state pension a smidgen above the income elegibility criteria for pension credit which is a gateway benefit to a lot more.

£169.50 pw is not enough to live on.

Many people on the old State Pension get less than that anyway, as it needed 39 years of contributions to qualify for the full amount, or 44 years for men.

If contracted out then even more deductions are made to that £169.50 even if the private works pension is a pittance.

People on the old state pension don't have deductions for any years they were opted out.

My letter stating the amount of the old SP and how it is calculated states differently.

Allira

GranPepp

State pensions have become complicated and complex unfortunately but it isn't always advantageous to be on the newer "full pension" of £221 pw, as against £169.50 pw on the old "basic pension" (subject to differing NI contributions which are another area that is more complicated) than it needs to be. If you're on the £221, you're not entitled to pension credit. If you are on the £169.50, you get pension credit that top your weekly money up to £218 plus you get a load of other benefits such as free TV licence, council tax deduction, winter fuel payment, £25 every week the temperature is below a certain level for some consecutive days, you qualify for a social broadband tariff much lower than others pay, help with your fuel bills from funds fuel companies hold, free glasses etc). And someone on £3 more a week because they are on "full state pension" gets none of this. I don't think it's a coincidence the Govt set the new full state pension a smidgen above the income elegibility criteria for pension credit which is a gateway benefit to a lot more.

£169.50 pw is not enough to live on.

Many people on the old State Pension get less than that anyway, as it needed 39 years of contributions to qualify for the full amount, or 44 years for men.

If contracted out then even more deductions are made to that £169.50 even if the private works pension is a pittance.

People on the old state pension don't have deductions for any years they were opted out.

My free bus pass is disabled one so I can use it on anytime bus and local trains. Here men and women get free bus / local train pass at 60.

Franbern heard yesterday I will be getting £200 winter allowance. Phoned BT I can get it cheaper if I had slower download speed . But decided I like it as it is so will still pay the same rate . I don't have a landline.

My council will only reduce my band rate if I have to use a room to suit my needs that wasn't the original use of the room . My friend gets reduced band rate because the study had to be made into a bedroom for her down stairs and shower room . Plus gets reduction because her daughter is her full time carer they live together.

Whiff, re Community charge. Re-check with your local authority. All LA can give up to 100% to people on Pension Credit - nothing to do with size of property or how rooms are used, totally on fact of being in receipt of PC. So would be surprised if yours did not do so.

BT have a social tariff of £15 per month for landline and Internet. So, unless you are someone who downloads lots of films, etc. then this is ideal for most small households.

Your winter fuel allowance will be £200, but you will probably need to apply for it this first year of being a pensioner (and on PC). Your tv licence - pension credit definitely effects payment of this, but I a think may also have some sort of age involvement. Do check it out carefully.

For much of my 'working years' I was a stay at home Mum, looking after my disabled hubbie (no carers allowance back then), and also fostering babies and toddlers for local authority. Very little (if any) pay element to the money we received for that back in 70's and 80's. Then I was very seriously ill myself and a bungled operation meant I was unable to consider returning to work until I was in my sixties.

So, my retirement pension was/is severely curtailed for all those years when there was no stamp as I was not in receipt of any salary.. (These days fosters receive a proper salary and get their stamp paid).

Thank goodness for PC, not sure how I would survive otherwise. I do not smoke, have a pet, or a car, do not go on holidays. Do have a lovely flat and am able to lead a comfortable life with this assistance. I am very grateful for this - I feel that I have more than paid my way in the past with looking after my husband, bringing up my own family - (who all have for many years now been in employment and paid full taxes etc.), as well as looking after some forty foster children.

I also receive Attendance Allowance, which means I have been able to purchase such items as my mobility scooter - which ensures I am not housebound, and my electric wheelchair which enables me to get round on public transport, and items within my home. (eg riser-recliner armchair, electric adjustable bed, etc. etc.)

With these things I am able to lead a virtually independent life (I do have a daughter locally who takes me to out of town medical appointments etc.).

Franbern thank you . I did talk to my council but unless I have had a room adapted into a room other than it's original purpose I don't qualify. I live in a 2 bed bungalow and use my rooms for there original purpose . But will check with my broadband provider thank you.

Primrose53

I see nothing wrong with the two rates. Let’s say you were born in Feb 1953 you got your state pension aged 62. If like myself you were born just a few months later then you had to wait several years to receive your state pension.

That seemed very unfair to me and I had to wait until I was 65 or 66, can’t remember which now. However, I effectively lost out on a lot of money. It’s only fair now that people like myself receive the higher rate.

But you were allowed to continue working if you wished, retirement wasn't compulsory at 60, 65 for men, as it was in some careers. Therefore you could continue earning.

It doesn't change the fact that older pensioners are now managing on about £60 per week less than younger pensioners and that gap will only widen. The extra amount received by older women pensioners over those five years will be cancelled out by the age of about 82, I believe.
Men had to work until 65 before receiving a SP - no-one seems to think about them.

I see nothing wrong with the two rates. Let’s say you were born in Feb 1953 you got your state pension aged 62. If like myself you were born just a few months later then you had to wait several years to receive your state pension.

That seemed very unfair to me and I had to wait until I was 65 or 66, can’t remember which now. However, I effectively lost out on a lot of money. It’s only fair now that people like myself receive the higher rate.

Whiff, if you are on Pension Credit then you can get the other things you mention - but you do have to apply for them, they are not awarded automatically.

Social Amount for Broadband - you need to find out if your BB provider is part of this. Usually a phone call is all that is required, or else change to one that does give this excellent service. You will also need to apply to local authority to get the other 75% of your council tax paid. The WFA may require application for first year, after that it continues.

As you say, it is not free optical services, just a very small amount of money off eye tests. If you can find an NHS dentist then that is free of charge, but if there are none you can go to, then you will still have to pay full private charges.