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

An interesting thread. My work pension was contracted out, which means that I get just under £2000 pa less than the full state pension. A friend in the same job but who never paid into the pension scheme has retired with the full SP.
Add this to being born in 1953 and waiting until 10 days before my 66th birthday to draw my pension, I feel a little unfairly treated when the same friend received her state pension 16 months earlier than me although only 4 months older.
My husband's occupational pension was also contracted out, he receives even less state pension than me. We had no choice about being contracted out.
As has been said above, the system is too complicated and for many seemingly unfair. We both retired during the introduction of the new SP and like others were given different information and advice by DWP, I'm still not sure we receive our full entitlement!

Allira

Even if you didn't know about the reduced national insurance, the fact remains you and your employer paid less than someone who was not contracted out and thus made a saving.

J52

Yes my tax bill will be increased, I doubt if I’ll see much of the payment.

You will only lose 20% of the increase, assuming you are a basic tax payer

knspol
What Grannymel2 is referring to is SERPS and S2P which is based in earnings and paid on top of the basic pension, so she is correct. Many on the old pension receive far more than the new pension maximum.

Grannymel12

From what I remember from my time working at DSS if you were on the older state pension you were also entitled to an additional pension allowance based on your NI contributions. You don't get that on the newer state pension.

Don't think that's correct as I'm on the old pension and do not receive any additional pension and have always paid full NI contributions.

From what I remember from my time working at DSS if you were on the older state pension you were also entitled to an additional pension allowance based on your NI contributions. You don't get that on the newer state pension.

J52

Yes my tax bill will be increased, I doubt if I’ll see much of the payment.

The amount I received in April went down, not up, then did go up slightly in May.

Yes my tax bill will be increased, I doubt if I’ll see much of the payment.

I’m not getting excited about it as I’ll just be paying tax

The amount of tax I paid last year (although very little I should add) wiped out most of any increase I had anyway.

Thanks for the replies, I should have worked that one out! Duh!
The info I read was just blanket amounts for everyone on each system.
I’m not getting excited about it as I’ll just be paying tax, but I’m pleased for those who will benefit. A pity that those on the old rate lose so much.

Cabbie21

Because it is a % increase, so 4.5% of, say, £170 produces an increase of less than an increase of 4.5% of £220.

My SP is made up of various components. At the last increase, not all the components were given the % increase. So it is complicated and the blanket % you hear on the news does not apply across the board.

Yes, so the gap widens.

Because it is a % increase, so 4.5% of, say, £170 produces an increase of less than an increase of 4.5% of £220.

My SP is made up of various components. At the last increase, not all the components were given the % increase. So it is complicated and the blanket % you hear on the news does not apply across the board.

Because it’s a percentage increase.

The annual pension rise under the triple lock is based on a percentage figure, so those on the old state pension fall further behind those on the new state pension every year. The number of people eligible for pension credit will rise every year therefore.

I don’t think there’s a thread started on this, but a rise in SP from April. There’s is a difference of around £100 less for those on the old SP. £460 for new SP, £353:60 for the old rate.
Any ideas why?

jd79

Allira no if you're on the lower rate pension you do not immediately qualify for Pension Credit. A friend of mine is now £2 over so struggles.. She does get help with rent but that's all. If you add up all the things she would get if she had £2.50 less it would amount to probably what I get having paid into a pension when I worked. I have to say it isn't unfortunately bring me much more than me having to pay more tax! :-(

Yes, it happened to relatives of mine, just very slightly over to claim.

Brahumbug

rafichagran

It was not lowered on the basic pension. Meant to add that on my previous post.

I presume you mean the contracted out pension equivalent (COPE) deduction? If so, you have to remember you and your employer paid less national insurance in respect of that pension.

Well, who knew at the time that there were two different rates?

Certainly not anyone I know.
I should have asked my accountant DN but was too busy working, caring for a family and elderly relatives.

Allira no if you're on the lower rate pension you do not immediately qualify for Pension Credit. A friend of mine is now £2 over so struggles.. She does get help with rent but that's all. If you add up all the things she would get if she had £2.50 less it would amount to probably what I get having paid into a pension when I worked. I have to say it isn't unfortunately bring me much more than me having to pay more tax! :-(

rafichagran

It was not lowered on the basic pension. Meant to add that on my previous post.

I presume you mean the contracted out pension equivalent (COPE) deduction? If so, you have to remember you and your employer paid less national insurance in respect of that pension.

It was not lowered on the basic pension. Meant to add that on my previous post.

4allweknow

Rafichagran No matter the size of your state pension it is included in the calculation of your total income. If all income, eg, lower SP plus, say, any occupational pension takes you above the person allowance then the surplus is taxed.

Yes I am aware of that, I have had my pension for 17 months now.
I worked 41 years and resent any money being taken from my state pension because I had a occupational pension.

Franbern

I find it difficult to understand why older Pensioners are expected to survive on the lower rate of state pension, over three grand a year lower than the higher rate for younger pensioners.

Surely if anything, it is the older ones that is likely to need more money for heating, taxis, etc. etc. Cannot find any real justification for these two levels anywhere.

Surely, if the higher rate is what is considered the minimum for a pensioner to have to cover their needs, then anyone solely on the lower rate hsould be entitled to be able to get Pension Credit to 'top-up' the lower rate to that of the higher rate.

Me too Franbern, it’s outrageous. My husband gets the lower rate yet paid far more in tax and national insurance than I did. I can’t understand how they can justify it. I bet the French wouldn’t put up with it yet we meekly accept everything thrown at us.

Cabbie21

No, PIP does not stop when a claimant reaches pension age, but people over that age cannot make a new claim. Attendance Allowance can be claimed, but there is no Mobility element to that.

Hellesbelles, are you sure you might not qualify for the Daily Living Element of PIP as well as Mobility? I advise you to get help when it comes up for renewal.
You are allowed to dip into savings as required for normal expenditure. If you have between £6000 and £16000 you might be eligible for Universal Credit. Obviously if you spend lavishly that would be seen as Deprivation of Assets
Sorry to digress.

Thank you for that correction about PIP and state pension.

No, PIP does not stop when a claimant reaches pension age, but people over that age cannot make a new claim. Attendance Allowance can be claimed, but there is no Mobility element to that.

Hellesbelles, are you sure you might not qualify for the Daily Living Element of PIP as well as Mobility? I advise you to get help when it comes up for renewal.
You are allowed to dip into savings as required for normal expenditure. If you have between £6000 and £16000 you might be eligible for Universal Credit. Obviously if you spend lavishly that would be seen as Deprivation of Assets
Sorry to digress.

Those on the new state pension did not all work for six years longer than others. Many will have been in full-time education for several years after I left at age 16 (and paid for my own extra qualifications subsequently) so probably contributed for a similar number of years. My DH was 6 years longer in free education than me. He was even paid to be at University.

I was able to draw my SP at almost 62. I worked from age 16 (and at 72 am still doing some paid work) apart from about 3 years to raise tiny children (my first paid job after my first child was born was when she was 8 months old) and I combined part-time employment with self-employment meaning I paid Class 2 NI as well which qualified me for absolutely nothing. I claimed HRP for 18 years that did absolutely nothing for me most of the time either. For many years I also paid Class 4 NI which was basically another word for "Tax" - with no benefit to me. I also fell foul of the then rule that if you were employed part-time in many jobs you were not allowed to join the private pension scheme, until the European Courts declared this to be sex discrimination as the vast majority of such workers were women. BUT I had to pay over £3k to "buy in" 4 extra years of pension to make up the 15 years of part-time teaching contributions. I did get tax relief on them. I should have paid reduced NI during those years but never got the money from the government.

My DH now gets £100 a month more SP than me (old pension scheme as is mine).

I'm not pleading poverty cos I also have an occupational pension (greatly reduced due to being "forced" to claim it early), as does DH, plus three personal pensions (all paid for) and we also effectively had a third income between us due to a small business we had for about 25 years.

Like all government benefits there are gross inequalities, Some have occurred due to people making poor choices or doing nothing to try to support themselves in their old age. My best friend was one of these. Spent every penny of her earnings on luxuries (including several cruises), doubled her weight due to laziness, and accepted vast amounts of state benefits due to her poor health - that she was unable to spend cos she was housebound for years. I loved her to bits, but the result was that her two sons inherited all that unspent cash from benefits when she died.