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

PoliticsNerd

Brahumbug You're emphasizing SERPS (State Earnings-Related Pension Scheme) and S2P (Second State Pension). These are not relevant to how the wider system works unless you are looking at Pension Credit and/or a possible means-tested state benefit although they are obviously important to the individual.

A process for a means-tested benefit started to be set up in 2012. Even then, when discussing governments future plans, SERPS et al are only as relevant as any other additional income.

As you seem to be making this discussion personal it may well be a good time to draw a line under it and perhaps come back to it at a later date.

Not making it personal at all. Until around 2065 the pension system will be in transitional arrangements. Therefore SERPS and S2P will play a part, though a diminishing one as the decades pass and the cap on the new state pension becomes a more important factor. However I still fail to see how a higher level of means tested pension would be affordable to the tax payer in general. So let's leave it there.

Brahumbug You're emphasizing SERPS (State Earnings-Related Pension Scheme) and S2P (Second State Pension). These are not relevant to how the wider system works unless you are looking at Pension Credit and/or a possible means-tested state benefit although they are obviously important to the individual.

A process for a means-tested benefit started to be set up in 2012. Even then, when discussing governments future plans, SERPS et al are only as relevant as any other additional income.

As you seem to be making this discussion personal it may well be a good time to draw a line under it and perhaps come back to it at a later date.

PoliticsNerd

Brahumbug. If you insist on telling me what I intend by my posts, when I have clearly said something else, I'm afraid my posts get longer and more detailed.

My apologies for that but suggesting you know more than I do about why I entered this discussion is not really very helpful.

If you insist thst your post is beyond analysis and criticism then we will get nowhere. I understand the pension system thoroughly and you have made statements which are not correct regarding SERPS and S2P. What you intend by your post may not be the actual outcome. The so called new pension will be a flat rate eventually, but not until the middle of the century due to transitional arrangements. Untill then people will be getting a mixture of pensions based on SERPS and S2P as well as the basic pension. The pension has nothing to do with the amount you have paid, that is correct, it is the number of qualifying years or pension credits, which are an important part of the pension system.
As I have said, funding and affordability are at the heart of the pension debate and workplace pensions will become more important in the coming decades.

Ho, ho, came the chorused reply.

Where's Trevor Phillips when you need him

🤔

Brahumbug. If you insist on telling me what I intend by my posts, when I have clearly said something else, I'm afraid my posts get longer and more detailed.

My apologies for that but suggesting you know more than I do about why I entered this discussion is not really very helpful.

Brahumbug, it helps to understand (factually) the nature of the State Pension and its relationship to contributions, as well as the ongoing evolution of pension schemes like SERPS and workplace pensions.

State Pension vs. National Insurance Contributions: The State Pension is a benefit tied to National Insurance contributions but it operates on a flat-rate basis rather than being directly proportional to the amount an individual has paid in. This means that all qualifying individuals receive the same basic amount, regardless of their contribution history. Understanding this distinction is crucial when discussing pension sustainability and fairness.

SERPS: The State Earnings-Related Pension Scheme (SERPS) was based on earnings and allowed for additional pension benefits based on contributions. With the introduction of the new State Pension in 2016 and the shift to automatic enrollment in workplace pensions, the intention was to create a more comprehensible and uniform system for retirement savings.

Workplace Pensions: The transition to workplace pensions has been a significant development in ensuring that workers save for retirement in addition to the State Pension. The emphasis on these pensions is particularly important in the context of a changing demographic landscape, including a growing aging population and lower birth rates.

Means-Testing Concerns: Your concern about a potential move towards a means-tested pension is valid and reflects ongoing debates. There's a tension between providing universal benefits and ensuring that pension systems are sustainable given demographic changes.

Funding and Future Sustainability: The challenge of funding pensions in the long term, especially with demographic shifts, is a pressing concern for policymakers. Discussions about how to finance these benefits—whether through taxation, contributions, or means-testing—will be critical in shaping the future of the pension system.

I am trying to encourage a thoughtful discussion about the future structure and funding mechanisms of the State Pension especially as society continues to evolve.

PoliticsNerd

"I am not quite certain why a means tested pension needs to be higher than the current pension credit or why it would be more affordable. But I am open to being persuaded." Brahumbug

A means-tested pension for all would completely change the way we award state retirement age benefits at present, although it could build on Pension Credit.

It could be higher because not everyone would receive it. It should be higher because the current means test, Pension Credit, does not currently meet the minimum standard for this age-related income.

I hope this helps.

I can't agree with your statement that
"they operate separately from state-provided benefits for individuals who have retired from the workforce."
SERPS and S2P are part of the benefits provided for retirees, they are not separate. They are unfortunately, no longer available to new workers, or added to for existing workers with historic entitlement to them.
What you are basically arguing for is a higher level of pension credit. I would like to see a stream lined system rather than the current mess of bolt on additions that we currently have. But affordability still needs to be taken into consideration. For instance we should rationalise the means tested assistance available to those currently over the pension credit limit.

"I am not quite certain why a means tested pension needs to be higher than the current pension credit or why it would be more affordable. But I am open to being persuaded." Brahumbug

A means-tested pension for all would completely change the way we award state retirement age benefits at present, although it could build on Pension Credit.

It could be higher because not everyone would receive it. It should be higher because the current means test, Pension Credit, does not currently meet the minimum standard for this age-related income.

I hope this helps.

Brahumbug

@PoliticsNerd
Sorry, I worded that badly, I didn't mean it to sound as sharp as it did! But SERPS and S2P are definitely not irrelevant as they were an important part of the pension entitlement, just as the basic amount was.

To clarify, private pensions, income from ongoing employment, and family trusts can indeed play a significant role in an individual's overall financial well-being, as do SERPS payment, etc.

While these sources of income may provide financial support, they operate separately from state-provided benefits for individuals who have retired from the workforce.

The points I have raised relate to how we best provide this state benefit.

Posted to soon!
But a means tested safety net is important. After all, we are hopefully a civilised society that will look after the poorest members.

I am not quite certain why a means tested pension needs to be higher than the current pension credit or why it would be more affordable. But I am open to being persuaded ☺️. The state pension will be a smaller proportion of retiree's income in future decades as the limiting effect of the new pension increases and personal/ workplace pensions increase

@PoliticsNerd
Sorry, I worded that badly, I didn't mean it to sound as sharp as it did! But SERPS and S2P are definitely not irrelevant as they were an important part of the pension entitlement, just as the basic amount was.

PoliticsNerd

"The only thing you have omitted is the basic pension is generally supplemented by SERPS and S2P, not many receive only the £169.5, or if they do then they will have a work place pension in addition"

Some people will not get a full state for many different reasons Brahumbug. I was discussing the possible move to a means tested pension in years to come and for that purpose having opted into, or out of SERPS is irrelevant. All sorts of sources may add into a total income which may or may not make a claimant elligable for means tested benefits.

I showed the three payments and pointed out that compounding their growth means they will get further apart over time.

If we are to look at a future means-tested pension - which could be both more affordable and at a higher level than current Pension Credit - Pension Credit may have to retain triple-lock while the two Pension levels move to growth equal to wages/salary growth.

What do you mean by full state pension? The basic pension is just that, the basic before adding in SERPS and S2P. The new state pension will eventually be a cap, not an automatic entitlement. We will however, be in transitional arrangements till we past the middle of this century. Only those starting contributing after 2016 will be affected by the straight forward 35 years to achieve the maximum amount. The biggest reason for people getting less is contracting out. Others don't have the number of qualifying years. Showing just three numbers does not in any way reflect the reality of what people are getting. Only around 51% of people retiring after 2016 are getting the maximum pension, with some exceeding it due to preserved rights under the old system

"The only thing you have omitted is the basic pension is generally supplemented by SERPS and S2P, not many receive only the £169.5, or if they do then they will have a work place pension in addition"

Some people will not get a full state for many different reasons Brahumbug. I was discussing the possible move to a means tested pension in years to come and for that purpose having opted into, or out of SERPS is irrelevant. All sorts of sources may add into a total income which may or may not make a claimant elligable for means tested benefits.

I showed the three payments and pointed out that compounding their growth means they will get further apart over time.

If we are to look at a future means-tested pension - which could be both more affordable and at a higher level than current Pension Credit - Pension Credit may have to retain triple-lock while the two Pension levels move to growth equal to wages/salary growth.

Cabbie21

I do think it is important that any information given on the Legal, pensions and money Board is accurate. Anything else is misleading. The state pension is confusing enough without adding misinformation into the mix.

I couldn't agree more!👍

Here is an interesting analysis from the IFS on pensions and means tested benefits.

ifs.org.uk/publications/means-tested-support-people-approaching-and-beyond-state-pension-age?fbclid=IwY2xjawHKI_BleHRuA2FlbQIxMQABHXOlbDwbOvGZZFYpQ0Gw5xe_lAPAfZ188ZRWZS-v_rVymK-s3yTiOUwyEQ_aem_VGeBUt3kxtIUavfhOwfFgA

I do think it is important that any information given on the Legal, pensions and money Board is accurate. Anything else is misleading. The state pension is confusing enough without adding misinformation into the mix.

PoliticsNerd

I do think that, when dealing with legalities, we really need to understand and be accurate before going in to print. Otherwise we mislead.

Someone suggested that Pension Credit makes the Basic State Pension up to the Deferred Years Pension so it's worth comparing these figures and considering the effect of triple-lock and compounding.

For the year 24/25:

Basic Pension: 169.50
Pension Credi: 218.15
State Defered Years: 221.20

The triple-lock compounds each year - any equal percentage interest will - so each of these get further apart.

The Joseph Rowntree trust suggests a minimum income standard for pensioners of £17,200 or £330.77. The state expects the the individual to make up the difference with personal pensions. The Workplace Pension scheme will help with this but the poorest pensioners are still likely to be a) women and b) the oldest pensioners.

All good points with regards to the pension. The only thing you have omitted is the basic pension is generally supplemented by SERPS and S2P, not many receive only the £169.5, or if they do then they will have a work place pension in addition.

I'm not sure what you want Bea65. If you are on the "new" Deferred Years state pension and your income is below the eliabiliy level you can still get Pension Credit. If it isn't I'm not sure what you are suggesting.

‘Be more financially comfortable as WITH PENSION CREDIT and all the add ons WHF/ DENTAL BENEFITS/ RENT AND COUNCIL TAX ASSISTANCE etc

Personally I’m worse off financially as retired @67 and 3 months- saved a little and paid into 2 tiny pensions- hoping to have more funds in retirement… BUT I would be financially more comfortable- do wish the older Seniors would take note that not having SP @60, some of us are worn out physically and mentally at 66 so we now need more care earlier than my own brother/sister who didn’t need much care till 75+

So, the headline for this thread was "Higher and Lower rate of State Pension,. This really needs changing." This moves us from facts to opinion.

The state cannot afford the costs to the tax system of unfunded pensions. The only way I can see this being resolved is to move from universal pensions to means-tested ones.

This, however, is most unlikely to affect any current State Pension benefits including the three listed in my previous post.

I do think that, when dealing with legalities, we really need to understand and be accurate before going in to print. Otherwise we mislead.

Someone suggested that Pension Credit makes the Basic State Pension up to the Deferred Years Pension so it's worth comparing these figures and considering the effect of triple-lock and compounding.

For the year 24/25:

Basic Pension: 169.50
Pension Credi: 218.15
State Defered Years: 221.20

The triple-lock compounds each year - any equal percentage interest will - so each of these get further apart.

The Joseph Rowntree trust suggests a minimum income standard for pensioners of £17,200 or £330.77. The state expects the the individual to make up the difference with personal pensions. The Workplace Pension scheme will help with this but the poorest pensioners are still likely to be a) women and b) the oldest pensioners.

For any one who wants to see examples of the transitional arrangements for the pension after 2016, then follow this link. The calculation is a bit complicated but understandable!

www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension/the-new-state-pension-transition-and-contracting-out-fact-sheet