Sally Redux

I reckon they'll do it just before my husband retires

durham_lad

Those were my thoughts as well

In 2013 the projected top 10% of all people in the UK were receiving over £50,000/year gross according to HMRC. Don't know what % of people receiving OAP are in this group but it can't be too many since it includes all wage earners.

dunroving

I assumed Cape Blue meant the top 10% of pension earners. I can't imagine hardly any pensioners would be in the top 10% of salary earners.

I prefer to be optimistic and don't think state pension would be completely denied "high earners" but I can't help feeling that those of us who saved responsibly instead of spending all our dosh on cars and holidays and such will get stung somehow in retirement.

The WEP system in the US comes to mind - state pension being offset by other retirement income, with a maximum deduction of 50% (like WEP).

Editha

Means testing of pensions is going to be very much a last resort for any UK government. It wouldn't save that much because the vast majority of British pensioners would be entitled to means tested benefits if their state pension was removed, and the savings from the minority who weren't would be offset by the administrative costs.

Means testing also has another disadvantage, that it discourages people from saving for old age.

There are easier ways to save on the pensions bill, some of which are already in place.

Firstly, the state pension age is going to be adjusted to reflect increased life expectancy -- so someone in their thirties now should assume that they won't get their state pension before they reach 69.

Secondly, the extras can be cancelled -- the bus pass, winter fuel allowance and TV licences and even the free prescriptions.

Thirdly the 'triple lock' which ensures that the pension goes up by the higher of wages, inflation or 2.5% is likely to be abandoned since it is unsustainable in the long term.

But that doesn't mean that paying NI to get a full state pension is a bad investment. It is still extremely good value compared with investing in a private pension fund, and there are risks to investing in private funds too.

durham_lad

I'm already going to be WEP'ed on my US SS so I can quite see a change meaning I may also may WEP'ed on my UK OAP

Votes count and I would hope that anything too draconian would be seen as political suicide.

Editha

Haven't you noticed that the UK and the USA are different cultures? One has a welfare state, the NHS, a low crime rate and no death penalty. The other has the American Dream, no socialised health care, the highest murder rate in the developed world and inject a death row prisoner with an agonizing cocktails of chemicals so that he takes 45 minutes to die.

What is politically acceptable in Texas isn't necessarily so in Surbiton.

dunroving

Texas is hardly representative of the US, and we've got the top three UK political parties hiring yanks (well, two yanks and a Saffa) to run their election campaign. We are getting closer and closer ...

Editha

I still don't think that means testing the old age pension is going to be acceptable because they means test some kind of benefit in Texas (I've no idea what WEP and SS stand for).

durham_lad

I don't understand your comparison. What does the death penalty, murder rate and NHS have to do with pensions and pensioners?

Pensioners voting in the USA is similar to pensioners voting in the UK. They are a big block, a large % do come out to vote, and politicians do try and woo them, in both countries.

SS=OAP and is not means tested in the USA. If your income is low enough SS is all tax free, and if your have a high income, then up to 85% of what you get is subject to income tax.

durham_lad

WEP = Windfall Elimination Provision

SS=OAP and is funded by a payroll tax, FICA, similar to NI, with the employer matching the 6.2% the employee pays into FICA.

There are many government/State jobs in the USA that don't pay into SS because they provide their own pension. If a person has a pension from a job that did not pay into SS and also has a job where they earn SS (10 years of contributions) then their SS is reduced. This is because SS is front-end weighted so that lower paid workers get higher SS payments relative to how much they have paid in. If you have 30 or more years of SS contributions then WEP does not apply.

UK private pensions and OAP are classed as pensions earned from jobs that did not pay into SS and are taken into account when calculating how much SS is reduced, up to a maximum reduction of ~$500/month

Editha

What I was trying to point out, was that the USA and the UK have different cultures with different histories and different expectations. Historically in the UK, the state pension has not been means tested. There would be considerable resistance to means testing it. The fact that a benefit called SS in Texas is reduced for higher earners is utterly irrelevant.

Cape Blue

I did indeed mean the top 10-20% of pensioners.

The UK state pension is what, 6K pa? Someone working 40+ years and paying into a private pension should be able to amass around 200K, which with current annuities, would give them around 10-11K pa.

I can see the UK gov quite easily "doing a WEP" and deciding that (for instance) any private pension over 6Kpa will result in a 50% reduction in state pension - i.e. every extra 1000 pa of private will reduce the state by 500 pa.

Sure, it will be a disincentive for some people to save for a pension, but those types were never going to bother in the first place. As it will impact only the top 10-20%, it might not be an electoral disaster - it will be sold on these people quaffing champagne and caviar with their state pensions whilst other more impoverished types are struggling to pay the bills.

I agree with the likelihood of the pension age being increased and triple-lock being removed as well - the UK gov will need to look at all measures to reduce the exposure.

Editha

The reduction you suggest would be a very severe disincentive to saving and a nightmare to administer, since it would simultaneously increase the means tested benefit entitlements of those near the margin. By that I mean that many of those losing 50% of their pension above £6,000 would then become entitled to housing benefit and council tax assistance

But I'm confident you are not going to be taken on as government advisor on pensions, so I think it is about as likely to happen as the complete abolition of the NHS.

Sally Redux

Really? I could quite easily see it happening, and I don't think it's like complete abolition of the NHS at all.

Editha

Sorry Sally, but I've already explained why I don't think it is likely, and I don't want to repeat myself.

Only the right-wing think tank Civitas recommends means testing in the future. However, even the Civitas report does not suggest that pensions acquired through NI payments should be means tested. It wants NI payments to be abolished, and a new means tested pension paid for from general taxation.

This discussion was originally about whether it is worth paying voluntary NI contributions in order to get a pension. The likelihood that a government in the future is going to say:

"You know all those contributions you paid over 40 years, thinking they guaranteed you a pension? Well Yah Boo Sucks!! The Jokes on you suckers"

is nil. Zero. Zilch.