What do you think of the new state pension system from April 2017 ?

[1949threepence 3,367]

Just wondering what members thought about this, as it seems to me to have a fair few positives and negatives, depending on which way you view it.

There's an article about it from SAGA here

The main changes are that there will be a single flat rate of contributory state retirement pension, amounting in today's money to £144, as compared to the current £107. Recipents will need to have paid Class 1 or 2 National Insurance contributions, or been awarded equivalent credits for 35 years, to get the full amount, and at least 10 to get anything at all. This compares to 30 at present (but that used to be much higher than (even) 35, not that many years ago) The state second pension SP2 (serps as it used to be called), will be phased out, but those who have contributed towards it, will receive some transitional protection.

Maybe the most contentious aspect of the arrangement will be the fact that existing pensioners will not receive any benefit from the new arrangements, and even more contentious will be the cliff edge approach to entitlement. Only men born on or after 6 April 1952, and women born on or after 6 July 1953, will be able to receive the higher pension. Those born before those dates, will be awarded a pension under the existing system. Women born prior to the above date of 6.7.53 will lose out more because they see their pension age rise, but lose out on the higher entitlement ~ so a double whammy for the early 50's born females. By comparison, the biggest beneficiaries will be men born between 6 April 1952 and 5 December 1953, as they get to draw the higher pension at age 65, before the threshold age rises in stages to 66, for those born after 6.12.53, and before 1955, by 2020.

[Rob 3,152]

The one thing you can guarantee is that any reform of any benefit will produce a mixture of winners and losers. This will be no different.

I think it may well be a transitional arrangement simply because life expectancy is increasing quicker than anyone could have imagined even a decade or two ago. The rate of increase in life expectancy has ticked upwards in the most recent years and pension review has been ongoing for many years too, irrespective of the party in power. All of which suggests the politicians are playing catchup (again) due to their innate unwillingness to confront politically unpopular issues head on. The increase in retirement age was long overdue. When pensions were originally introduced, the average worker lived a few years before he popped his clogs. Today that number is certainly 15 with many cases over 20. As the state pension was always funded from current receipts, it should not come as a great surprise when an attempt is made to narrow the period between retirement and death as the whole thing depends on current workers paying for the retired.

If you want to provide a state pension, simplification is a must, in common with the whole benefits system in general. There are too many parallel benefits which should be rolled into fewer systems. It is also important not to get carried away too much worrying about who will win and who will lose. No system will be considered perfectly equitable because any two individuals will nost likely have different circumstances. Simplification with flat rate entitlements are much easier to administer too, which means there should in theory be less scope for abuse. On this basis I think it will be a step in the right direction. However, the benefits will have to be reconciled to the income to be distributed. Given the demographics and standard of living to which everyone has become accustomed, this might end in a nasty shock. A universal entitlement is not as bad as either party would have you believe. Those who need any allowance will automatically claim, but some well off people will not, thus generating a saving on the total expected bill.

From my point of view, I think a state system should be predicated on the assumption that it would provide a basic, but sustainable allowance for 'Mr Average'. People that take steps on their own initiative to save for a rainy day should not be penalised for having planned in advance as this is just the other side of the coin to those who fritter away every penny and more, then expect others to clean up the financial wreckage they leave behind. The pension level should be based on the price of essentials such as subsistence, power, water, and not discretionary purchases on luxuries such as tobacco, consumer electronics or holidays.

[Gary D 76]

Being on the cusp of all of this being born in June 1954 I am watching closely. Having paid SERPs and 2nd pension for many years I will be more than disappointed if I get less than what is currently due to me. Both SERPs and the 2nd pension are discretionary, I could have opted out, so I expect to see the benefits of it, not have it given to someone else.

[DaveG38 405]

I am one of those who just misses out, having been born in 1950, although I do accept that I won't be caught by the new age at which pensions start to be paid. In practice, I retired at 56 on a company pension and so I'm not too worried about the changes, since the difference of between say £106 or £144 per week isn't that much for me to bother about. However, I do accept that for some people it may well be a considerable disadvantage if they don't get the new rate.

Having said this, rather like the benfits increase 'cut' recently announced, all of those pensioners who receive the £106 per week are not going to be worse off, they just won't be as well off as those who get £144, so in a sense nobody loses. It's just that some win a bit more than others. What I don't understand is why there is a cut off at all. One of the reasons for the simplification has to be the costs of administering the system and I'd have thought that the maximum savings would be made by simplifying it for everyone. By keeping two systems going, and with one of them slowly withering as pensioners die, I'd have thought it would make sense to simplfy the whole thing, cut the admin costs and keep everyone equal. But there you are, what do I know?

It's a bit like child benefit. There was all the hoo-ha about who got it, who earned what and with some households earning far more than the threshold to get it, but because two workers were involved they kept it, but in others where there was only one breadwinner they lost out. All of this could have been avoided and simplified by completely removing the benefit for new children. In other words all existing families continue to get it, but from the date of the new rules all children born afterwards don't. All that was needed was to bring in the rules at say April 2013, having given notice in the autumn statement 2011 that this would happen. That's a 18 month notice period and is plenty long enough to ensure that choices are made about the affordability or otherwise of another child. In short nobody who was pregnant in the notice period would lose out. In this way, child benefit becomes a payment that reduces over time to zero.

Sorry, but this is one of my hobby horses.

[Peckris 579]

I creep into the new scheme by literally a few days!

My question is this - I have a small private pension 'pot' which I can cash in and get an annuity on any time. Part of this - probably the largest part - is a 'Contracted Out' PP plan which I started by contracting out of SERPS in the late 80s when the Govt. of the day paid all those incentives and bonuses. What happens to my private pension under the new scheme? Should I defer taking it until after April 2017, which would be a bit silly given the state of my health and given the steady decline in annuity rates, or should I cash it in?

Edited January 19, 2013 by Peckris

[1949threepence 3,367]

I creep into the new scheme by literally a few days!

My question is this - I have a small private pension 'pot' which I can cash in and get an annuity on any time. Part of this - probably the largest part - is a 'Contracted Out' PP plan which I started by contracting out of SERPS in the late 80s when the Govt. of the day paid all those incentives and bonuses. What happens to my private pension under the new scheme? Should I defer taking it until after April 2017, which would be a bit silly given the state of my health and given the steady decline in annuity rates, or should I cash it in?

Shouldn't make any difference to it, surely ?

You'd still get the £144.00 irrespective of when you decide to cash in your private pension.

[Peckris 579]

I creep into the new scheme by literally a few days!

My question is this - I have a small private pension 'pot' which I can cash in and get an annuity on any time. Part of this - probably the largest part - is a 'Contracted Out' PP plan which I started by contracting out of SERPS in the late 80s when the Govt. of the day paid all those incentives and bonuses. What happens to my private pension under the new scheme? Should I defer taking it until after April 2017, which would be a bit silly given the state of my health and given the steady decline in annuity rates, or should I cash it in?

Shouldn't make any difference to it, surely ?

You'd still get the £144.00 irrespective of when you decide to cash in your private pension.

That's what I'd have thought. Yet that article in the link was moaning on about the effect of the new scheme on private pensions?

ETA: Ah no, it was talking about the present system:

The other big drawback is that around 40% of pensioners are entitled to means tested Pension Credit, but if they receive this, their private pensions or earnings are penalised. Many people will find that they have wasted all their private savings. As we have just started automatically enrolling all workers in an employer pension scheme, it is vital that the state pension does not keep undermining private pensions.

But this is equally difficult to understand - why should getting Pension Credit affect your personal pension?

Edited January 19, 2013 by Peckris

[1949threepence 3,367]

I creep into the new scheme by literally a few days!

My question is this - I have a small private pension 'pot' which I can cash in and get an annuity on any time. Part of this - probably the largest part - is a 'Contracted Out' PP plan which I started by contracting out of SERPS in the late 80s when the Govt. of the day paid all those incentives and bonuses. What happens to my private pension under the new scheme? Should I defer taking it until after April 2017, which would be a bit silly given the state of my health and given the steady decline in annuity rates, or should I cash it in?

Shouldn't make any difference to it, surely ?

You'd still get the £144.00 irrespective of when you decide to cash in your private pension.

That's what I'd have thought. Yet that article in the link was moaning on about the effect of the new scheme on private pensions?

ETA: Ah no, it was talking about the present system:

The other big drawback is that around 40% of pensioners are entitled to means tested Pension Credit, but if they receive this, their private pensions or earnings are penalised. Many people will find that they have wasted all their private savings. As we have just started automatically enrolling all workers in an employer pension scheme, it is vital that the state pension does not keep undermining private pensions.

But this is equally difficult to understand - why should getting Pension Credit affect your personal pension?

It's not that Pension Credit would affect your personal pension, it's more the other way round. Receipt of a personal pension might well affect your entitlement to Pension Credit, because it's means tested.

The normal contributory state retirement pension (both old and new types) are not means tested. So you can earn or receive anything else outside of the benefits system, without it affecting your entitlement.

[Peckris 579]

I creep into the new scheme by literally a few days!

My question is this - I have a small private pension 'pot' which I can cash in and get an annuity on any time. Part of this - probably the largest part - is a 'Contracted Out' PP plan which I started by contracting out of SERPS in the late 80s when the Govt. of the day paid all those incentives and bonuses. What happens to my private pension under the new scheme? Should I defer taking it until after April 2017, which would be a bit silly given the state of my health and given the steady decline in annuity rates, or should I cash it in?

Shouldn't make any difference to it, surely ?

You'd still get the £144.00 irrespective of when you decide to cash in your private pension.

That's what I'd have thought. Yet that article in the link was moaning on about the effect of the new scheme on private pensions?

ETA: Ah no, it was talking about the present system:

The other big drawback is that around 40% of pensioners are entitled to means tested Pension Credit, but if they receive this, their private pensions or earnings are penalised. Many people will find that they have wasted all their private savings. As we have just started automatically enrolling all workers in an employer pension scheme, it is vital that the state pension does not keep undermining private pensions.

But this is equally difficult to understand - why should getting Pension Credit affect your personal pension?

It's not that Pension Credit would affect your personal pension, it's more the other way round. Receipt of a personal pension might well affect your entitlement to Pension Credit, because it's means tested.

The normal contributory state retirement pension (both old and new types) are not means tested. So you can earn or receive anything else outside of the benefits system, without it affecting your entitlement.

Yes, that's exactly what I'd have thought! Just lazy journalism in that article.

[Peter 615]

At one time I could claim my pension at 65 it is now 68.Where has my £15k + gone and why hasn't anyone complained?

[declanwmagee 122]

At one time I could claim my pension at 65 it is now 68.Where has my £15k + gone and why hasn't anyone complained?

I remember asking the same thing when they told me that they'd blown my endowment on the stock market! I do hope no-one thinks pensions will be any different. Here's an idea - don't give it to them to gamble with, buy coins!

[1949threepence 3,367]

Yes, that's exactly what I'd have thought! Just lazy journalism in that article.

Dr Ros Altman didn't explain that bit very clearly, I agree, Peck.

Edited January 19, 2013 by 1949threepence

[Peter 615]

Exactly Declan

My investments are all below the taxman.Just recently Mrs Peter has suggested we sell all and disappear to North Norfolk.

At 51 it seems a gamble.But worth a think...I have a great homemade shrimp net and 4 beachcaster rods.

[declanwmagee 122]

just recently Mrs Peter has suggested we sell all and disappear to North Norfolk.

At 51 it seems a gamble.But worth a think...I have a great homemade shrimp net and 4 beachcaster rods.

oh how exciting! then buy a bag of farthings and start again...

[Peckris 579]

Exactly Declan

My investments are all below the taxman.Just recently Mrs Peter has suggested we sell all and disappear to North Norfolk.

At 51 it seems a gamble.But worth a think...I have a great homemade shrimp net and 4 beachcaster rods.

You'd better make Mrs Peter your sister first, then