State Pension Announcement
The State pension has been under review by the Coalition Government. The system is currently very complicated, involving elements of National Insurance contributions at different rates and levels over many years. In a noble attempt to ensure that pensioners cannot fall below a minimum income, various credits and guarantees had been introduced over the years. The main problem with this is that it punished those that saved who then lost out on extra money that would have been provided. Of course this is a problem for the poorest in society and not everyone, although we all obviously have to collectively contribute tax towards the welfare state.
State pension – a target for means-testing?
Today the Government is expected to announce a flat £144 a week rate for the State pension. It is anticipated that this will require additional qualifying years of NI payments (35 years instead of 30) and of course we all know that the State pension retirement date is moving upwards from 65. Quick sums will tell you that £144 a week is £7,488 a year, which forms part of taxable income, is itself below the annual personal allowance, so effectively tax free. So any changes to genuinely simplify the benefit and State pension system are welcome. There’s almost certainly a catch. The State pension is fairly expensive and we have an ageing population as we all know. We have seen the alteration of Child Benefit to a means-tested benefit and I would suggest that the State pension is almost certainly likely to become a target for means-testing within the next 20 years. By then, who knows what shape UKplc will be in, but the mathematics of the State system look fragile if we continue to make the same central Government spending choices and promises into the future. The new proposals (which are just that) are scheduled for implementation in 2017 (a different Government) and will not effect existing pensioners.
Here’s a video that I found on You Tube. I regret that I do not know its source or if it’s ok for me to put it here. There’s no commercial agenda on my part here. I have assumed that it has been taken from BBC television somehow.