Forum Topic

Social Security benefit or entitlement?

If one has worked and paid NI contributions for more than 30 years, is the State Pension one gets classed as a "benefit" or an entitlement?

Gerry Tan ● 4902d33 Comments

BTW, Keith, you might find Wednesday's Money Box Live on the new pension useful. I didn't hear it all so don't know if it addresses your particular concerns.http://www.bbc.co.uk/programmes/b01ptzt5There was something about it at the end of today's Money Box too.

Susan Kelly ● 4897d

Thanks for that Susan.

Keith Iddon ● 4898d

I think it must have been in the 80s, Keith, when I was an employee, before becoming self-employed. I guess my employer asked me if I wanted to contract out. A small portion of my NI was then used to make private pension provision, which is still sitting around somewhere, waiting till I decide to take it, but is a small amount.I believe that the current thinking is that this is not a good idea and that one should stick with Serps; many people have contracted back in. At your time of life, you will almost certainly have built up a good Serps record, which you will still get at retirement, so I don't think you need to do anything.

Susan Kelly ● 4898d

My understanding of SERPS is also fairly limited but I do know that when I started work in the 60s NI was a flat rate contribution of, I think, about 75p per week regardless of what you earned.  Some time in the 70s it changed to a percentage of what you earned and in the 80s SERPS must have been introduced.  My Co-OP man asked me to sign a form which I didn't understand but I trusted him so I did.  He explained that I was just contracting out of SERPS and this would give me an additional pension. Then about 10 years ago the Co-Op informed me that they were no longer accepting SERPS contributions and I was being contracted back into the state system so I now have a small pension from the Co-Op and a very small increased state pension.  I have no idea whether contracting out was beneficial or not but I definitely trusted the Co-OP with my money rather than any government.Re child benefit - when my son was born in 1969 there was no child benefit paid for the 1st child and in 1973 when my daughter was born I received the equivalent of 90p per week.  I have no problem with child benefit and don't believe this idiot government should be messing about with this ridiculous new system but, as I said previously, it should only be paid to those in the UK with children in the UK not to foreign nationals and certainly not to those claiming for children that were not born in or have not even visited the UK.  How barmy is that?  Picking up the tab for children in another country is beyond me.

Bernadette Paul ● 4898d

I'm very curious here Susan.How does one contract out of Serps,what are the benefits/drawbacks of doing this?I know nothing about pensions as you can tell and woulf=d appreciate anything you can tell me.

Keith Iddon ● 4899d

I got a forecast last year but it seemed to bear no relation to reality. It said I had paid many more years of NI than I have and that I would get SERPS when, in fact, I contracted out years ago.I have no faith in these forecasts at all.

Susan Kelly ● 4899d

7.5 years to go and weeping at the annual reduction in my projected annuity. Should have retired three years ago and would have been thousands of pounds per year better off.Thank you greedy bankers, hopeless governments and stupid regulators! Not bitter- not much!!!

Nigel Brooks ● 4899d

11.5 years to go yet Nigel!Thanks for the link.

Keith Iddon ● 4899d

Rather than precis the information Keith, here is the linkhttps://www.gov.uk/additional-state-pension/overviewIf you are approaching retirement age it is worthwhile getting a pension forecasthttps://www.gov.uk/state-pension-statement

Nigel Brooks ● 4899d

I know I'm being a bit dim here but how does this SERPS lark work.I pay NI at the normal rate and have done for 37 years and if my job carries on as is I will do so until I retire.I know I will get the state penion,but is SERPS something I will be entitled too?

Keith Iddon ● 4899d

Any SERPS rights already accrued will be paid, I believe. I think that the new system is designed to run for the long term so, in fifty years time, there will be no one with SERPS contributions to fret about. We are so unused to any government planning for the long term and not the next election that this step is to be welcomed, I think.And, Gerry, yes, those were the benefits I meant, as Nigel says.

Susan Kelly ● 4899d

No argument from me either.How about twelve months notice that, exisiting claimants aside, child benefit will only be paid for the first two children.  That'll stop the feckless 'breeders' with muliple kids by multiple fathers.As to SERPS or second pension contrbutions I did read that these would be 'returned'. With interest? At what rate? The devil, as ever, is in the detail.

Nigel Brooks ● 4899d

No argumnent here Bernadette and I would go further than that.We may find that the EEC won't let us tho'.

Keith Iddon ● 4899d

The thing that's not clear to me with this proposal for a flat rate pension is, what happens to peoples' SERPS contributions?  Does it mean that although someone may have paid considerably more towards their pension they will actually get nothing more than that paid to someone who yet again may not have contributed?Also, given that the additional benefits may disappear, surely that simply means that unless you have vast savings or a decent private pension, everyone else will end up virtually destitute in spite of a flat rate pension which will probably be derisory when it comes in in any event.If the government wants to reduce the benefit bill right now, my first proposal would be for them to stop paying child benefit to foreign nationals particularly those claiming for children that have never even been to the UK.  This is not anecdotal nonsense it's a fact.

Bernadette Paul ● 4899d

The age-related tax break is also being removed as the overall personal allowances rise.The 'normal' tax threshold is rising, the age-related allowance isn't. You won't pay any more tax but you certainly won't pay any less.You get free dental / optical care if you are in receipt of Pension Credit, which of course disappears under the proposed flat-rate pension. So 'gird your loins' for dental / optical treatment costs. As far as I know sight tests will remain free (whoopee! they are free at Tesco anyway!!).

Nigel Brooks ● 4899d

Thanks Nigel, these extra pensioners' benefits are very welcome - let's hope governments don't stop them now that the better flat-rate State Pension comes in. What about free dental treatment and age related tax cuts? Are these two available to pensioners now?

Gerry Tan ● 4899d

Without pre-empting Susan.Free bus passes, prescriptions, winter fuel payments anything else that this lacklustre bunch can get away with withdrawing.

Nigel Brooks ● 4899d

What are the other pensioner benefits in addition to the "new" State Pension are you thinking about Susan?

Gerry Tan ● 4899d

One of the big advantages of a flat-rate pension which its critics seem to have overlooked is that people who save for their old age will no longer be penalised for it. At the moment, there is no point is saving comparatively small sums during your working life, as you will just be expected to spend them in old age while your neighbour, who always spent every penny he earned, gets pension credit.This and the new auto-enrolment scheme for occupational pensions should mean that more people reach retirement age with money in the bank.I do wonder if the new flat rate will be accompanied by a withdrawal of all other pensioner benefits, though.

Susan Kelly ● 4899d

The State Pension is NOT a Benefit, but people do get mixed up by what it is since it is paid by the Dept of Work and Pensions who also do pay Benefits such as JSA. JSA etc is a safety net and is why some chose to call it welfare. It is a form of alms except it is administered by the State. On the other hand the State contracted with you to pay a State Pension.I agree it is quite wrong in principle to have, in the future, a flat State Pension, unlike now where we recognise that you can be paid more if you meet certain criteria.Trouble is we just cannot afford it. So we won’t get a higher rate of SP, even though under today’s’ rules we would qualify for it.What is happening is that Gordon Brown could not countenance old people living in a state of poverty with them not (at the same time) being able to do anything about it like getting another job. So he gave us Pension Credit. It’s the best bit of social engineering he did. At a stroke he reduced the impecunious circumstances of a large group of people. Cameron also is very reluctant to reduce this Benefit at the moment or take the elders back to the bad old days. Long may that remain. Tony Blair wanted to take another very large group out of poverty as well. Those little blighters less than 18 years old. To some extent he did that, but he did not hit the numbers he wanted. The Coalition has not been so sympathetic to their cause. The DWP costs us a fortune. There are some 1.5 to 2M pensioners who do not claim PC. That is for endless reasons. But clearly the Government does not want that to continue. I have always agreed with that. Get all pensioners onto a minimum, i.e. around £143 and reduce processing PC claims. That will bring in a lot of departmental savings.Once that system is installed we can at least say that no pensioner should claim real poverty. We then have to consider how we reward those who have worked and those who have worked some of the time. If they have paid tax which is partly used to fund today’s pensioner, then they have to be rewarded with more than those who have not paid in or paid in little. They have to seen as being better off in old age than those who have not worked, or not much.The same desire to reduce departmental costs goes for the Personal Allowance for people younger than pensioners. Raise the threshold to £10K and far less HMRC processing will be required – both on tax returns as well as Tax Credits.  The penalty is that Pensioners will lose the age allowance which I think is wrong – but the argument will be that we can no longer afford the age allowance let alone the associated costs of processing. In my view the threshold needs to rise above inflation for some years to come.No escaping that most of us will be poorer. The Empire has been extinguished and there are too many people in this country and indeed on the planet.

George Knox ● 4900d

The earnings related benefit I refer to was not a pension but a top up to dole money that you got if you had been in work.It was removed about 25-30 years ago I believe.

Keith Iddon ● 4900d

Sadly Keith, SERPS (State Earnings Related Pension Supplement) which paid you more in retirement to reflect the higher contributions that you made over your working life is the very thing that is now being finally abandoned by the 'flat rate' pension.So, and I guess we are of 'an age' as I have 39 years of work behind me, we shall receive the same as some feckless waster who has spent the majority of his/her time on NI credits without ever actually contributing.Great isn't it?

Nigel Brooks ● 4900d

Bearing in mind too those who have never worked nor contributed also have equal access to health care and schools for their kids as those of us who have bothered to get out of bed every morning to earn a crust for the last 37+ years.Benefits used to be linked to earning via a mechanism called 'Earnings Related Benefit'I believe.Bring it back I say.We need to de-incentivise being on benefits and motivate people to work imo.If we can also tackle the tax avoiders/evaders we may have a chance.

Keith Iddon ● 4900d

I don't know about workhouses, but I sure do wish that there was something that we as a society could do about the feckless without impacting the deserving claimants.

Tony Colliver ● 4901d

it was ever thus.NI has never been stored - it has always been a giant Ponzi scheme and worked more or less okay as long as the numbers paying in were going up.Now they are on the decline the same thing that happens to all Ponzi schemes eventually is happening to the UK government pension scheme - it is collapsing.

Tony Colliver ● 4901d

Also, as I understand it, the NI we pay now funds today's pensioners and is not being stored anywhere to pay us. I am in the same position as Bernadette and am furious about one level state pension for all regardless if they have worked or not.

Penny Crocker ● 4901d

Point taken.Also a bit unfair is for the govn. to ask those of us who have worked since school,I have 37 years in and counting,to work extra years before getting our pensions,whilst those who do not work will just have another year or two on benefits before getting their benefits topped up.I am looking forward to retiring as soon as possible and do not wish to work any longer now they have moved the goal posts half way through the game.

Keith Iddon ● 4901d

The government accepts that no one can actually live on the full state pension of £107 per week, hence the minimum income guarantee of £142. If you have no income (and few savings) other than your full state pension, then you too are eligible for pension credit and the other benefits that come with it.Bernadette is right: all this talk of how many years NI people have to pay is a bit academic. It makes a difference only if people have other pensions and savings. If they have made no other provision for their old age, then they will get pension credit of £142 a week. But what's the alternative -- workhouses for the feckless?

Susan Kelly ● 4901d

That's daft and unfair too and no incentive for anyone to work and pay NI.I will be in a similar position in relation to a couple of mates when I retire.Perhaps pension credit should be limited to a % of the full state pension.

Keith Iddon ● 4901d

One thing I have discovered regarding the state pension is that there is no benefit to you if you have worked all your life and paid full NI contributions.  You may as well not bother because if you do not get a full state pension you will be able to claim pension credit which brings it up almost level to the full state pension.  If you receive pension credit you also benefit from a whole host of other benefits (housing benefit, council tax benefit, free dentistry etc) which are unavailable to someone on a full pension.  As a result the pensioner receiving pension credit can frequently end up better off than the pensioner on a full state pension.It's not that I want to take money from anyone or make pensioners poorer than they already are (not all pensioners are well off) but, I do feel aggrieved that having worked full time since the age of 15 whilst raising 3 children single handed and accruing 42 years full NI contributions I am actually worse off than my sister who did none of the above.  What was the point?

Bernadette Paul ● 4901d

Assuming she has worked and paid her National Insurance (and being a maiden she will not have opted for the married woman's stamp and then moaned that she's not getting a pension as a result), then it's certainly an entitlement. If she's not entitled (see! Entitled!) to a full pension and has to claim pension credit then that's a benefit.

Susan Kelly ● 4902d

This is not an enquiry for myself, its for an elderly maiden relative, who prides herself in claiming not to have been much of a liability on the State for benefits.  She is approaching retirement age and has been in contact with the Pension Service, which is part of the Work and Pension Dept, to ask about her future State pension.Yes I agree with you Asha, the State Pension should be called an entitlement and not a Benefit.

Gerry Tan ● 4902d

I would say it is an entitlement because you have contributed NI contributions while you worked and now you are entitled to receive something back.

Asha Smith ● 4902d