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

I was inlocal government for my first year after uni and when I moved jobs I withdrew my pension contributions instead of transferring them to my next scheme. I really regret that as I just frittered it away and it would have made one of my other pensions quite a lot bigger! I became more sensible as I got older and froze my pension from the NHS when I took a career break to have children. Thankfully I got credits for the years when I had home responsibilities and didn't work, or didn't pay NI otherwise my state pension would be much lower.

Personally I believe the new system in the longer term will be fairer. There has to be a starting point for something new somewhere. I am pleased contracting out ended in 2015/2016.

As I said in my introductory post I am male.
I worked in education for 42 years full and part-time and was contracted out for may of those years up to 2016. Only well into my career did I fully realise paying into a very decent public sector pension. Although, I have to say, I went into teaching to make a difference and because I loved the job. The pension provision was never a prime consideration.

In paid a total of 47 years worth of NI contributions up to April 2024. Several payments were made as voluntary top ups (I only worked part-time from 2018 to June 2024). I now receive almost the full new pension bar a few pence. I am totally happy with this outcome.

I also have no issue with paying tax in retirement as I still make use of public services such as the NHS, use the roads, have a police force to protect me and so on. I also like the idea of continuing to do my bit. I pay about £375 tax a month.

Finally if you are able to top up with voluntary National Insurance contributions do give it serious consideration. The pay back period is relatively very short and index linking makes it more attractive. You are in profit within 2 to 3 years.

Best wishes.

There is a lot of misinformation/differing opinion on this site so I hope nobody reading it is misled.
I paid a full stamp all my life, became entitled to a full pension but only receive the lower amount. I don't see why others should thing this is reasonable because I only had to wait a matter of months after 60th b'day to receive pension and others had to wait years. It's no more unjust than those who decided to continue to pay the lower married woman's stamp and then had their pension amount increased.
I wonder if any increase in numbers claiming pension credit will outweigh the savings from the reduction of people getting the heating allowance.

That is a very simplistic version and there are so many loopholes in that argument.

Explain that to me Allira.

your facts and figures are wrong.

No, they're not. If anything, my figures are on the generous side. I was forced to work for 6.5 years longer, for a little more money than older pensioners, only to be informed that those who retired much earlier than me are now eligible to claim additional pension, to bring them up to my pension level, plus extra benefits that I'm excluded from. Tell me where I'm wrong.

I also fully appreciate that about 20% of men and 33% of women only have their state pension as their income in retirement. However I do not know exactly how may of those are married/living together in whatever sort of couple, (therefore have 2 state pensions for a couple) or how many are receiving extra pension through having SERPS/2nd state pension payments.
Again over time this percentage should continue to reduce as most people will retire with some form of occupational pension in addition to their state pension. One benefit of auto enrolment.
My main concern is for those single people or in some cases widows or widowers who only have their state pensions on which to live. Furthermore some of those may not have full state pensions (either old or new) owing to lack of sufficient NI contributions.
Again those who who are renting in retirement can be very vulnerable indeed.
If any of us know anyone in that situation we should encourage them to ensure they are receiving everything they are entitled too such as pension credit, council tax help etc....

Rafichagran No matter the size of your state pension it is included in the calculation of your total income. If all income, eg, lower SP plus, say, any occupational pension takes you above the person allowance then the surplus is taxed.

Having paid the Married Woman's stamp for all my working life, I get the grand sum of £102 weekly..... if my husband was not around, I really don't know where I would be. although I know then that I would be eligible for Pension Credit. (hopefully)
I had to wait 9 months for any sort of pension, and then because of my paying reduced stamp, it was only £25 per week, until my husband reached State Pension age and then it went up (a little) it now goes up a little each year with the last April pay rise to £102 (that is over 14 years)
Someone said earlier on in the comments, (sorry can't reemember who) why can't everyone be paid the same each week, doing away with the reams of paperwork and leaving us all on the same pension, the amount being a sensible figure, to take into account all the outgoings we have each week ( Council Tax, Electricity, Gas, Water Rates etc) Food we would just have to get and pay for as we are now.
Perhaps that is too simple for the DWP and Ministers to work out, but it seems a much simpler way of working and if pensions go up each year, we should still be able to cope !

I am 63 and,will not receive my pension until I am at age 67 so you would have retired 7 years before me.
My husband is the same age as me and hasn't worked for a few years , he receives pip mobility only which is less than £75 a week . I was his carer and received £ 80 a week .
Previous to any illness we worked hard to pay off our mortgage asap and get some savings behind us.
We went without holidays ( not been on holiday for 12 years )
Fast forward to now , I also do not work because of a debilitating illness and now also get pip at the same rate as him.
However , because no mortgages or rent plus savings over £16.000 we get no additional help, we have to also live off savings .
If we'd holidayed , drank alcohol , smoked , gone out socialising , not saved and not gone without , we'd be a lot better off now !
Plus we both have another 4 years each before ( in your eyes ) we get to be a better off pensioner.

My 92 year old DSI left school at 14.
Started work next day, no university and gap years for youngsters then.
And why should those who were able to take time off to look after their children expect the same rewards as those who couldn't and paid full stamp for 39 years?

magshard20

Having paid the Married Woman's stamp for all my working life, I get the grand sum of £102 weekly..... if my husband was not around, I really don't know where I would be. although I know then that I would be eligible for Pension Credit. (hopefully)
I had to wait 9 months for any sort of pension, and then because of my paying reduced stamp, it was only £25 per week, until my husband reached State Pension age and then it went up (a little) it now goes up a little each year with the last April pay rise to £102 (that is over 14 years)
Someone said earlier on in the comments, (sorry can't reemember who) why can't everyone be paid the same each week, doing away with the reams of paperwork and leaving us all on the same pension, the amount being a sensible figure, to take into account all the outgoings we have each week ( Council Tax, Electricity, Gas, Water Rates etc) Food we would just have to get and pay for as we are now.
Perhaps that is too simple for the DWP and Ministers to work out, but it seems a much simpler way of working and if pensions go up each year, we should still be able to cope !

If everyone got the same, what would have been the benefit of paying the full stamp? How can someone pay less in and expect to get the same amount out?

I agree, Hellsbelles. Means-testing doesn't encourage people to be 'sensible'. If you have a house and savings and then need care you'll be penalised there, too.

PuddyCat

^That is a very simplistic version and there are so many loopholes in that argument.^

Explain that to me Allira.

your facts and figures are wrong.

No, they're not. If anything, my figures are on the generous side. I was forced to work for 6.5 years longer, for a little more money than older pensioners, only to be informed that those who retired much earlier than me are now eligible to claim additional pension, to bring them up to my pension level, plus extra benefits that I'm excluded from. Tell me where I'm wrong.

The new pension age for women was brought in over about 10 years, not a sudden change.

Based on an average annual pension of approximately £8000 per anum, you've received somewhere around £48,000 in pension
Around £8,800 pa is the present basic old State Pension.

Ten years ago the amount was C£5,800

The new State Pension was introduced in 2016 at about £8,100 pa.
In 2016 the old State Pension was C£6,200 pa., about £1,800 pa less.

Perhaps we have an accountant or an actuary on here who could make an exact calculation but it is not £48,000.

Benefits can only be claimed by the poorest pensioners and bring them up to just less than the level of the new State Pension. That includes people on the new State Pension.

Does that make sense?

£1,800 pa less Typo
About £1,900 less.

knspol

There is a lot of misinformation/differing opinion on this site so I hope nobody reading it is misled.
I paid a full stamp all my life, became entitled to a full pension but only receive the lower amount. I don't see why others should thing this is reasonable because I only had to wait a matter of months after 60th b'day to receive pension and others had to wait years. It's no more unjust than those who decided to continue to pay the lower married woman's stamp and then had their pension amount increased.
I wonder if any increase in numbers claiming pension credit will outweigh the savings from the reduction of people getting the heating allowance.

You also had to have 39 years of NI contributions to qualify for a full basic pension.
It is only 35 years now.

Hellsbelles

I am 63 and,will not receive my pension until I am at age 67 so you would have retired 7 years before me.
My husband is the same age as me and hasn't worked for a few years , he receives pip mobility only which is less than £75 a week . I was his carer and received £ 80 a week .
Previous to any illness we worked hard to pay off our mortgage asap and get some savings behind us.
We went without holidays ( not been on holiday for 12 years )
Fast forward to now , I also do not work because of a debilitating illness and now also get pip at the same rate as him.
However , because no mortgages or rent plus savings over £16.000 we get no additional help, we have to also live off savings .
If we'd holidayed , drank alcohol , smoked , gone out socialising , not saved and not gone without , we'd be a lot better off now !
Plus we both have another 4 years each before ( in your eyes ) we get to be a better off pensioner.

I can empathise with your anger and frustration with the situation in which you find yourself.

However it is a bit simplistic to be angry at those who may have lived their lives differently to yourselves. We all have choices to make with our lifestyles.

I have never smoked or drank alcohol but have enjoyed holidays and socialising with others. Sometimes I have stretched the budget to do so, but life is for living not just existing. These have been my choices and I wouldn't be annoyed with others for making different ones.

On the plus side you have your own home and savings. Unfortunately their has to be a cut off point somewhere when it comes to means tested benefits. Savings are there to be used in times of need.

Having said all that have you checked if their is anything else you can apply for to help you out. If you are only both receiving PIP that gives you an income of only £7800 a year. Have you contacted your local council about council tax support? Are there any free travel services in your area?
Have you contacted Citizens Advice or Age UK. They can be very helpful.

Are you maximising your savings in terms of interest? Is their a possibility you could downsize (although this doesn't always free up enough money to make it worthwhile)

There may well be other organisations out there that can assist or point you in the right direction.

Just some suggestions sincerely made.

When you both reach state pension age you will be better off, but I believe your PIP will stop. However I appreciate that it is the here and now that is concerning you.

Hopefully things will improve for you both.

Those on the new state pension did not all work for six years longer than others. Many will have been in full-time education for several years after I left at age 16 (and paid for my own extra qualifications subsequently) so probably contributed for a similar number of years. My DH was 6 years longer in free education than me. He was even paid to be at University.

I was able to draw my SP at almost 62. I worked from age 16 (and at 72 am still doing some paid work) apart from about 3 years to raise tiny children (my first paid job after my first child was born was when she was 8 months old) and I combined part-time employment with self-employment meaning I paid Class 2 NI as well which qualified me for absolutely nothing. I claimed HRP for 18 years that did absolutely nothing for me most of the time either. For many years I also paid Class 4 NI which was basically another word for "Tax" - with no benefit to me. I also fell foul of the then rule that if you were employed part-time in many jobs you were not allowed to join the private pension scheme, until the European Courts declared this to be sex discrimination as the vast majority of such workers were women. BUT I had to pay over £3k to "buy in" 4 extra years of pension to make up the 15 years of part-time teaching contributions. I did get tax relief on them. I should have paid reduced NI during those years but never got the money from the government.

My DH now gets £100 a month more SP than me (old pension scheme as is mine).

I'm not pleading poverty cos I also have an occupational pension (greatly reduced due to being "forced" to claim it early), as does DH, plus three personal pensions (all paid for) and we also effectively had a third income between us due to a small business we had for about 25 years.

Like all government benefits there are gross inequalities, Some have occurred due to people making poor choices or doing nothing to try to support themselves in their old age. My best friend was one of these. Spent every penny of her earnings on luxuries (including several cruises), doubled her weight due to laziness, and accepted vast amounts of state benefits due to her poor health - that she was unable to spend cos she was housebound for years. I loved her to bits, but the result was that her two sons inherited all that unspent cash from benefits when she died.

No, PIP does not stop when a claimant reaches pension age, but people over that age cannot make a new claim. Attendance Allowance can be claimed, but there is no Mobility element to that.

Hellesbelles, are you sure you might not qualify for the Daily Living Element of PIP as well as Mobility? I advise you to get help when it comes up for renewal.
You are allowed to dip into savings as required for normal expenditure. If you have between £6000 and £16000 you might be eligible for Universal Credit. Obviously if you spend lavishly that would be seen as Deprivation of Assets
Sorry to digress.

Cabbie21

No, PIP does not stop when a claimant reaches pension age, but people over that age cannot make a new claim. Attendance Allowance can be claimed, but there is no Mobility element to that.

Hellesbelles, are you sure you might not qualify for the Daily Living Element of PIP as well as Mobility? I advise you to get help when it comes up for renewal.
You are allowed to dip into savings as required for normal expenditure. If you have between £6000 and £16000 you might be eligible for Universal Credit. Obviously if you spend lavishly that would be seen as Deprivation of Assets
Sorry to digress.

Thank you for that correction about PIP and state pension.

Franbern

I find it difficult to understand why older Pensioners are expected to survive on the lower rate of state pension, over three grand a year lower than the higher rate for younger pensioners.

Surely if anything, it is the older ones that is likely to need more money for heating, taxis, etc. etc. Cannot find any real justification for these two levels anywhere.

Surely, if the higher rate is what is considered the minimum for a pensioner to have to cover their needs, then anyone solely on the lower rate hsould be entitled to be able to get Pension Credit to 'top-up' the lower rate to that of the higher rate.

Me too Franbern, it’s outrageous. My husband gets the lower rate yet paid far more in tax and national insurance than I did. I can’t understand how they can justify it. I bet the French wouldn’t put up with it yet we meekly accept everything thrown at us.

4allweknow

Rafichagran No matter the size of your state pension it is included in the calculation of your total income. If all income, eg, lower SP plus, say, any occupational pension takes you above the person allowance then the surplus is taxed.

Yes I am aware of that, I have had my pension for 17 months now.
I worked 41 years and resent any money being taken from my state pension because I had a occupational pension.

It was not lowered on the basic pension. Meant to add that on my previous post.

rafichagran

It was not lowered on the basic pension. Meant to add that on my previous post.

I presume you mean the contracted out pension equivalent (COPE) deduction? If so, you have to remember you and your employer paid less national insurance in respect of that pension.

Allira no if you're on the lower rate pension you do not immediately qualify for Pension Credit. A friend of mine is now £2 over so struggles.. She does get help with rent but that's all. If you add up all the things she would get if she had £2.50 less it would amount to probably what I get having paid into a pension when I worked. I have to say it isn't unfortunately bring me much more than me having to pay more tax! :-(

Brahumbug

rafichagran

It was not lowered on the basic pension. Meant to add that on my previous post.

I presume you mean the contracted out pension equivalent (COPE) deduction? If so, you have to remember you and your employer paid less national insurance in respect of that pension.

Well, who knew at the time that there were two different rates?

Certainly not anyone I know.
I should have asked my accountant DN but was too busy working, caring for a family and elderly relatives.

jd79

Allira no if you're on the lower rate pension you do not immediately qualify for Pension Credit. A friend of mine is now £2 over so struggles.. She does get help with rent but that's all. If you add up all the things she would get if she had £2.50 less it would amount to probably what I get having paid into a pension when I worked. I have to say it isn't unfortunately bring me much more than me having to pay more tax! :-(

Yes, it happened to relatives of mine, just very slightly over to claim.

I don’t think there’s a thread started on this, but a rise in SP from April. There’s is a difference of around £100 less for those on the old SP. £460 for new SP, £353:60 for the old rate.
Any ideas why?