'Biggest improvement to UK State pension in our lifetime': imminent

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'Biggest improvement to UK State pension in our lifetime': imminent
By Ian CowieYour MoneyLast updated: March 4th, 2011
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The “biggest improvement to State pensions in our lifetime” will be unveiled by the Government soon, possibly before the Budget on March 23, according to experts involved in official consultations.
They point to a flurry of recent announcements which seem to pave the way toward a higher minimum State pension for everyone with a full National Insurance Contributions (NICs) record. Surprisingly, experts say this should not be expensive in the short-term because of reduced rebate payments to people who have opted out of the State Second Pension (S2P) and lower means-tested benefits claims.
Another factor is growing awareness in Whitehall that action is needed to prevent its National Employment Savings Trust (NEST) turning into the next pensions mis-selling scandal. Every employee who does not already have a pension will automatically have some of their pre-tax
pay deducted to fund contributions to NEST from 2016.
But, as the Telegraph revealed five years ago, auto-enrolment into NEST will strip millions of low earners of some or all of their entitlement to means-tested benefits and give rise to massive claims for compensation. Now experts say a higher minimum State pension avoids that risk.
Dr Ros Altmann, director general of Saga, said: “We are about to get the £140 a week minimum State pension. This will replace the S2P and the Basic State Pension (BSP), which will be rolled into one flat-rate payment for everyone with full NICs records.
“All the pieces now seem to be in place and it’s just a question of timing. We have just had the Office for Tax Simplification coming out and recommending ending contracting out of S2P for all pension schemes from 2012. That would fit beautifully with a flat-rate state pension and would also bring in a few billion pounds of revenue to the Treasury because it will no longer need to pay NICs rebates to people who opt out of the S2P.
“Earlier this week, we had the Department for Work and Pensions (DWP) saying that it was finding the complexity of giving forecasts for S2P and the State Earnings Related Pension Scheme (SERPs), which S2P replaced, plus graduated pensions far too complex.
“DWP figures show that women’s average State pension entitlements total about £110 per week, compared to £160 per week for men. So introducing a minimum State pension of £140 a week will be the biggest improvement to State pensions in our lifetime and especially beneficial for women.”
Official estimates suggest that about 12m employees working for 1.1m employers will be auto-enrolled into NEST because they currently have no pension savings at all. Steve Bee of Paradigm Pensions said: “The only way that these important reforms can succeed is if everyone gets a decent, subsistence level of State pension so that savings made for private pensions are not devalued by loss of means-tested support.
“I applaud the Government’s current plan to increase the State pension to a level that will make means-testing for the elderly a thing of the past. It will, I think, come to be regarded as the most significant reform of our pension system for generations.
“The Government simply has to make it pay to save in a pension. People need to be given a guarantee that every £1 invested in a pension will make them at least £1 better off than non-savers.”
Tom McPhail, pensions expert at Hargreaves Lansdown, added: “Reform of the State pension is the keystone which will ensure that the UK’s overall pension system can bear the weight of our retirement needs and expectations.
“At present we have a complex system which creates perverse disincentives to save. A universal state pension would address this problem and at the same time encourage everybody right across the income scale to save in a private pension to top up their State entitlement.”
 
It is widely anticipated that along with this higher pension, will be the requirement to be a citizen of the UK, and possibly also resident. I wonder how this will affect the 500,000 expats whose pensions are currently frozen. Will our pensions remain frozen? What about those expats who have yet to claim state pension (Dave the Dude and Coffee Corner immediately spring to mind). Will they be eligible to claim at all?

Hopefully when the scheme is announced, it will cover all these points.
 
Yes a lot of unanswered questions. I HOPE it means a greater pension for me(& others) when the time comes (its a long way away BTW):biggrin:
 
Prakhonchai Nick said:
It is widely anticipated that along with this higher pension, will be the requirement to be a citizen of the UK, and possibly also resident. I wonder how this will affect the 500,000 expats whose pensions are currently frozen. Will our pensions remain frozen? What about those expats who have yet to claim state pension (Dave the Dude and Coffee Corner immediately spring to mind). Will they be eligible to claim at all?

Hopefully when the scheme is announced, it will cover all these points.
Click to expand...

Im paying my contributions still. To think there might a possibility of being denied a pension even after 30 plus years of contributions makes my blood boil. Im wondering if i should cease payments and buy an extra crate of leo a month....
 
Me too Lukey, i am paying voluntary contributions, but my accountant is of the opinion its a waste of time, but i am coming up to the 30 year rule, after that, stuff em !!
 
I stopped mine as soon as the max term dropped to 30 years. Grey Britain is wonderful at taking from the worthy and giving to the f@cking bone idle and new EU arrivals( that havn't moved to Pattaya).
 
I will soon be 64 so I am approaching state pension age.
I will be moving to Surin later this year and the whole subject and the unfairness of it is getting me increasingly wound up.
Throw into the equation of frozen state pensions (or non pensions) the fact that on my non state pensions I still will have to pay UK tax - has anyone found a legal way of avoiding this?
 
There does not seem to be a way round paying income tax on any income derived from the UK

However, note that in the tax year you become 65 (you don't have to actually reach 65), your personal allowance increases to £9940 (this wef 6th April 2011), with only the excess taxed at 20%. They won't tell you - you must claim it!


Note also that whilst currently you require 30 NI contributions for a full pension, any bereavement benefits that may be payable to your widow after you have gone will require the full 44 NI contributions for maximum benefit.
 
Suprised you didn't mention QROPS Nick, in answer to ColinW? Not that I know too much about the scheme.

Nick, is the personal allowance going up to GBP 9940 for everyone on 6/4/2011??
 
Dave The Dude said:
Suprised you didn't mention QROPS Nick, in answer to ColinW? Not that I know too much about the scheme.

Nick, is the personal allowance going up to GBP 9940 for everyone on 6/4/2011??
Click to expand...

Everyone who is 65+ or will be 65 during the 2011/2012 tax year starting 6th April.

Sorry don't know anything about QROPS, since I am one of the fortunate ones to be on a final salary pension.
 
Nick,thanks for the info about allowances.
I won't be 65 until the 2012/13 tax year when I will have to remember to claim the additional allowance
 
Budget has failed frozen-out pensioners, says expat


As debate over the 2011 Budget continues, a key figure in the frozen
pensions debate has spoken out against the continued refusal of the Government
to help British retirees living in poverty abroad.









budget_1856343c.jpg


As Budget 2011 was unveiled, The
International Consortium of British Pensioners spoke out once again against the
Government's refusal to unfreeze expat pensions Photo:
Eddie Mulholland/Rex Features








By Leah Hyslop 5:45PM GMT 24 Mar 2011
3 Comments






George Osborne’s
Budget introduced a number of potential reforms to the pension
system, including raising the state retirement age automatically in line with
life expectancy and replacing the current means-tested system with a flat £140
weekly pension for all retirees.



Entirely absent from from the Budget, however, was any measure to deal with
the plight of the 500,000 or so British retirees living abroad who do not have
inflation-proofed pensions.



Expats living in around 150 countries which do not have reciprocal social
security agreements with the UK have their pensions frozen as soon as they start
drawing them abroad - meaning that in some cases, pensioners are surviving on as
little as £6 a week.



Pressure group the International Consortium of British Pensioners
(ICBP), which has been campaigning for the unfreezing of expat
pensions for over two decades, had previously expressed hope that the Coalition
would prove more receptive to their demands than previous governments.




John Markham, a retired expat living in Canada and a key spokesman for the
ICBP said: “Many will cheer a £140 per week pension ‘for all’ but those planning
on retiring abroad should look at the fine print of the Budget.








“Those people need to know that retiring to Australia, Canada, New Zealand
and many of the Commonwealth countries means that their pension will not be
uprated in line with inflation and will therefore stay frozen at the rate at
which you first start drawing it.

“With recent surveys showing that half of all 45-64 year olds in the UK are
considering moving abroad, the government can no longer carry on ignoring this
issue. It must act to address the injustice done to those pensioners who have
already retired to one of the 146 ‘frozen’ countries and the many millions more
planning on doing so in the future.”

Michelle Mitchell, charity director at Age UK, said: “Plans
to consider introducing a higher, flat-rate state pension are very good news.
Our state pension system is one of the least generous and most complicated in
the developed world so any move which takes away the guesswork for those nearing
retirement is a step in the right direction.

"A wide-ranging consultation on the state pension system is an opportunity to
re-open the question of the freezing of pensions for many people living abroad.
Ideally everyone who has contributed through National Insurance should receive a
fair pension that rises in line with living costs, whether they live in this
country or overseas."

Despite overall enthusiasm for the idea of a flat-rate pension, the Budget's
pension reforms have also been criticised by UK-based pensioners and charities.
They argue that the reduction in winter fuel benefit, as well as the fact that
the retired do not benefit from one of the Budget's biggest giveaways (the
decision to raise the personal allowance by over £600) makes pensioners one of
the Budget's hardest-hit groups. Ros Altman, the director of Saga, called the Budget a "big
disappointment...for pensioners".

Mick Evans, a 66-year-old expat living in Canada told Telegraph Expat: “My
wife and I moved to Canada three years ago, hoping to benefit from a lifetime of
working hard in Britain and bring my wife’s elderly mother to join us in due
course. Instead, the fact that our pensions are frozen here has trapped my
mother-in-law in the UK by herself and has already been eating away at our
pensions. In the three years we have been here my wife’s pension is now worth 10
per cent less and we know worse is to come.

"Yesterday’s confirmation of the flat-rate £140 state pension is good news
for some British pensioners, but for Brits like us who want to retire abroad the
ongoing freeze is like a slap in the face.”

A spokesman for the Department of Work and Pensions said: "The
state pension is uprated throughout the European Economic Area and in countries
where we have reciprocal social security agreements. People who are considering
emigrating abroad should always consider the impact the move could have on their
future state pension entitlement."

It has been estimated that uprating frozen pensions would cost the government
£478 million a year; around one per cent of the overall pensions budget.

Telegraph Expat is supporting the campaign to uprate British expat
pensions. Find out more about the plight of British pensioners abroad here .
 
In the reports I have seen it appears probable that the £140 per week would only be paid to people who start drawing their state pensions after it has been introduced, anyone who already draws the state pension would not be uprated.
Did you also see in the budget that they are going to investigate combining tax and National Insurance, unless they introduce compensating allowances for pensioners this would be a disaster for those of us who will be retired thereby currently paying tax but not National Insurance - hopefully it won't happen- will it?
 
I wonder if Pension Credit will then take up the slack, for those not getting the GBP140?
 
The Consultation Document is now out. www.dwp.gov.uk/docs/state-pension-21st-century.pdf

The proposed £140 a week pension or more if inflation increases before it is introduced, will not as far as I can see provide more money for anyone.

The 30 years of NI contributions still stands for maximum pension with a minimum of 7 years (currently 1 year!)

No mention of expats in frozen countries.

No mention of a need to be resident in the UK

For those yet to reach pension age, it looks like you will still receive a sate pension at 66+ regardless of living in Thailand.
 
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