Having a pension paid up?

Although she does not qualify for Pension Credit, she is on a low income which means she would have most of her council tax paid for her anyway. If she was over 65 she would not have to pay any CT. Assuming she is aged 60+, I estimate she currently has an income of 118.07 per week out of which she is liable to pay income tax of 2.38.

If you take her nett income and feed it in to one of the online benefit calculators you will find (I hope) that if she had a council tax liability of 20 per week she would receive a council tax rebate of 18.28 per week, so she would have to contribute just 1.72 per week to her council tax. When she is 65+ she will pay nothing.

I think, if you examine the figures carefully, you will find that she is actually about 4.50 a week better off (or should be) than if she was on Pension Credit. Not a lot, but not true to say that she is actually worse off. Also, because she is on a low income she could apply for a form, I think it is a HC5, which would allow her the same help with dental fees, glasses, and the other things that would be available to her if she was on PC.

If your mum was able to get a lump sum instead of a weekly pension then presumably the lump sum would be treated as capital. I dont know if the limits are changing this year but last year you could not qualify for Council Tax Benefit if you had capital over 16,000. Capital under 6,000 is disregarded. But for capital over 6,000, a tariff income of 1 per week is assumed for every 500 above the 6,000.

Best thing to do is to use an online calculator to work out how different situations would affect your mother's claim. A small occupational pension often seems to be more of a hindrance than a help. My own view is that it would be nice for your mother to forgo the weekly pension and have a few grand to spend now. But you have to see how the capital would affect her council tax rebate and that would depend on other factors like how much capital she has now.

Good Luck

Ellis

"Ellis" gave some sensible advice but I fear that not everything has been taken into the equation.

The lady involved has paid into a pension scheme for years but she still has the indignity of claiming means-related benefits as someone who has squandered their money through life. She has to complete income tax forms. Other items like (purely for example) claiming from the social fund or obtaining possible remission for evening class fees or obtaining free tickets for the grandkids' annual party at the local club require a lot more paperwork and very inquisitive searching question.

A very valid point has been made. If it is possible she would be better off taking the small lump sum (if indeed this is allowable through the rules of both the pension fund and the government....personally I doubt it!)

The government really needs to look at this problem. At present there are many people in this position.

terryw

Essentially then the pensions industry has failed her and the government has set the level at which benefits kick in just below the level of a failed pension. Since in our system getting one benefit is the gateway to getting them all, she feels understandably discriminated against.

Well they bezzled it up !

DG

I daresay when they look at pensions they will look at that problem. Just might come up with something worse. Never trust government to come up with something better for everyone. They might manage it, but don't trust them to do it just because they are the government.

No-one is forced to claim state benefits, but can lose out on a lot of entitlement. Those state benefits, as they use state money, tend to have rules. So long as someone satisfies those rules, no problem getting it.

Martin <

Pension Credit was set up so that more pensioners are on means tested benefits which inevitably have complex rules. The tax credits system is also designed in exactly the same way.

Gordon loves means tested benefits, he would ideally like almost everyone on them, providing all the info. that goes with claiming them and feeling indebted to him for granting them.

He then cannot understand why so many civil servants are required to maintain them. PC and TC require a huge amount of admin, State Pension (RP) by comparison requires less, approx 1/3 of the administration. This is based on my office which handles 2.5x as many SP customers as PC customers with less than half the staff. Not because the computer or staff are better, simply because there's less to go wrong and it is simpler to calculate.

Mike

Mike

In message , Wodger writes

No, as Ellis has explained, it doesn't. This is the "you are better off on means-tested benefits" myth writ large. I agree with much of what Ellis says.

April 2005/2006, i.e. current, figures:

Total Income (both pensions) 118.07 Qualifying figure for Guarantee Pension Credit 109.45 Her contribution to Council Tax 1.72

So, she is £8.62 above the qualifying figure for GPC and has to pay £1.72 towards her Council Tax.

If she were able to remove the occupational pension in the way you suggest she would be getting the GPC, have no Council Tax to pay and overall would be £6.90 pw worse off.

There are a few further problems with your idea. If she had the £15k that would certainly be enough to "affect any benefits". It would reduce her benefit entitlement by £18 pw because of the assumed or tariff income from the capital. So the calculation would be

Retirement pension income 92.76 Assumed or tariff income 18.00 Total 110.76 Qualifying figure for Guarantee Pension Credit 109.45

So she would still not be on GPC, and would pay 20 pence plus towards her Council Tax.

If she spent the £15k then she would qualify, as you suggest, but she might run into problems with that. It could be held that she has "voluntarily deprived herself of resources" in order to qualify for GPC. Then the £15k that had been spent would be treated as still being available to her and she would not get GPC anyway.

There are not "a load of other benefits" available to those on GPC - she will qualify for most of the health and welfare benefits on age grounds anyway.

A further factor is that when she reaches 65 (she looks to be in her early 60s at present) she would qualify for Savings Pension Credit of (on current figures) c. £13.00 pw. This would be on top of the retirement and occupational pensions. This is generously treated for Council Tax Benefit purposed - she would be likely to only have to pay c £1pw towards Council Tax at that point.

HTH

Clive

Without going into detail on your figures, Clive, there is still something very wrong with a system where someone who has saved for a pension of

109.68 per month is effectively only receiving at very best 6.90 per week and then has an enormous amount of form- filling to achieve this! Couple this with other "passport" benefits and it is very unlikely that this lady is any better off.

The message is very clear. Saving for a private pension age gives a very bad effective return.........far better to spend your money in life and rely on government top-ups in old age. If you really want to save anything for a rainy day make sure that you have less that the set allowable figure to claim full benefits.

The long-term effects of this policy are terrifying given the demographic changes in the future.

terryw

In message , pendragon writes

I don't think it is quite as simple as that...

I'm not clear which "passport" benefits you have in mind - most of those for people of this age are available on age not income grounds.

An underlying problem is the long-term decline in the real value of the state retirement pension. If this were paid at the £130 pw that it would be if the prices/earnings uprating method had not been removed then the problem of "not encouraging people to save" is sharply reduced.

However, even then, she'd still get quite a level of Council Tax rebate whilst paying tax as well of course ...

Clive

"Clive Martin" wrote

Can you explain that statement? AIUI, the state retirement pension is increased in line with inflation. Thus "the real value" is actually kept **exactly the same**, isn't it?

Inflation takes account of certain item increased prices only. Specific costs someone has can increase a lot more than inflation - in recent years, the amount of council tax increase has at times been more than the amount of benefit or state pension increase in real terms. And thats just one bill.

If you start out with 100 a week income, and get a 2% rise every year, you can find some costs going up more. And some even decreasing.

Martin <

In message , Tim writes

Well, yes, but...

See:

Clive

Is the pension increased with CPI or RPI ?

Jim.

According to

"Non income-related social security benefits, such as the State Retirement Pension

and Incapacity Benefit (IB) are generally uprated in line with the movement in the

Retail Price Index (RPI) to September, whereas the income-related benefits such

as HB and CTB are uprated by the ROSSI index. (defined as the all items retail prices index excluding rent, mortgage interest payments, council tax and depreciation costs.)

For the year to September 2005, the increase in

. RPI was 2.7%

. ROSSI index was 2.2 %"

So the retirement pension was uprated using the RPI, however, just to confuse matters further,

Pension Credit was apparently uprated using the Average Earnings Index (AEI) which was 4.2%.

Incidentally, my own occupational pension is about 110 per week and if I did not have the pension I would have got ((last year) 109.45 Pension Credit per week. So using the same logic that has been applied above you could say that (from age 60+) I gained about 60 pence a week from my pension. On that basis,(comparatively speaking) the op's mum did not fare so badly after all.

However, during its (fifteen year) lifetime I have found my Occupational Pension to have been a considerable benefit to me and I would advise anyone to pay in to a pension if they can. If you have not yet reached 60 and you have an occupational pension (perhaps coupled with a part time job) then you don't have to worry about getting pushed around in the Job Centre by some young sprog, who is under orders to harry you in to some low paid menial job.

When you reach 60+ you may not get much benefit out of it - but at least it is yours- and no one can threaten to withdraw it as they may with PC. When you are aged 65+ it may enable you to defer your retirement pension and look forward to a sizeable lump sum in a year or two's time. If you get a part time job, it is still yours, along with your state retirement pension. Even if you become disabled you could try your hand at flogging stuff on Ebay without having to worry about the Governments 24 hour computer's churning away and watching your every move. It is not just a question of financial considerations it is also about personal freedom.

Ellis.

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"Ellis" gave some very sensible opinions coupled with his personal circumstances:>

I have to agree with much of what you say Ellis. However under the present rules between 60 and 65 you are not bothered by the said "young sprog". The Pension Credit and NI contribution are given as of right. You are obviously fit enough to earn a few pounds to supplement your occupational pension. Good luck to you. Power to your elbow. But it must still be galling to the person in your circumstances who is unable to work and is only coppers better off than someone who has never worked or contributed to even a NI contribution.

To take a very slight side-step, the news today was all about the strike by Unison workers to do with their pension rights at age sixty. Please understand that I am not trying to be political, but as many Unison members are low paid....dinner ladies, caretakers, cleaners etc then in cash terms the issue is very debatable. At age sixty they can claim Pension Credit which is very unlikely to be very much below the amount of paid- for pension that would be received any way.

You are right though Ellis.......personal freedom is worth much more than money.

terryw

"Clive Martin" very kindly pointed us to an excellent article which sums up this whole problem>

Thanks for that Clive. I wish that I had written that! It is nice to see that other people are as concerned as we at this newsgroup. terryw

That is true, and believe me, it is a huge relief to be done with all that hassle.

Yes, providing you meet the qualifying conditions, regarding income and capital, and the residence qualification for NI contributions. My point is that the DWP can withdraw payment, at any time, if they think there has been an irregularity, they can even come back at you years later and demand repayment of alleged overpayments.(Even though their allegations may be unfounded or incorrect). That kind of thing does not happen with an occupational pension.

I am not sure how you arrived at this conclusion. But it is true that if someone is able to supplement their pension through work then an occupational pension is a huge asset.

There might be some fleeting resentment but it soon evaporates. Life is too short. You cannot blame individuals for a system that is created by government. People on low incomes can get most pass-ported benefits too. They just need to know their entitlements.

As far as I am aware, they are protesting that the government have scrapped an agreement that allows them to retire on full pension at the age of 60. I would be angry too. You should not mess about with people's lives like that.

I think ultimately that this is a political issue and I don't think we are very much far apart in our political stances. What I was simply trying to point out, from my own personal experience, is that an occupational pension can be an asset,at different times in a persons retirement cycle and for different reasons. You cannot make hard and fast judgements.

I am with you 100 per cent on that, Terry. We pay a huge price in terms of public intrusion in to every aspect of our personal and financial lives in return for the benefits we get.

I understand there are financial analysts who say the govt could increase pensions and benefits, without means-testing, and then reclaim the money back from those that don't need it through the tax system. But apparently that is not the way the Chancellor sees it, and of course it is we Turkey's who ultimately have voted for Xmas.

Ellis

That article is way too simplistic, the idea that getting a state pension at the MIG level would: " ..mean that if people choose to save by whatever means during their working lives, they would get the full benefit of their savings in retirement. ...... Almost all means testing of pensioners would be eliminated"

is simply rubbish. What about housing benefit, ISMI and council tax benefit? OK many/most pensioners will be living in houses they own with the mortgage paid off, so ISMI and HB won't apply, but what about council tax benefit?

To remove "almost all means testing of pensioners" you would need to increase the MIG to the AA plus five times the top end band E council tax! About 240 a week should do it.

So, according to other posts, council tax is included in the uprating, so all you're talking about is natural variation between people - if their council tax really has been going up more than the average, then they live in a larger than average house, and should consider reducing their outgoings in other ways.

Jim.

Do you not get any basic state pension then? If you get some basic state pension on top of your occ pension then you're a lot better off than 60p a week. If you don't, or the 110 includes your state pension, then you should be eligible for the saving credit.