National Insurance and state pension

[anonymous-user]

I briefly caught on the news that there are going to be changes to the state pension.

It sounded like everyone was going to get the same regardless of how much NI one pays.

Anyone know how all this is going to work?

[davepoth]

Yes.

1. National insurance goes, and gets folded into income tax. Everyone gets £155 a week pension, flat rate.

2. ???

3. Profit.

[otherman]

MonkeyMatt said:

I briefly caught on the news that there are going to be changes to the state pension.

It sounded like everyone was going to get the same regardless of how much NI one pays.

Anyone know how all this is going to work?

Starts from retirements in (I think) 2017. Everyone will pay the same NI rate, presumably somewhere round 10%. You won't be able to earn a higher state pension by paying more any more, but then everyone will get £155 rather than the current basic of £110ish. Anything you earn up to that date won't be lost, so if you paid serps already that's ok. In future you won't lose state pension because you have a private one, as you do currently.
The aim is to a)simplify it b) make it more worthwhile to save for yourself

[anonymous-user]

davepoth said:

Yes.

1. National insurance goes, and gets folded into income tax. Everyone gets £155 a week pension, flat rate.

2. ???

3. Profit.

What about all the NI we have paid! Is there any point in continuing paying it?

[eldar]

davepoth said:

Yes.

1. National insurance goes, and gets folded into income tax. Everyone gets £155 a week pension, flat rate.

2. ???

3. Profit.

You still have to have to make a number (30?) of years NI payment to qualify at the full rate.

[anonymous-user]

eldar said:

You still have to have to make a number (30?) of years NI payment to qualify at the full rate.

I thought I heard that everyone will get the £155 regardless of whether you have paid NI all your life or a housewife that has never paid any?

[GeraldSmith]

MonkeyMatt said:

What about all the NI we have paid! Is there any point in continuing paying it?

It's a tax, it's not paying into a fund that you then get paid out of. How much you pay in has never had any bearing on what you get out and being a tax you have no choice about paying it.

[Mojocvh]

GeraldSmith said:

MonkeyMatt said:

What about all the NI we have paid! Is there any point in continuing paying it?

It's a tax, it's not paying into a fund that you then get paid out of. How much you pay in has never had any bearing on what you get out and being a tax you have no choice about paying it.

100% correct, although contributing for 30 odd years then getting nothing when you need it is galling.....................

[davepoth]

Mojocvh said:

100% correct, although contributing for 30 odd years then getting nothing when you need it is galling.....................

Exactly. So why bother? It's not like it's an insurance scheme in any sense of the word. Ditching it makes life a lot easier for a lot of people.

[rs1952]

MonkeyMatt said:

eldar said:

You still have to have to make a number (30?) of years NI payment to qualify at the full rate.

I thought I heard that everyone will get the £155 regardless of whether you have paid NI all your life or a housewife that has never paid any?

As I understand it, you have to pay NI for at least 30 years to get the full amount. If you were "a housewife" all your life and didn't work at all then presumably you would get a pension off the back of your old man's NI contributions as you would now.

The existing system was designed in the days when many married women did just that, but in the last 40 years or so many things have changed. Like women working for most of their adult lives, f'rinstance (virtually never heard of in my grandparents generation). They also tended not to get divorced in those days, and divorce has caused a bit of a problem in claiming a pension on your old man's contributions if you divorced him a decade or two ago.

The 30 rather than the current 39-year qualifying period (for women) will go someway to overcome the problem of women taking career breaks when having their kids and then not getting enough years in to get a full pension

[davepoth]

rs1952 said:

As I understand it, you have to pay NI for at least 30 years to get the full amount. If you were "a housewife" all your life and didn't work at all then presumably you would get a pension off the back of your old man's NI contributions as you would now.

The existing system was designed in the days when many married women did just that, but in the last 40 years or so many things have changed. Like women working for most of their adult lives, f'rinstance (virtually never heard of in my grandparents generation). They also tended not to get divorced in those days, and divorce has caused a bit of a problem in claiming a pension on your old man's contributions if you divorced him a decade or two ago.

The 30 rather than the current 39-year qualifying period (for women) will go someway to overcome the problem of women taking career breaks when having their kids and then not getting enough years in to get a full pension

The government want to fully ditch NI.

[98elise]

Mojocvh said:

GeraldSmith said:

MonkeyMatt said:

What about all the NI we have paid! Is there any point in continuing paying it?

It's a tax, it's not paying into a fund that you then get paid out of. How much you pay in has never had any bearing on what you get out and being a tax you have no choice about paying it.

100% correct, although contributing for 30 odd years then getting nothing when you need it is galling.....................

Thats the propblem with NI, its there is no pot of money growing for your retirement, it is simply a tax. You have to pay it, yet the benefits you draw will be decided by some future government, and the tax take available at the time.

[manic47]

davepoth said:

The government want to fully ditch NI.

I can see their point TBH - just roll it in with income tax and be done with it.
That'll remove the upper limit on NI contributions too.