Government pension changes likely to be introduced based on pre-election pledges by the Conservatives and the Lib Dems are currently being presented as benefits that will increase pension income from both state and private pensions.
Dig a little deeper, and we see that the pension changes are primarily designed to save the state money – which of course is the Government’s job, and must be applauded. However, looking at the pension changes with a cynical point of view does give a unique perspective on government pensions thinking in general.
Basic State Pension and pensions credits: The Government will say that the launch of the National Employment Savings Trust (NEST) in 2012 will provide everyone with an additional pension income, a private pension in addition to the Basic State Pension which currently pays out just £97.65 taxable per week. A cynic might point out that it will also save the Government paying out means-tested pension credits as a top-up to the Basic State Pension, since now we will all have a personal pension pot of our own from our NEST pension savings. In other words, the Government has had us save our own pension credits, and will soon need to pay far less pension credits from the coffers of state.
State retirement age and NI contributions: Government will say that raising the state retirement age to 66 gives employees more flexibility to work longer, which suits a generation whose improved health and longevity has dubbed them ’the wellderly’. A cynic might say that Government has also cleverly had us pay into the Basic State Pension for longer, with an additional year of National Insurance contributions, and also to draw the Basic State Pension for a year less, as we will retire a year later.
The 75 rule versus tax liabilities: Government will say that by abolishing compulsory purchase of a pensions annuity by age 75, we now have greater flexibility to keep our pensions savings, and to bequeath them to our children. However, a cynic might point out that after the government pension changes, the taxman at HMRC may be rubbing his hands with glee at the prospect of Inheritance Tax and other tax liabilities - these could eat up four-fifths of our pension savings, if we leave them in our will without taking pension advice and discussing retirement planning.
I have worked all my life paying tax and NI contributions. I have a small pension which disqalifies me from pension credits. Isnt it wonderful to have subsidised scroungers all my working life to present them with even more money so that they have an equal or better standard in their retirement?