State Pension

Norkie

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From the Daily Telegraph

https://www.telegraph.co.uk/money/tax/income/labour-retirement-tax-hit-state-pensioners-next-year/

Retirees will be dragged into paying income tax on their state pension as early as next year, fresh analysis suggests.

Forecasts by Deutsche Bank suggest the triple lock will rise by £600 – 5.5pc – next year to £12,631 – meaning it will breach the personal allowance which has been frozen by Rachel Reeves until 2029.

As a result, nine million pensioners will pay tax on their income from April 2026.

Experts have repeatedly warned the state pension is on track to collide with frozen income tax thresholds – a phenomenon that has been dubbed “Labour’s retirement tax”.

The triple lock is designed to ensure the state pension keeps up with living costs and rises each year by the highest of either inflation, average wage growth, or 2.5pc.

Deutsche Bank forecasts growth in average weekly earnings (AWE) will reach 5.5pc in July – higher than the projected inflation figure. They therefore predict the triple lock will rise by the same amount in April 2026.

Sanjay Raja, the bank’s chief UK economist, said the bank was confident in its forecasts, adding: “As of right now, our projection for AWE in the three months to July sits at 5.5pc year on year.

“Our September 2025 CPI projection sits just around 4.25pc. Therefore, based on our current projections we see state pensions rising by 5.5pc in April 2026.”
 
A corollary of the fiscal drag even now, is those with modest other pensions are already paying small amounts of income tax.

So, the longer the delay to increasing the Personal Allowance to a more suitable level (including to remove low wage earners from paying any tax?) will drag an increasing number of pensioners to pay an increasing amount of tax!

Having said that, there are ever increasing demands on the exchequer to get defence spending higher.
 
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I don't get this fuss at all.

I receive the basic pension plus roughly £40 per month from a company I worked for decades ago. My wife gets about £100 a month from a company pension and about 3/4ths of the basic pension. We live comfortably on that and have money left over most months.

What expenses do people have that makes the state pension less than their needs?
 
AndrewFlannigan said:
I don't get this fuss at all.

I receive the basic pension plus roughly £40 per month from a company I worked for decades ago. My wife gets about £100 a month from a company pension and about 3/4ths of the basic pension. We live comfortably on that and have money left over most months.

What expenses do people have that makes the state pension less than their needs?
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I can perceive that there are some pensioners who are only receiving a state pension and possibly pension credits. Thus, that either those renting a property (or possibly even a cohort yet to finish paying their mortgage off???) would struggle due to the cost of living.

Granted there will be many who are "jam'ing" but no all.

The fiscal drag I think I heard reported will cause many(?) pensioners in receipt of pension credits to see that benefit reducing or withdrawn.

Like in many things in life, not everyone's circumstances are the same.
 
Not every pensioner receives the full state pension.... it's a 2 tier system with a lower rate for retirees born before 1953. It also depends on NI contributions and contracting out of SERPS

Less than half the people entitled to the maximum state pension actually receive it.

www.royallondon.com

Revealed: 150,000 pensioners get a State Pension of less than £100 a week - Royal London

Data obtained by Royal London reveals that only half the 3.5 million recipients of the new State Pension are paid the full amount.
www.royallondon.com www.royallondon.com
 
crikey i am allready paying tax on my private pension at 55 i am over the tax allowance when i get to 67 all of my state pension will get taxed lol
 
Mr Bump said:
crikey i am allready paying tax on my private pension at 55 i am over the tax allowance when i get to 67 all of my state pension will get taxed lol
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I'm 62, retired at 59.5 and another one already paying income tax on my pension income.....
 
So, if it states you will get the full amount when you retire, you may not?
 
My wife and I are both retired and paying tax on our pensions.
 
I retired just shy of 55 and paid income tax from day 1 (as expected)
When I got the state pension this year my tax code changed and now pay the full tax amount from my private pension.
This means my state pension is paid in full every 28 days, very welcome boost to our finances.
My state pension was calculated on the years I contributed, so for me it was 37 years NI contributions.
 
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Rachel reeves conducted a con job in the last budget . And an even bigger one with the withdrawal of the winter fuel payment . The basis of the con is claiming that you can get pension credit to get it back , come april the increase in state pension will push the majority of those new payments recipients over the threshold so they will lose out again .. as no pension credit no extra help .
Smoke and mirrors hoping that no one will pick up on it , the people at dwp must be sick of it by now
 
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Norkie said:
Forecasts by Deutsche Bank suggest the triple lock will rise by £600 – 5.5pc – next year to £12,631
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So you are getting another £600 of mine and my working adult children's money and you are complaining about paying tax on it?
 
sirch said:
So you are getting another £600 of mine and my working adult children's money and you are complaining about paying tax on it?
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I don't recall complaining??
A modern society should thrive on the taxes it collects and use those taxes for the greater good. I don't see that happening currently.
 
I tend to side with @sirch on this - I get my full state pension and two small pensions from the cvil service and German state pension. That means I pay tax on some of the total. It seems fair that I didn't get the winter fuel payment because the pension will go up by more than the £300 in April anyway and then more again the following April. The only people with a right to whinge about losing the winter fuel payment are those on the Old state pension who get a pitiful amount. That old state pension should be phased out, not by their deaths but by gradually bringing it into line with the new state pension amounts. To do so in one fell swoop would certainly be unaffordable.
Of course we'd all like the state pension to come into line with the "living wage" but it won't happen in a sudden change. And with life expectancy increasing so much generally, many people are capable of working to an older age - I'm working still at 68 and expecting to continue into my 70's at least part-time. I can, and have the opportunity, so why not? I have no desire to be constantly going on holidays even if I could afford to, and that's all I see early retirees appearing to do. Besides which it appears that most of the people complaining about paying tax on their pensions seem to be those with good private pensions who don't seem to realise that the only reason you are paying more tax is that your income has increased. You are still better off.
I dare say I'll get flamed for this standpoint, so be it, opinions differ and that's healthy.
 
I assume tax is paid only on any money above your personal allowance.
 
lindsay said:
I dare say I'll get flamed for this standpoint, so be it, opinions differ and that's healthy.
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Not from this address!

I was taught early to keep a close eye on the bawbies and when I forgot that lesson, life (and she who must be obeyed) swiftly kicked me into remembering it.
 
F1.2 said:
I assume tax is paid only on any money above your personal allowance.
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Yup that is the way it works, I have paid tax all my time I have had a pension as the tax allowance has not gone up for ages. Each year you get a rise in April but it drags you into the tax bracket. State pension plus a private pension means you are taxed.
 
lindsay said:
I tend to side with @sirch on this - I get my full state pension and two small pensions from the cvil service and German state pension. That means I pay tax on some of the total. It seems fair that I didn't get the winter fuel payment because the pension will go up by more than the £300 in April anyway and then more again the following April. The only people with a right to whinge about losing the winter fuel payment are those on the Old state pension who get a pitiful amount. That old state pension should be phased out, not by their deaths but by gradually bringing it into line with the new state pension amounts. To do so in one fell swoop would certainly be unaffordable.
Of course we'd all like the state pension to come into line with the "living wage" but it won't happen in a sudden change. And with life expectancy increasing so much generally, many people are capable of working to an older age - I'm working still at 68 and expecting to continue into my 70's at least part-time. I can, and have the opportunity, so why not? I have no desire to be constantly going on holidays even if I could afford to, and that's all I see early retirees appearing to do. Besides which it appears that most of the people complaining about paying tax on their pensions seem to be those with good private pensions who don't seem to realise that the only reason you are paying more tax is that your income has increased. You are still better off.
I dare say I'll get flamed for this standpoint, so be it, opinions differ and that's healthy.
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No moans from me about paying tax, wouldn't want to get less than £12.5k a year or not getting the 200 quid, would have been first time for me
Already decided I would donate it to Crisis anyway, know a few people who always give it to charity

I did the work thing for 38 years, much prefer the holiday option so please carry on, but its not for me thanks very much.
 
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I worked for 40 years and was a higher rate taxpayer for at least half of the time. I am fortunate I have a private pension and a local govt pension in addition to my state pension. I think it's fair that I should pay tax on my pension, however I think freezing the threshold for paying the lower rate of tax is unfair as it hits the poorest in society hardest.
 
broc said:
I worked for 40 years and was a higher rate taxpayer for at least half of the time. I am fortunate I have a private pension and a local govt pension in addition to my state pension. I think it's fair that I should pay tax on my pension, however I think freezing the threshold for paying the lower rate of tax is unfair as it hits the poorest in society hardest.
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Totally agree, the basic allowance seems to have been static for years.
 
AndrewFlannigan said:
I don't get this fuss at all.

I receive the basic pension plus roughly £40 per month from a company I worked for decades ago. My wife gets about £100 a month from a company pension and about 3/4ths of the basic pension. We live comfortably on that and have money left over most months.

What expenses do people have that makes the state pension less than their needs?
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So state pension is 1k a month.

Many people live on their own, so it is much more expensive to live like that rather than a couple. I have a 3 bed house, so bang average and my bills (or estimated bills as if I was retired I would not need as fast a broadband for example) are:

- 150 Gas/Electric
- 40 Water
- 190 Council tax
- 30 House Ins
- 35 Broadband & Mobile
- 40 Car Ins
- 120 for fuel, service etc...
- 300 for household shopping

So thats around 900 - and ignores hobbies, car tax, tv license, house maintenance etc... And thats assuming someone is mortgage free too. Surely if someone has worked over their lives they deserve to be able to holiday etc. and do a bit more with their lives rather than just exist. In your case, you probably get bout 1.8x of state pension, around 2k, but as a couple the only increase would be on the food part
 
Raincloud said:
So, if it states you will get the full amount when you retire, you may not?
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all pensions are subject to tax rules the only difference is you don't pay NI
 
cambsno said:
So state pension is 1k a month.

Many people live on their own, so it is much more expensive to live like that rather than a couple. I have a 3 bed house, so bang average and my bills (or estimated bills as if I was retired I would not need as fast a broadband for example) are:

- 150 Gas/Electric
- 40 Water
- 190 Council tax
- 30 House Ins
- 35 Broadband & Mobile
- 40 Car Ins
- 120 for fuel, service etc...
- 300 for household shopping

So thats around 900 - and ignores hobbies, car tax, tv license, house maintenance etc... And thats assuming someone is mortgage free too. Surely if someone has worked over their lives they deserve to be able to holiday etc. and do a bit more with their lives rather than just exist. In your case, you probably get bout 1.8x of state pension, around 2k, but as a couple the only increase would be on the food part
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the answer is in your first line though, sadly if you were only being paid state pension
you would downsize and release some money from your 3 bedroom house if you were in that position
 
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cambsno said:
...but as a couple the only increase would be on the food part
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That's why I'm doubly lucky: a super wife and as much money as we need. :naughty:
 
Another thing that the freeze in the personal allowance affects is the amount of tax you pay on savings interest.
There is a 0% rate on £5000 of savings interest but the £5000 reduces by £1 for every £1 you earn in income (Salary / Pension) above the personal tax allowance.
So people with savings and lowish income or pension could lose out twice.
 
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tijuana taxi said:
Totally agree, the basic allowance seems to have been static for years.
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Thanks to J Hunt, who also reduced NI contributions for workers, which pensioners don't pay. Pain in the butt, you plans for retirement and some buggers come along and change the rules.
 
looking at this as staggered how it varies by country. Ok, there are variables like % of old people, life expectancy etc.,... but Spain & Belgium at 2,700 a month (and lower cost of living).Even France at 1,500

How does UK pension compare to the rest of Europe? | Almond Financial

At Almond Financial, we compared the UK's pension system to the rest of Europe’s countries to see which one offers the most to retirees.
www.almondfinancial.co.uk www.almondfinancial.co.uk
 
I didn't see Germany in that article, which is odd.
Anyway, I note that I get Euros181 every month from my German state pension after working there only 2.5 years, so I think if I'd paid into the system there for 12 years I'd get about the same as I do for 35 years UK contributions. Makes me wish I'd worked longer in the then Federal Republic. Although the annual increases are less (lower inflation and no triple lock)
 
A friend of mine receives a local government final salary inflation protected pension after working for the local council. He had a minor role in the job. £16,000.00 per annum plus he gets the state pension, albeit slightly reduced because he contracted out, altogether, £27000.00 a year.
He does pay income tax.
These pensions are paid for by residents in the local authority area. They should be banned.
 
sirch said:
So you are getting another £600 of mine and my working adult children's money and you are complaining about paying tax on it?
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One could argue that my taxes were paying for your children's education. Maybe we are just seeking payback
 
Norkie said:
A friend of mine receives a local government final salary inflation protected pension after working for the local council. He had a minor role in the job. £16,000.00 per annum plus he gets the state pension, albeit slightly reduced because he contracted out, altogether, £27000.00 a year.
He does pay income tax.
These pensions are paid for by residents in the local authority area. They should be banned.i
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Local Govt workers pay income tax and national insurance, not to mention making contributions to their pension fund. They also pay council tax like other residents.
 
Norkie said:
A friend of mine receives a local government final salary inflation protected pension after working for the local council. He had a minor role in the job. £16,000.00 per annum plus he gets the state pension, albeit slightly reduced because he contracted out, altogether, £27000.00 a year.
He does pay income tax.
These pensions are paid for by residents in the local authority area. They should be banned.
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Why begrudge others a decent standard of living in their old age.
Just a shame these pensions have become something of a rarity these days.
 
Because I’m paying income tax and poll tax that’s being used to fund lucrative pensions for council employees.
 
Norkie said:
Because I’m paying income tax and poll tax that’s being used to fund lucrative pensions for council employees.
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I'm no doubt financing wealthy shareholders with all my utility bills.
Then we have others who are doing very nicely from the inflated shopping prices.
I'm glad other ordinary working people will enjoy their retirement.
 
Norkie said:
A friend of mine receives a local government final salary inflation protected pension after working for the local council. He had a minor role in the job. £16,000.00 per annum plus he gets the state pension, albeit slightly reduced because he contracted out, altogether, £27000.00 a year.
He does pay income tax.
These pensions are paid for by residents in the local authority area. They should be banned.
Click to expand...

I guess thats just the trade off - low base salary, little benefits but safe job (in most cases) and great pension v private sector with little job security, lower pension but better salary and benefits
 
Norkie said:
Because I’m paying income tax and poll tax that’s being used to fund lucrative pensions for council employees.
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But I could say that about so many things, asylum seekers, aid to India, northerners, cushy prisoners, education for people who dont want / need to be there, libraries I never use...
 
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