New £144 Pension rate masks stealth cuts

[Jasper]

The government announced last week that the basic state pension would be raised from £107.45 to £144 by 2017 for everyone and means testing for top-ups would end. Most news items said only those with high incomes, the young and those who had a contracted-out pension would be worse off.

Truth is everyone will be worse off. First of all you now need an extra FIVE years NI contributions to qualify for the £144. In addition, these NI contributions will be higher for every employee.

Then the state pension age is being raised yet again in 2026 to 67. It is then being reviewed every five years, with most believing today’s 30-year old will not get a state pension until they are aged 70 maybe older.

So on the one hand we are getting an extra £36.55 a week. (£1,900 a year) But we are having to pay in more (how much depends on your earnings) and wait longer. Raising the pension age by two years will cost everyone under 53 £11,175 at today’s rates. This will mean you would need to live until you are at least 73 to break even just to get your £11k back!

And remember those already getting a state pension before 2017 wont get the increase at all ever, so the extra NI contributions are not being used for today’s pensioners!

[big-all]

so at 59 i have to wait until i am 65 and 4 months to get my pension if i was born 1 month earlier [dec 1953] it would be 65
anyway i get my state pension mid 2019 i am now taking my railway pension at 59 and will survive off that for the next six years and four months
so are you now saying its 35 years ni contributions and at what rate??

[Jasper]

Ni rate is 12% of salary I think. But it will rise.
In the 80's Income Tax was 33% and NI about 4%.
Both these deductions are calulated on gross income so you pay tax on NI contributions and NI on the income tax deductions. A bit like duty on fuel and vat on the duty!

At least you havent got to wait another full year like I have!

[northwales4u]

Both these deductions are calulated on gross income so you pay tax on NI contributions and NI on the income tax deductions. A bit like duty on fuel and vat on the duty!

Are you sure? I thought tax is payed on your income above the taxable threshold - therefore not gross

[kellys_eye]

I've already receieved notification from Mr Taxman that I've made all the NI contributions to ensure I get the full state pension so I'm now one of those who are 'supporting' those that have never worked a day in their lives

[big-all]

i though tax was after ni contributions

[big-all]

I've already receieved notification from Mr Taxman that I've made all the NI contributions to ensure I get the full state pension so I'm now one of those who are 'supporting' those that have never worked a day in their lives

i got notification off 31 years in nov 2009
so at worst i will have to make feb to nov [10 months] although the form does say i can make up 2007-08 for £156 or £13 a week

thats assuming its 5 more years at 35

[northwales4u]

i though tax was after ni contributions

I've just looked at a payslip from last month and the Gross Pay, NIable Pay & Taxable pay were all listed at the same amount - not sure if it makes any difference but it was an MOD payslip

[Jasper]

i though tax was after ni contributions

I've just looked at a payslip from last month and the Gross Pay, NIable Pay & Taxable pay were all listed at the same amount - not sure if it makes any difference but it was an MOD payslip

Gross Pay - Your pay before any deductions are made!
Taxable pay - The amount of your pay that is subject to tax
NI Contributions - The amount of your pay that attracts NI deductions.
Your pay slip shows that the rates charged are as I said on gross pay not after Tax or NI have been deducted.

The Tax due is reduced by Tax Allowances, but all pay is subect to tax less these allowances.
It matters not who you work for!

If people can't understand this. then is isn't any wonder that the government can gradually take more and more of your money and you don't even know why and how it does this!

[northwales4u]

If people can't understand this. then is isn't any wonder that the government can gradually take more and more of your money and you don't even know why and how it does this!

I have to confess that I don't fully understand how tax and NI is calculated but I doubt I will pay more to the government because I get my accountant to fiddle the books for my tax return and he does a far better job of it than me