I'm not angry that pensioners enjoy a benefit more that I can see how unfair it is on the younger generations I work with.
They are finding it much tougher to get on financially than previous generations and it does seem so unfair to have a benefit system stacked in favour of the old.
And yes the state pension is a benefit paid out of current tax and NI contributions. It's never been paid for out of contributions paid during your working life like a normal pension.
To give an example, until recently (the thresholds have increased) there has been no change to the £60,000 single income which meant a family no longer had any child benefit (this was introduced in 2013).
Yet a pensioner could have unlimited income and still recover the winter fuel allowance.
However the big difference between the two is that the number of children had been fairly flat compared to the numbers of over 65's.
In 2013 the ONS estimated that there were 13.3 million children under 16, by 2024 this estimate had gone down to 12 million. As such if the rules had been changing the cost would have likely reduced over time.
Conversely that over 65 in the same time period have increased from 11 million to 13 million, which means that the cost to provide them with a state pension has increased significantly (even if it wasn't increasing faster than inflation).
I've previously suggested that if you really wanted to cut government costs you could bring in a role which have people with a certain income to either pay an extra tax once they earned over a certain amount (like the child benefit system) or defer the start of claiming the pension.
For those still working at the age of retirement they get a pay rise in their take home pay due to no longer paying NI, so for them the "loss" of not being paid the state pension wouldn't be that great.
In the long term there is a risk that this could cost more as the amount they get in state pension increases, as by deferring the start the government increases the amount paid when the payments start.
If you set the extra tax as +10% on earnings over £60,000, then the amount earned before you received no state pension would be around £180,000.
As such the vast majority of pensioners would still be paid a state pension, not only that but the it's still worth saving for old age, as each extra £1 earned only lost an extra 10p in tax.
Even if the rules were 10% extra between £60,000 and £100,000, 15% extra tax between £100,000 and £125,000 and 20% extra tax between £125,000 and whatever the top band (around £145,000) meant they had payed enough tax to no longer receive any state pension. Even though the amount extra for each extra £1 earned was fairly small (35p), they would still get more money overall.
As this is passive income rather than worked for income (even though it's likely to be worked for to generate the savings pot in the first place) it's arguably less of an issue that there's a fairly limited amount of extra income.
There's often such a degree of hatred towards passing more in tax that people don't want to pay a higher percentage of tax. However generally (not always there's examples where it doesn't always work) if you earn £1,000 on which you have to pay a higher rate of tax you still have more money at the end.
Someone on £130,000 may pay 45% tax but they are still better off than someone on £125,000 paying 40% by around £2,750.
Even if that tax rate was 65% (as they were a pensioner and the above extra tax came into play) they would still have £1,750 extra. Whilst they may not be a large increase in extra money, it's still extra money.
Yet there will be some who will rather not have that extra £1,750 just because they'd rather the government not have any more of their money (even though the extra tax is only reducing the amount of money the government is giving them in the first place in state pension).
If the bottom threshold was linked to the child support cap, there's a much better chance of that rising with time.
The negative press would be fairly limited, as how many of the wider population would be bothered if someone on £90,000 was now getting about half the state pension that they would have got previously?
Another option could be to reduce the rate of NI and switch it to income tax (I.e. reduce NI by 3% but income tax increases by 3%). However that would impact far more pensioners and from lower income rates, even though that of working age wouldn't see the total tax deductions from their pay change much (there would be some change, I think a small reduction, due to the differences in the thresholds of when NI and income tax was paid, even if the total percentage totalled the same).
Of course either of the above options would be far too controversial to bring in, even though working aged benefits have been cut and means tested quite a lot over the years and are generally reducing (at least compared to the state pension). Even though the politicians were saying "we're all in this together".
On an aside, someone was making the point that politicians with a passive income don't have the same understanding of income as someone who has to work for income. It's perhaps why certain politicians/political parties come across as our of touch when the give money advice.
