State pension blow as expert warn ‘it’s a benefit not a right’

State pension: Pensioner asks ‘who’s going to pay?’

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For years, many pensioners have reacted with fury to government claims that the state pension is a benefit. They believe it is theirs by right, having contributed for years. It isn’t, a top pensions expert has insisted.

Older people who take pride in never have any claimed state benefits during their working lifetime don’t like the idea of being given one when they retire.

Especially since most will have made decades of qualified National Insurance (NI) contributions towards their state pension during their working lifetime.

How much we all get at retirement depends on how many NI contributions we have made.

So to get the maximum new state pension, paid to those who retired from April 6, 2016, men and women need to make 35 years of contributions.

Those who paid in for fewer years will get less.

Men who retired before April 6, 2010 on the old state pension had to make a massive 44 years of NI contributions. Women had to pay in for 39 years (later cut to 30 for both).

They understandably believe they have rights, in the same way as if they had paid into a workplace or personal pension.

Yet that isn’t the case. readers regularly post comments beneath articles or write letters to the editor arguing that the state pension is a right.

A few years ago, a petition called on Parliament to stop the government from labelling it as a benefit.

It argued: “As state pension has usually been contributed to over many years, it seems wrong to title it as a ‘benefit’, and should revert back to what it has always been called, i.e. state pension.”

Yet the government stood its ground, stating that the state pension is described in legislation as a “benefit” and will stay that way.

Many pensioners feel this leaves them vulnerable, as the government reserves the right to suspend the state pension triple lock at will.

It could be axed for the second year in a row on Thursday, when Chancellor Jeremy Hunt delivers his autumn statement.

Baroness Ros Altmann, a former Pensions Minister and a campaigner for pensions reform, has now delivered some bad news on this front.

She told the position is clear and will disappoint many: “I’m afraid that technically and legally, state pensions are a benefit, not a legal right.”

In contrast to public sector or private pensions, people are “not building up legal entitlements to a promised sum of money”, Altmann said. 

This leaves pensioners highly vulnerable to policy shifts. “Governments can change the rules and have done so many times.”

Altmann said people “seem to get very cross about this” but pointed out that NI contributions are very different from pension contributions. 

“NI also funds unemployment benefits, bereavement benefits, the NHS and more, not just state pensions.”

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The state pension is funded from the tax and NI receipts of today’s workers, rather than a pot of money set aside from your own earlier contributions, said Andrew Tully, technical director at Canada Life. “There is no magic fund built up on your behalf.”

Stephen Lowe common communications director at later life specialist Just Group, said the state pension is a non-means tested benefit, available to all who have the required NI record.

“The NI contributions we make help pay for state pension but also the NHS and other benefits too. There’s no ‘fund’ as such. Today’s pensioners are simply paid out of today’s NI and taxation.”

This means that if the state pension is unaffordable the government can cut it back or change the rules, just has it as it has done so by increasing the age at which people can claim it.

That will continue to make many people feel “cross”, but as Hunt lines up his triple lock decision, there is little they can do about it.

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