State Retirement Pensions UK and US

[Owen` 2]

Rather than continue to hijack nidnoyham's thread about his workmate, I am starting this new one with data sinbinjack just posted. I had not seen it before.

 

We in the UK on retiring get a minimum (if we have paid all our stamps)£87 a week plus whatever private pension that we paid for,I would hope for the equivalent of £140-£150 a week when I retire in 9 years and that would make me happy in LOS

 

 

This, I presume, is the UK "state pension". In the US we call it Social Security.

 

This minimum number equates to 87/wk X 52 = 4524 pounds per year (a bit over 9K USD)

 

The US average Social Security check is about $1000/month in 2007 or 12K/yr. The minimum number is somewhat lower and probably compares closely with the UK. Working from this average (which includes spousal survivor checks and the many people who begin collecting a decreased amount at age 62 rather than await full pension age) we get 32,000 baht per month.

 

sinbinjack notes he hopes for 145ish pounds per week including his "works pension". In the US this is called company pension and they are going away. I think the number is down to only 20% of employers who have such a benefit still.

 

Medicare starts for US folks at age 65 and as has been discussed this makes it very hard to stay in LOS past that age because most private health insurers will stop coverage then. The British NHS covers all ages, but Brits will find the same problem getting private health insurance in LOS past 65. Guys there now in their 60's probably have a way to get coverage and maybe will die before they lose that. The guys there now in their early 50's . . . it's an unknown. Maybe something will happen in 10 yrs to allow health coverage outside home country past age 65. As of this moment, the trends are towards insurers shutting off coverage at that age and forcing people home.

 

But back to the state pensions. Make sure you know your expected number. And make sure you know how the annual inflation index works that provides you an annual pay raise. Ditto your works (company) pension. A slight US advantage exists for this. Any company paying a pension to a retiree, especially an "early" retiree, also is allowing that retiree to remain within their group health plan -- which has far lower premiums than an individual plan. Know the inflationary adjustment process and the date it occurs and watch the news for any suggestion that "improvements" are to be made to it. THIS is how benefits will be cut. An erosion of the inflation adjustment is a quiet, easy thing for government to do and if you are not loud in your complaints, they will get away with it.

[js007 795]

Inflation adjustments? What a joke. I wonder how long it'll take most retirees to wake up to what's really happening? In the USA, Social Security and other government pensions are indexed to the CPI. And yet the CPI does not rally track inflation accurately. Not only do they exclude food and energy from the mix, but they engage in calculations of "hedonistic" value. In effect, they're slowly robbing the retirees. Maybe that goes without saying, though.

 

Anyway, the bottom line is that it's very hard to do any type of financial planning at all. And lately, everything seems to be even more volatile than normal.

 

J

[Emil 0]

sinbinjack notes he hopes for 145ish pounds per week including his "works pension". In the US this is called company pension and they are going away. I think the number is down to only 20% of employers who have such a benefit still.

 

 

Fortunately in the US there are other pensions besides Social Security and the company pension. You have the military pensions both active and reserve, federal civil servant, state employees, county, city and other public service pensions.

 

I had friends who had a military pension, federal civil service pension and social security pensions all rolling in, we called them triple dippers.

[sinbinjack 243]

Hi, myself personaly I dont have a "company pension " because I never worked in an industry that had them (trucker)so I have 2 small private pensions that will give me the extra that I mentioned plus a small lump sum.If I move full time to LOS then any pension I get from the Government Is frozen and never goes up,but if I have my home in the UK it does.Luckily for me,in a retirement money sense only, I have other small pensions due to disability so I will be in a lot better shape than many pensioners in the UK who did not make any provision for themselves.One more thing, one guy of my acquaintance came to Pattaya a single retiree and then married a Thai girl and was surprised to find that his Pension went up to the married couples amount of £142 a week with no hassles at all but, his pension will not rise yearly as he is resident in Thailand.

Edited January 6, 2008 by sinbinjack

[BongoBill9999 0]

Just a few additional points:-

The single persons state pension in UK is indeed £87 pw which isn't much, but this is topped up to about £113 pw with pension credits if that person has no other income. It is raised each year in line with increases in the retail price index. From about 2012 it will be increased in line with incomes, rather than inflation. Also, if you get your state pension after 2010 you will only need 30 years National Insurance contributions which is good for me as I retired early and get my state pension in 2012.

 

Sinbin is right that the pension "withers on the vine" if a person moves abroad, except to EU and certain other countries (PI being one of them) but not LOS, otherwise it is topped up annually with a cost of living increase. Interestingly, I have an Armed Forces Pension and that increases annually no matter where I live. Joined up thinking by the Brit Government!!!!!

 

Of course, all you need is a UK address while abroad and ones state pension will increase! The UK government keeps no track of where you go out of the country so how would they know? Currently they don't even know WHEN you leave the country, and when that is introduced they won't know your (ultimate) destination. Also with a UK address you have no drama with using the NHS in the future.

 

It may be advantageous to declare that one is living abroad in order to avoid paying UK taxes on say offshore interest on bank deposits, but that has to be balanced with pension increases and will vary with the individual.

 

Bill

[Eneukman 1]

BongoBill, has the reduced requirement to pay National Insurance contributions been introduced officially yet? As far as I was aware, this was still under consideration and the minimum to ensure that your received the full state pension was still 35 years.

 

My contributuions for the year 2005/2006 are inadequate to count (hardlysurprising as I only worked for 1 week of that year. ). I was given the opportunity to make up the shortfall, but as I am almost on the point of achieivng 35 years worth of contributioins, I have declined to do so. I have been making voluntary contributions but as I may have the full 35 years contributions by the end of this tax year, I may cancel them. One point to consider is that if you marry a Thai girl, she will be entitled to a widow's pension but that the amount she will get will be dependent on how many years contributions you have paid So, continuing the voluntary contributions will give her a higher pension.

 

One point I would be very wary of is trying to hide where you are actually living. I spent 25 years administering estates of people who had died and had a few cases where the Department of Social Security as it was then reclaimed money it had paid out to people who had claimed benefits to which they were not entitled. The last time this arose, they failed to substantiate the amount that had been overpaid within the required time scales so I distributed that money to the beneficiaries of the estate.

 

Alan

[BongoBill9999 0]

BongoBill, has the reduced requirement to pay National Insurance contributions been introduced officially yet? As far as I was aware, this was still under consideration and the minimum to ensure that your received the full state pension was still 35 years.

 

My contributuions for the year 2005/2006 are inadequate to count (hardlysurprising as I only worked for 1 week of that year. ). I was given the opportunity to make up the shortfall, but as I am almost on the point of achieivng 35 years worth of contributioins, I have declined to do so. I have been making voluntary contributions but as I may have the full 35 years contributions by the end of this tax year, I may cancel them. One point to consider is that if you marry a Thai girl, she will be entitled to a widow's pension but that the amount she will get will be dependent on how many years contributions you have paid So, continuing the voluntary contributions will give her a higher pension.

 

One point I would be very wary of is trying to hide where you are actually living. I spent 25 years administering estates of people who had died and had a few cases where the Department of Social Security as it was then reclaimed money it had paid out to people who had claimed benefits to which they were not entitled. The last time this arose, they failed to substantiate the amount that had been overpaid within the required time scales so I distributed that money to the beneficiaries of the estate.

 

Alan

 

 

Alan

 

I am as certain as I can be about the reduced requirement - I have looked hard and fast over the past couple of days to see if there is a change over period but have found nothing. You can get NP46 the Guide to State pensions here. http://pensionsgroup.org/pdf/np46/np46apr05.pdf

It is updated to cover the pensions act of 2007 and page 2 states quite clearly that only 30 qualifying years are required for those claiming the pension after April 2010. If you have the 30 years I would see no point in paying voluntary contributions unless it gives you some other advantage of which I am unaware.

 

I take your point about residence. God forbid that I should ever break the spirit of the law. However, HMG makes it difficult to be a non resident (because they want the tax) but for someone who just has the basic pension and has never received benefits and just chooses to go on very long holidays I don't really see a problem, and if one does turn up after the person has croaked, who gives a flying f*ck.

 

Bill

[dontcha 53]

Rather than continue to hijack nidnoyham's thread about his workmate, I am starting this new one with data sinbinjack just posted. I had not seen it before.

This, I presume, is the UK "state pension". In the US we call it Social Security.

 

This minimum number equates to 87/wk X 52 = 4524 pounds per year (a bit over 9K USD)

 

The US average Social Security check is about $1000/month in 2007 or 12K/yr. The minimum number is somewhat lower and probably compares closely with the UK. Working from this average (which includes spousal survivor checks and the many people who begin collecting a decreased amount at age 62 rather than await full pension age) we get 32,000 baht per month.

 

sinbinjack notes he hopes for 145ish pounds per week including his "works pension". In the US this is called company pension and they are going away. I think the number is down to only 20% of employers who have such a benefit still.

 

Medicare starts for US folks at age 65 and as has been discussed this makes it very hard to stay in LOS past that age because most private health insurers will stop coverage then. The British NHS covers all ages, but Brits will find the same problem getting private health insurance in LOS past 65. Guys there now in their 60's probably have a way to get coverage and maybe will die before they lose that. The guys there now in their early 50's . . . it's an unknown. Maybe something will happen in 10 yrs to allow health coverage outside home country past age 65. As of this moment, the trends are towards insurers shutting off coverage at that age and forcing people home.

 

But back to the state pensions. Make sure you know your expected number. And make sure you know how the annual inflation index works that provides you an annual pay raise. Ditto your works (company) pension. A slight US advantage exists for this. Any company paying a pension to a retiree, especially an "early" retiree, also is allowing that retiree to remain within their group health plan -- which has far lower premiums than an individual plan. Know the inflationary adjustment process and the date it occurs and watch the news for any suggestion that "improvements" are to be made to it. THIS is how benefits will be cut. An erosion of the inflation adjustment is a quiet, easy thing for government to do and if you are not loud in your complaints, they will get away with it.

 

Fuck me people in the US + UK get very little in State pensions, In Ireland the weekly State pension is €223.30($329.37 or £167), pensioners also get an extra week every year in early December not to mention fuel allowances, living alone allowance,electricity allowance + free travel in Ireland for anyone over 70.

The annual State pension in Ireland = €11834.9 ($17492 or £8852.5) not including other benefits.

Most people have some kind of a personal pension as an of €11834.9 would be considered as living in poverty.

I would guess that many other countries in Europe pay higher State pensions than Ireland.

It looks like you guys in the UK and the USA are getting avery raw deal from your governments at the end of your working lives

[BongoBill9999 0]

By Dontcha

 

It looks like you guys in the UK and the USA are getting avery raw deal from your governments at the end of your working lives

 

 

In general I would agree that the state pension in the UK is crap. However, what has not been mentioned are all the other benefits that people get. Just as an example I know of a friend who gets the following:-

 

A single persons state pension with credit (£113 pw)

Approx £64 a week for help (attendance allowance)

A very nice 2 bed flat (apartment) rent free, maintenance free,

A new fitted kitchen and new central heating recently fitted, free

An extra £300 a year for heating

Free TV licence (for what that is worth)

Free NHS, prescriptions etc

Recently fitted stairlift in her flat - free

Free local bus travel (from everywhere from April next)

She pays no income or council (property taxes).

 

She reckons she has never had it so good. Her husband now deceased was a deep sea fisherman and not well paid. I know all this is true - she is my mother.

 

Bill

Edited January 6, 2008 by BongoBill9999

[sinbinjack 243]

Bongo Billy I know that some will find this question weird ,but ,Is your mum blind as I have always been under the impression that only Blind people got the TV license free?. As for all the rest we in the UK are very good with the people who don't have a lot of money( don't even need to be British just have residency, I swear that I am not a racist just don't like giving my money to people who I think aren't really entitled) when they retire, unfortunately they are not so good if you have saved a little made extra provision for an extra pension and own your own home.

Edited January 7, 2008 by sinbinjack

[BongoBill9999 0]

Bongo Billy I know that some will find this question weird ,but ,Is your mum blind as I have always been under the impression that only Blind people got the TV license free?.

 

 

Nope, she isn't blind. Everyone in the UK over the age of 75 (including millionaires) gets a free TV license!

Good ol socialism (I don't think). Blind people just get a discount which just shows how stupd the whole freakin system is. Mine expires at the end of Feb, just hope my house is sold by then and I will be a country that doesn't use this pathetic system.

 

Bill

Edited January 7, 2008 by BongoBill9999

[Eneukman 1]

Alan

 

I am as certain as I can be about the reduced requirement - I have looked hard and fast over the past couple of days to see if there is a change over period but have found nothing. You can get NP46 the Guide to State pensions here. http://pensionsgroup.org/pdf/np46/np46apr05.pdf

It is updated to cover the pensions act of 2007 and page 2 states quite clearly that only 30 qualifying years are required for those claiming the pension after April 2010. If you have the 30 years I would see no point in paying voluntary contributions unless it gives you some other advantage of which I am unaware.

 

I take your point about residence. God forbid that I should ever break the spirit of the law. However, HMG makes it difficult to be a non resident (because they want the tax) but for someone who just has the basic pension and has never received benefits and just chooses to go on very long holidays I don't really see a problem, and if one does turn up after the person has croaked, who gives a flying f*ck.

 

Bill

 

Thanks Bill,

 

After my post, I checked out a couple of sites on the internet and it does seem that from October last year the entitlement was reduced to 30 years. I will phone them in the next few days to confirm the position and stop payments after the March one. The one benefit I can see in continuing payments is that my widow (if I ever marry) will receive a higher widow's pension.

 

Alan

[Owen` 2]

Really useful to have a feel for the UK norms on these matters. Maybe vice versa if you ever associate with Americans.

 

The item about your state pensions "freezing" the day you leave the UK is an ugly one. I know of no equivalent feature in Social Security.

 

For Social Security there is a requirement that contributions take place for "40 quarters" in order to qualify for a minimum payout. That is largely calendar, but not entirely. If you make large contributions in some quarters they can count as more than one quarter. Regardless, if you stop contributing, you stop increasing your benefit (which does have a maximum), but you do not freeze inflation adjustments.

 

Meaning, if you quit work at age 54 with contributions of a magnitude that will give you $10,000 USD/yr in pension, that will be $10,000 2008 dollars in whatever year you collect them. The amount WILL adjust upward with inflationary adjustments each year. Also, with Soc. Sec, people have the ability to start collecting at age 62 (in fact most do) at a 33% decrease, forever, from the amount they would collect at "full retirement age" (65, 66, or 67 depending on the year you turn that age). The equation for deciding on early collection depends, of course, entirely on your death year. The longer you live, the wiser it becomes to wait for the extra 33%, but since no one knows when that will be, most grab the money as fast as they can at age 62.

 

Note that these numbers above are rather low. I believe a top end earner (it is capped at about 100K income) will get about $25,000 USD/yr.

 

A big issue with Soc. Sec. is its taxability. If people have other sources of income, their SS gets taxed at different levels. There is a fairly loud philosophical fight about this in that SS is technically not income -- it is a return of insurance premiums paid over a lifetime.

 

Anyway, a generic Early Retiree will not hit those max numbers. Leaving the workforce early cuts your benefit. This is a reasonable thing and something guys should research to know their numbers.

[Merangue 1]

Well its a good few years off yet but i hope to be able to officially retire at 60 with my full Civil service pension. I also hope to have about £100k + to allow me to stop work early (55-56) and move somewhere like Thailand. I reckon i can live quite comfortably on that until my Civil service pension kicks in 4-5 years later followed by my State pension at age 66.

 

In order to do this i am paying extra into my Civil service pension so that i will have the maximum 40 years allowance. Its either that or keep working and then take the chance my health etc is up to me being able to enjoy my money in Thailand.

 

Also looking at opening a couple of Isa's to boost any savings i might have.

 

The combination of these three should put me somewhere around

 

Age 56 £16000 per year from savings + Isa's if needed (Todays prices 65 per £1 = 86666 Baht per month + Isa's)

 

Age 60 £16000 per year pension + Savings/Isa's left (Todays prices 65 per £1 = 86666 Baht per month + Isa's)

 

 

Age 66+ £16000 per year pension + State pension + Savings (Todays prices 65 per £1 = 111171 Baht per month + whatever is left of my savings )

 

Now this is all 15 years in the future and i am sure things will change in that time but thats the general plan.

 

Another alternative it to take a lump sum at age 60 retirement but that would then cut into my annual income. Roughly £1000 per year for each £10000 i take in a lump sum.

 

That is all assuming i do not get a promotion in the next 15 years and therefore my income does not change for the better.

Edited January 7, 2008 by Merangue

[DaveB 3]

Well its a good few years off yet but i hope to be able to officially retire at 60 with my full Civil service pension. I also hope to have about £100k + to allow me to stop work early (55-56) and move somewhere like Thailand. I reckon i can live quite comfortably on that until my Civil service pension kicks in 4-5 years later followed by my State pension at age 66.

 

 

 

What pension scheme are you in? I am a civil servant and have been for many years, I can retire with the Maximum 45/80 at age 57 and a half, but I can find nowhere in my pension scheme that pays a large sum of money at an earlier age without being dismissed on the grounds of medical inefficiency, the sum can be up to 2 years salary.

 

The only other way i can go earlier is to take early retirement any time after I am 50, but this reduces my pension by 10% per year for each of the years i go early, ie: I go 5 years earlier my pension is reduced by 50%. So it is not really a good decision for me to go down that road.

 

[Merangue 1]

There is no lump sum from the pension in my calculations.

 

The 100k is personal savings and selling up etc. I am also doing Isa's etc.

 

Sounds like you are on the Classic pension with the 40/80. ( you cannot contribute the added 5 years unless you are already over 60 ) I am also guessing you have been paying over the normal in order to be able to hit the max at age 57. Either that or you started in the Service at age 12 hehe.

 

As i have transferred years in from another Pension scheme and joined in 2005 i am actually on the Classic Plus which has the same rules as the new Premium scheme. EG: 40/60 with the option to take a lump sum at age 60 but which seriously cuts into your Monthly pension.

 

Incidentally if you ARE on the classic then at age 60 you should also get a lump sum payment on top of your 40/80 to a maximum of 3 years annual pay. Dependant on your grade that could well be a nice sum of cash to invest.

 

Classic pension link

 

http://www.civilservice-pensions.gov.uk/sc...on/classic.aspx

 

Classic Plus Pension Link

 

http://www.civilservice-pensions.gov.uk/sc...assic_plus.aspx

 

 

Premium Link

 

http://www.civilservice-pensions.gov.uk/sc...on/premium.aspx

 

Main Site link

 

http://www.civilservice-pensions.gov.uk/

 

 

Note:

 

If you are now on the classic plus ( likely) you need to work out service before and after October 2002.

 

Assuming you had 20 years service till 2002 you would get 20/80 + 3X Annual Pension. Added to that 20/60 + plus the option to take some of that as a lump sum.

 

No point in working till 57 till you get 45 years in. Would be better off leaving the job at 52 with the maximum 40 years service, Getting something else in the way of work and instead of paying into a pension fund invest as much money as possible into saving/bonds/Isa's etc.

 

Then claim your pension at 60 like i intend to.

 

Hope that helps. Either way i suggest you have a word with Pensions and discuss what exactly you stand to get and what your options are. I am certainly no expert and once i have sorted a few more things out, i intend to get some professional advice.

Edited January 8, 2008 by Merangue

[DaveB 3]

I am on the Classic Pension, with reserve rights to retire at 55, with full 40/80 pension.

I can do an extra 2 and a half years which will be "doubled up" to 5 years pension which again is my terms and conditions with reserved rights.

 

After 20 years service my pension "doubled up" so for every year i do after that i get double pension, up to a max of 40/80 at 55, but doing the extra 2 and a half years it will give the maximum pension of 45/80.

 

I joined my present job in 1985, but was a civil servant prior to that for 8 years.

You are correct in saying that i will get a lump sum, but its 3 x my pension not annual salary, but can also enhance the lump sum with the new scheme that became available in Oct 07, but this will reduce my pension.

 

It is the only reason I stay in the job, as I have now only 7 and half years to go, or 10 if I do the extra 2 and a half years.

 

Looking forward to my retirement with a strong possibility that it will be in Thailand.

[Merangue 1]

Bah humbug. I still have 15 years till i reach the magical year i can sod off and instead of doubling up i have to pay the extra years myself.

 

Wish i had reserved rights but i joined BT just after it went private so missed out.

 

I knew about the 3 X Annual pension thing i just forgot to type the word pension hehe.

 

Out of interest which branch of the Civil service do you work in?

[Eneukman 1]

A big issue with Soc. Sec. is its taxability. If people have other sources of income, their SS gets taxed at different levels. There is a fairly loud philosophical fight about this in that SS is technically not income -- it is a return of insurance premiums paid over a lifetime.

 

Anyway, a generic Early Retiree will not hit those max numbers. Leaving the workforce early cuts your benefit. This is a reasonable thing and something guys should research to know their numbers.

 

The state retirement pension in the UK counts as taxable income. It's only becomes an issue if you have extra income to take you over the nil band rate. People over 65, receive a higher personal allowance than younger people, but this is restricted if your income is over a certain level. At present, when I reach 65, my income will be high enough to mean that I will simply get the same personal allowance as people younger than 65.

 

Alan

[Owen` 2]

The state retirement pension in the UK counts as taxable income. It's only becomes an issue if you have extra income to take you over the nil band rate. People over 65, receive a higher personal allowance than younger people, but this is restricted if your income is over a certain level. At present, when I reach 65, my income will be high enough to mean that I will simply get the same personal allowance as people younger than 65.

 

Aha. Another similarity.

 

See, the problem with threads this complex is that it is about a subject no one wants to deal with, and it's complex. The combination turns guys away from it, and they simply must not do that. This stuff must be understood or life will get miserable in later years.

 

[One last tidbit, mentioned in previous threads. US Military veterans, do not forget that your military service increases your Social Security benefits and that increase is NOT reflected in the earnings form you get each year. Read about it on www.ssa.gov.]

[Daveuk 28]

One thing that hasnt been mentioned in regard to state pensions in the UK is SERPS (State earnings related pension). Unless you contracted out of this you will receive an additional pension which is related to your earnings over many years. I am 65 in March and have had quite a pleasant surprise in that whilst my basic state pension is only £85 per week, my total state pension will be £223 per week. The additional amount is mainly the serps element. This together with a pension I derive from being in a company scheme for over 30 years should see me well placed.

There are a few other "fringe benefits" from being old in the UK. I can now travel free on the buses and have 30% reduction from train travel off-peak. Not forgetting £200 per year winter fuel allowance.

I like to think that I spent the £200 shagging Thai girls during my last visit and will use a fair bit of my state pension for the same purpose when I return.

Edited January 10, 2008 by Daveuk