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How does the UK state pension compare worldwide?

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Our latest Which? Money investigation looked into state pension systems in 15 different countries. Where do you think the UK sits in relation to its counterparts?

It’s extremely difficult to make a like-for-like comparison between nations’ pension schemes, as each country has different qualifying criteria and ways of calculating your entitlement.

However, despite this, our snapshot survey shows some marked differences.

Pension schemes are worlds apart

While the Swedes enjoy a maximum state pension of just over £25,000 a year, South Africans get a maximum of £1,044. And although Britain’s current basic state pension of around £5,500 a year leaves it near the bottom of the league table, government reforms will see this rise to almost £7,500 (in today’s money) in 2016.

It’s important to remember that you can’t look at a country’s state pension in isolation. How much tax people pay and what they get for their taxes are inextricably linked to the issue of pensions.

Another vital consideration is the average salary for each country. For example, a yearly pension of £1,044 in South Africa might not seem quite so low when you learn their average annual salary is £7,421.

Support for private pension saving is another key issue. Like Sweden and the Netherlands, the UK’s private pension coverage boosts its meagre state pension.

Pension ages on the up

State pension age is also a controversial subject in the UK. For many years it was 65 for men and 60 for women, but it’s increasing to 66 for both genders by 2020, to 67 by 2028 and will rise in line with life expectancy thereafter.

But the UK isn’t alone in increasing state pension age – of the 34 Organisation for Economic Co-operation and Development countries, 28 others intend to do the same.

*The state pension age may have changed since the date of publication for this article. For the latest advice and information on the state pension, check out the Which? State Pension calculator and advice guide.

Comments

Helen, perhaps if we had all stuck up for the elderly over 30 years when Thatcher moved the goal posts on how State pensions would be paid, things just might be different today ?. People now, are suffering like our elderly people have been suffering for 30 odd years.

The bottom line is that Britain’s State pension is a joke because the Tory’s dont believe in it

There has been a long-running Labour government since Margaret Thatcher who could have changed this if they had wished.

Malcolm R. Labour have’nt run this country since the 1970’s. What your reffering to is Tony Blair’s New Labour Government 1997- 2010. Mr Blair not only continued Thatcher’s free market, but he did not reverse Thatcher’s State pensions policy. People coming up to retirement now, did not support our pensioners when Thatcher broke the State pensions link with earnings in 1980. Perhaps if people had stood up for the elderly then, things might be different for one and all now ?

Michael, the point I was trying to make, badly perhaps, was there have been 40 years to change the state pension whatever the party in power. Trying to keep it non-political. I assume the wish was to try to get people to save for their retirement through either Serps or an opted-out scheme.

I would like to see better provision made to support those genuinely in need who did not have the means to make their own decent provision. I would also like to see an end to public service final salary schemes in the future so we all are placed on the same basis.

Why end final salary schemes if they provide a way of offering some certainty when we enter retirement and there are so many uncertainties, not least about how long we will live? Maybe average salary schemes would be fairer but I really feel sorry for those who have had pension funds collapse at a time of life when they are not in a position to take any useful action.

The final salary schemes I am concerned about are those that are subsidised by the taxpayer – the very people who are being short-changed on their own state pension. If they can stand on their own feet, that is fine, but most private schemes have been closed because they were not apparently sustainable.

I agree that they should stand on their own feet, but all pension schemes should provide a degree of certainty, for reasons I have explained.

As private pensions are mainly funded from investments their value, and return, will go up and down. So the capital, and the income, will never be certain. The way to get certainty is to subsidise the income, e.g. from taxes. That means those on variable private pensions will contribute to keep a select group on sure incomes – if they pay tax, or through VAT or fuel duty. Seems a bit unfair to me.
What I believe we need is a decent “certain” minimum state pension that gives a living income – targetted at those who need it though, and not a universal benefit. At least in hard times we should not distribute state money to those who don’t need it.

One of the reasons we are discussing the inadequacy of the state pension is because contributors have been let down by private pension schemes. What we need is for all pension schemes to provide a sure income rather than attempting to get rid of those that are doing a good job already. With people living longer, I can acknowledge that these will have to be less generous than in the past.

For most private pensions the only way to get a “sure” income was to buy an annuity. Certainty but a low return. Thank goodness we have alternatives now. What I do not agree with is a two-tier system with one part subsidising the other.

On a similar tack, nor do I agree with a two-tier redundancy system
https://www.gov.uk/government/consultations/recovery-of-public-sector-exit-payments/recovery-of-public-sector-exit-payments
where quite a few public sector people are entitled to far more than the private sector. Time we had equality across the board in pensions and other benefits. Sorry to digress!

malcolm r. This right wing Tory Government are using the deficit as a cover to reduce the State, cut welfare to the bone, and privatise the NHS. This is because the Tory right wing are ideologically opposed to the State and everything attached to it, including the State pension. And by the way, Thatcher started rolling back the State over 30 years ago, and the first thing she did was break the State pensions link with increases in British prosperity..I believe in universal benefits based on solidarity. I dont believe in means tested handouts based on charity. The reason we are all in this mess now is due to over 30 years of Thatcher’s free market policies.

I am all for reducing the numbers employed in State bureaucracy – both unnecessary management and civil servants – but not those in the “front line”. I am also in favour of reducing misdirected welfare. We should also buy back extortionate PFI contracts and renegotiate terms, stop state-sponsored vanity projects like HS2, and remove ill-thought out subsidies to wind farms for example. So reducing the state is good if it releases effort and money to create a proper productive economy.

juan s says:
12 January 2015

there have been 13 years of labour government who could have reversed thathers policies if they had wanted to ….
Don,t know about other countries but spains pension is generous partly because the terms are different…..i.e. females don,t retire until they are 65 …. you can not draw a pension and continue to work even part time …
and most importantly…… If you are self employed then you pay 256 euros a month minimum social security payments regardless of earnings ..
I believe that is about 4 times what you pay in the uk ?

anne says:
23 January 2015

sorry to but in, can I just point out that the minimum need to live above the povery line is over £14000.00 per year so if that is the smallest amount anyone can live on why do we expect pensioners to live on less then half that amount? Also before anyone adds work related costs to justify the need for extra income, just look at the increase costs of staying home, there are quite a number if only heating costs. That figure by the way is not to live the high life only a very basic lifestyle or we all saying pensioner should only beable to eat and keep warm, noithing else?

Having lived through the period, and read several authoritative histories of it, I believe I am right in saying that the link between pensions and average wages was one of the contributors [maybe not the most significant but certainly not to be ignored] to the agressive and higly damaging rate of inflation in the late seventies. It is true that Margaret Thatcher, as Prime Minister at the time, broke the link; many considered that action to be courageous, essential, and beneficial to the economy overall. That policy has been consistently condemned by opponents but not reversed until recently. It is impossible to extrapolate its consequences for pensioners today because of the multitude of counter-acting changes to tax rates, allowances, benefits and and other economic factors. What has usually been overlooked in the debate is the massive increases in social security spending generally since 1980 which have had a compensating effect on any adverse effect of the broken link, however, being categorised and targetted these non-financial benefits have not been appreciated universally by pensioners.

Andyfeelingbeatenup says:
12 January 2015

Why can’t I get the same as others in the EU now we are part of it?
Foreigners come to the UK and get our child support etc without contributing a penny. How come the pensioners get beaten up?
Just what the hell does the UK government do with all of our taxes?

Michael says:
22 February 2015

Andyfeelingbeatenup, “”””Why can’t I get the same as others in the EU now we are part of it?
Foreigners come to the UK and get our child support etc without contributing a penny. How come the pensioners get beaten up?
Just what the hell does the UK government do with all of our taxes?”””.

British pensioners dont get European State pensions amounts because Blair stopped that when he was in Government. And “foreigners”, dont get anything until they have worked and paid into the system, and then they only get a third what British claimants get……Oh and by the way, British migrants to European countries to retire and work, are also “foreigners”.

[This comment has been edited to align with our commenting guidelines for the use of some hateful language. Thanks, mods]

Andy – When you ask “Why can’t I get the same as others in the EU now we are part of it?”, Well you can! The UK pension will always be better than many EU pensions, and much better than a Slovenian or a Bulgarian one for example. But what you probably mean is “why can’t I have a German or a Swedish pension?”.

There is no standard European Union state retirement pension. Each member state has its own pension scheme and there is a wide variation in scope and benefits across the EU – that is why it has proved very difficult to make comparisons even within Europe let alone worldwide! The UK model is one of the oldest and it has been varied many times over the years as it has developed. Basically, UK nationals domiciled in the UK cannot choose to have another country’s pension entitlements, mainly because in most cases they require a contribution record going back decades. As you say, foreign nationals who are domiciled in the UK can acquire rights to various UK benefits, and in most cases EU citizens have preferential treatment over other foreign nationals. Foreign nationals married to [or the civil partners of] UK citizens have certain rights and can more easily obtain UK citizenship giving them parity of treatment. There are reciprocal rights around the world which, historically, were considered beneficial to the UK, its international influence and its trading potential.

EU citizens who come to work in the UK legitimately and have a National Insurance number can build up a contribution record if they stay long enough and can eventually retire here on a UK state pension or have it paid to them if they return to their home country. The same applies in reverse to UK nationals if they develop a career independently in another EU country – bearing in mind that where they decide to go has a major bearing on the quality of the pension they can earn.

So far as I can recall the idea of harmonising state pensions across the EU has never been seriously considered. The economic conditions across the member states are so inconsistent that it would take an enormous amount of time to bring about a sensible alignment; even within the Eurozone common currency area there are serious fault lines that highlight the problems. The wealthier nations would balk at underpinning the pension schemes in some of the other countries which have been economically unsustainable for some time now. Most former Eastern Bloc countries have a very high and rapidly rising ‘dependency ratio’ – that is the working age [contributing] population is declining while the retired [pension-drawing] population is growing and living longer.

I am sorry you are feeling beaten up. I won’t attempt to answer your final question because you will get every opportunity to ask plenty of people eager for your vote between now and the 7th of May.

anne says:
23 January 2015

The problem with means testing is it requires forms to be completed, this becomes an increasing problem for some elderly people as their age increases, their anxiety about getting it wrong causing unnecessary worry and for a good number it is not worth the stress even if they are aware they would have an increase in their income. Some are not even aware they can claim anything and before you all shout this can not be the case today with modern communications ect, having worked with the elderly for over 20 years it is still a problem today and with our complex benefit system it is not improving.

anna, I agree with your comment about some elderly people not being equipped to deal with these matters. I do think it is necessary to ensure that financial help is targetted at those who genuinely need it, and not frittered away on others, so some assessment of need is essential.

There should be accessible local organisations tasked with helping potential claimants to see if they have a valid case, what they are entitled to and to help them complete the paperwork. If CAB has been tasked to help people with pensions advice, why cannot it also be told to do the same for this? They are funded by the Govt. who introduce the benefit criteria, so they should be the ones to help make proper use of them.

My view is that the state pension should be governed by what people pay in contributions during their working life. Additional benefits need to be means-tested, as Malcolm says, so that they go to those who deserve them. We don’t give disability support to people who don’t need it.

Anne, How about means testing our MP’s ? These subservient rules should apply to them. We are means testing our pensioners because we are a class entrenched and very subservient nation. We havent altered class attitudes since the days of King Richard and the mythical Robin Hood. Britain remains living in the dark ages

Anne – It is not necessary to fill in a form to get Pension Credit [for topping up he basic state pension where that is the only income]. It can be done over the telephone. The DWP has made the process for this and various other entitlements much more accessible.

I feel that a lot of people are deterred from taking up their entitlements because applying for them is constantly being described as “humiliating”, “demeaning”, or with other such pejorative language. It doesn’t help, and people who claim to be on the side of the poorer pensioners are not doing them any favours by perpetuating that image.

Patricia D'Amiral Manners says:
21 February 2015

I think the state pension in the UK is disgusting, compared to our near neighbours in Europe. It’s about time our government treated it’s older people with more respect instead of letting them struggle on with pension they receive. The UK is in Europe and therefore our pensioners should receive the same state pension as Germany and Sweden. I think it’s about time we should all stand up for the rights of all our older generation and see that they get the rights they deserve, the state pension is not a benefit, it’s something that people have worked for all their lives, and therefore should be a fair and positive amount that gives them a life without struggle and worry. They should live their autumn years in relative comfort.

Patricia, whilst I like the idea where is the money coming from to fund it?

According to Wikipedia, for 2012/13 the approximate revenue from National Insurance contributions was £84 billion compared with an expenditure on pensions and benefits, etc. of £91 billion. That is already a big shortfall. I don’t consider myself an expert on financial matters but it is evident that if we are going to spend more on pensions, we need to spend less in other ways.

It is worth noting that both Germany and Sweden fund their state pensions as we do – existing retirees from the contributions of existing workers. As they live longer there will no doubt be great difficulty in continuing to fully fund, unless they cut elsewhere. Germans apparently contribute around 9% of pre-tax income towards their state pension, and employees a similar amount.

As our economy hopefully continues to recover maybe the state will have more money from taxes to put into worthy causes? However, saving for your own retirement is prudent.

Thank you for that reference Wavechange. That is why it is good to have a substantial – but frequently criticised – national insurance fund surplus so that there is a funded reserve to carry us through the shortfall years without having to reduce the pension in order to balance the books.

Point taken John. Some private pension schemes have got into a mess by lack of forward planning and we cannot afford to do the same with our NI fund.

Michael says:
22 February 2015

Patricia D’Amiral Manners, ohhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh, well said that lady. Sums it all up!!

karl says:
17 April 2015

THE ONLY REASON WE DON’T HAVE ENOUGH MONEY TO PAY THE PENSIONERS WHO HAVE WORKED ALL THEIR LIVES AND PAID THEIR TAXES, IS BECAUSE HERE THE nATIONAL iNSURANCE CONTRIBUTIONS ARE NOT APPROPRIATED PROPERLY. tHEY GO INTO ONE BIG POT……AND ARE SQUANDERED WILLY NILLY. In Germany for instance, you pay a portion to health – a portion to pension and a portion to unemployment.that way the money goes to where it should be going……….a n d stays there!!!!!

This Conversation is mainly about how well or badly off UK pensioners living in Great Britain & Northern Ireland are compared to the pensioners of other states living in their own country on their national pension and benefit arrangements. Although we haven’t been able to pin down all the relevant data, it seems generally agreed that the situation for UK pensioners could be better.

What has not been discussed, although there was another Conversation about the freezing of the UK state pension for those who emigrated to certain other countries, is how UK Nationals who have retired to other countries have seen a significant reduction in the purchasing power of their UK-derived money [not just state pension but including occupational pension and investment income] over recent years due to exchange rate movements relative to Sterling. While the recent strengthening of the Pound is good news, two thirds of expat pensioners remain worse off than a decade ago. In the Eurozone, despite the fact that the Pound has risen by 10% in the last year, they will still be 7% worse off than a decade ago. An income of £5,000 now buys 6,548 Euros compared to 5,963 in February 2014, but this remains 500 Euros short of what could be purchased in 2005. In the rest of the world, many UK expats are still much worse off than a decade ago, especially those that retired to Australia (-21%), Canada (-22%), the United States (-23%), and New Zealand (-38%). The hardest hit are those in Switzerland (-59%). [Data from Equiniti]. This is purely a monetary analysis – the alternative quality of life might compensate.

John, I don’t believe we can subsidise overseas pensions by protectinhg them against curreny movements. These, and other countries arrangements, are known when someone contemplates moving overseas.

The state pension is not the whole income of a pensioner. I would like to compare the minimum total income including other benefits to which they are entitled, against the same overseas. It may still show us up in a bad light. We should also look at how our pensioners’ incomes compare with the cost of essential living in this, and other countries. It is not the amount of money that matters, but what essentials it buys. Again, we may come out badly, but just looking at a headline figure is not enough.

Malcolm – You are absolutely right that we should be looking at state pension plus benefits to which people are entitled and using this for comparison with other countries. Whether these figures are readily available is another matter.

I agree completely Malcolm. I just submitted this data for information as another facet of the difficulties of comparing living standards and purchasing power in different countries.

Personally, I happen to think when you take all relevant benefits and allowances into account, including the tax regime, the UK state pension is not really out of line interationally bearing in mind it is based on a contribution record.

Any financial hardship that affects pensioners may be as much to do with many other factors as with the pension rate. A universal scheme cannot remedy unique individual disadvantages so it is vital that there are other measures in place to provide relief. Perhaps it is those that require more examination

Michael says:
28 February 2015

John Ward. You miss the point,,,, again!….. European pensioners receive a decent amount of State pension making no need for means testing for State handouts.

Britain’s State pensions is so low, many pensioners are forced to apply for means tested State handouts.

The original posting states that Britain’s State pension on its own merit is lower than Europe’s State pension. And it is. Why dont you and your friend Malcolm R understand this ?

Michael says:
28 February 2015

John Ward, Britain’s State pension is the lowest compared to EU countries. Means tested handouts do not even enter the equation.

European pensioners receive a high enough State pension that they dont need to have to apply for means tested handouts.

Michael, John will no doubt reply on his own behalf, but I am contributing a point of view to this conversation. I happen to believe that we should support those who are in need of support, so benefits in addition to the basic state pension should be targetted at them but not dished out to everyone irrespective of need. Means testing is one way of checking this.

We have limited resources. If you want to we could explore where the money would come from to boost the basic pension. Defence? Foreign aid? Ask why benefits to non-pensioners can be £23000? Should we subsidise tuition fees? Rail travel? The money has to come from taxpayers – that is all of us (VAT is included) to provide pensions.

Michael says:
28 February 2015

Malcolm R. If you truly believe we have limited resources in this country then you need a wake up call..

We spend less of our GNP on our vital services than any European country does.

We should be looking after our own, not via degrading, humiliating means tested handouts, but by paying all pensioners a decent State pension, and this includes richer pensioners who have also paid into the system through their working lives. I do not subscribe to the 1930’s means test at all. I subscribe to a much higher level of universal State pension for both men and woman at what should be the legal retirement age of 60…….

It looks as if you may be suggesting we print money. It might create employment opportunities in wheelbarrow manufacturing, to carry increasingly worthless money around. Should we also hand out disability benefits to everyone rather than checking whether individuals deserve support?

I’m sorry I seem to keep missing your point Michael, but that is because I see things differently; it’s allowed. I concur in what Malcolm said on 28/02/15; to me, his views seem fair and balanced.

And I am afraid that the UK does have limited resources, partly because its productivity is too low [alongside countries like Germany, a popular comparison for UK pension levels] and also, as Malcolm mentions, partly because of the steep rises in benefit payments in 2008 and 2009 which continue to impact on the economy. It is open to any government to change the balance of spending in favour of state pensions but none have done so significantly and no viable contenders are promising to do so this time round.

I realise that you prefer language like ‘means test’ to ‘needs assessment’ to describe the process of getting additional entitlements. My only concern in that regard is to make sure that the state does address people’s needs when their income is too low, that the administrative barriers to access are kept low, and that the allocations are equitable taking both taxpayers and recipients into account.

Robert says:
11 March 2015

My mum get UK state pension but remember she gets housing benefit and council tax paid for. in Germany or Spain you wouldn’t get your rent paid for council tax if you didn’t own a property. UK System is a little unfair as well if we have a second pension then you wouldn’t get your housing benefit or council tax paid for it would come because you have a Second pension in which you paid all you your life, if you’re going to get a second pension in Britain you need a massive second pension otherwise is not worth it, however saying that it is best to take a second pension because nobody knows what the future can be maybe they will stop a lot of these benefits.

Neil Thomas says:
26 March 2015

As a pensioner, I would like it make a couple of points. As a rule of thumb, £200,000 is required to provide a pension of £6,000 per year. If anyone feels they have contributed more, they have right to feel ‘hard done by’. If they haven’t contributed, they have no right to complain. I have always been taught and been expected to pay my way.
My second point. In Germany, 19.5% of your wages goes into the State Pension pot. That is much greater than our NI Contributions and therefore they must be entitled to more.
What I do object to, is people who retire early, without full contributions, believing they are entitled to a full pension.
I object to the greek pensioners being funded by Europe having avoided contributions and taxes all their ‘working life’
I object to anyone who has not contributed and complains and most of all I object to people who want something for nothing and feel it’s their right.

Neil Thomas says:
26 March 2015

Sorry typo…..£100,000 is required for a £6,000 pension

Your first paragraph is interesting Neil. Despite our attempts in this Conversation, it’s been difficult to find a better state pension system in the European Union than the UK system overall – we can cherry-pick the tasty bits from other countries’ schemes but it’s hard to see the full picture.

One good point about the UK state pension scheme is that it doesn’t depend on the amount of money you pay in but the number of contributions you make This means that someone who has had a low-paid job but made continuous NI contributions throughout their working life will still get the full basic state pension. Higher earners have been able to make additional contributions which can supplement their basic pension but only by a smaller amount; beyond that they have had to pay in to a private pension plan where often the returns have been uncertain and the management expenses excessive. The other points to bear in mind are that this year’s pensions are paid for out of this year’s tax and NI revenues [there is not an historic ‘pension pot’ for each contributor which governs the amount they will receive], that NI covers a lot more than just pension contributions, and that there are safety nets in the benefits system to catch people whose contribution record has fallen short for whatever reason, and also for pensioners whose total income is no higher than the basic state pension [this is being consolidated shortly].

Another good thing is that the basic state retirement pension will go up by 2.5% whereas inflation is now at rock bottom. In many cases company wages [and cetainly public sector ones] are not rising like this – if people are better of it’s because of tax changes, low interest rates for loans, and falling commodity prices. At last, pensioners can make a bit of progress, relatively speaking.

Michael says:
26 March 2015

Neil Thomas, the “moan” and the point of this thread is that Britain’s State pension is too low, much lower than Europe’s much higher payments, and our WW2 veterans particularly, have indeed paid enough in NI contributions and taxes, to justify at least a £300 a week State pension.

John Ward, your first paragraph in reply to Neil Thomas is a joke. Again, the whole point of this thread is to see by the above graph, how much higher European State pensions are on a par with European levels. Means testing Britain’s pensioners for handouts after a working life of paying into our system is a disgrace,

Michael, means testing is a method of ensuring those most in need are targetted, not those who are not needy. Particularly in times when money is short, I would rather have this as a system for fair distribution of wealth. This is your and my taxes being distributed, and I’d like to see them properly used. I would, for example, means test the winter fuel allowance to ensure it goes to those who struggle, not those with ample money.

There are twenty-eight different pension schemes in the European Union. Some of them are better than the UK’s because those countries are wealthier or more productive or have higher taxes or contribution requirements. Some countries in the EU are also living way beyond their means and cannot sustain their own provisions [Italy is running a growing deficit year-on-year on its state pensions because there are not enough young working people to support the rising number of elderly people living longer and they have not addressed the need to adjust the state pension age].

A popular measure of pension value is the percentage it represents of average incomes [the ‘replacement rate’] and on this measure the UK is way down at the bottom of the table. We languish well behind countries like Hungary, Slovenia and Bulgaria for example, but that is because their average incomes are so low. We are also well behind France which is currently experiencing complete stagnation due to its huge government welfare expenditure, high taxes and declining production. Italy has a very high replacement rate but there is very little private pension provision there, taxes are high and other benefits poor. My impression is that pensioner poverty is quite acute in many parts of Europe but disguised by different societal structures. The OECD has reported that absolute poverty rates of British pensioners aged more than 65 in the UK fell from 12.2% to 8.6% between 2007 and 2010 and I think it is continuing to fall. £1.5 billion of entitlements go unclaimed in the UK each year – this is the scandal that needs to be addressed.

Sorry Malcolm – what to do about the the annual coal bucket has been kicked into the long grass . . . again. All pensioner households are going to get one whether they need it or not. It’s not even taxable. This could have funded a tailor-made warmth scheme for elderly people who live in hard-to-heat houses [spend once, spend wisely].

Hopefully the measures introduced last year will mean that in future most people will be paying into a pension scheme and fewer will depend only on the state pension plus benefits they quality for. Obviously we still have many who don’t have their own pension and the benefit of employment-based pensions will take years to materialise.

For those who cannot cope with the concept of means testing, perhaps the answer is to drop the term and refer to people qualifying for certain benefits. We decide whether a person is eligible for disability benefits based on ability to walk and many other factors, so what is so different in deciding whether someone should receive support because their income and savings are below a threshold?

wavechange, it will be hard to drop “means testing” no more than bedroom tax, mansion tax, rip-off, broken, untrustworthy etc because they are terms used to inflame opinion. Where the state is helping people with money they have not earned but need it because of circumstances not of their making we should be clear that is what it is. The welfare state was surely designed to use our taxes wisely in supporting the needy, as in benefits supplementing the state pension, not in sprinkling cash around willy nilly without regard to circumstances.

Malcolm – I have previously given the example of giving everyone disability benefit, whether or not they are disabled. That would be ridiculous. It’s fair enough to give everyone the state pension if they have made appropriate contributions but anything beyond should be on the basis of need.

As far as I know we have one disagreement, and it is a strong one. I want to get rid of energy standing charges and have a fixed price per unit. Present standing charges bear no relation to the costs of the infrastructure and distribution, as you can see if you compare prices for urban and rural properties. The reason I want this change is because low users who can’t afford to heat their homes properly are subsidising high users, including those with large homes and the profligate. If people are high users because of the design of their homes or they have a medical need, they should enquire to see if they are eligible for benefits.

wavechange, I have written to Which? about the flaws in their “unit price only” mantra. My criticism of Which? on this, and a number of other campaigns and articles, is they do not always give a whole argument. I fear they are sometimes economical with the facts to promote their particular stance. I believe consumers should be given all the relevant facts and a balanced argument and allowed to reach their own conclusions. However, this topic is about pensions.

Standing charges are relevant to this debate, Malcolm. You will see that others have mentioned that pensioners sometimes live in cold houses because they cannot afford to heat and eat. The standing charges mean that low users are subsidising those with large houses and those who waste energy. We manage to provide street lighting without putting extra charges on those who can least afford to pay. Is it not reasonable to provide everyone with energy and just charge them for what they use?

Energy bills affect everyone, not just pensioners. A separate debate really.

On the basis that we have had comments about pensioners not being able to afford to heat their homes properly and to eat, in this Conversation, I think it is very relevant.

Standing charges represent a significant expenditure for any pensioner who does not have a personal pension or significant savings, and is dependent on the state pension. At present they are having to subsidise those who are wealthy and live in large houses. You suggested we should use our taxes wisely, and one way would be to cover the costs of distribution of energy to our homes.

Incidentally, in referring to the ‘Which? unit price mantra’ you are using the sort of term that you have have opposed earlier. 🙂

The State provides a £200 (£300 for over 80’s) winter fuel payment designed to help the elderly with their energy bills. It more than offsets a typical standing charge. Without the standing charge unit costs would rise to compensate. The current situation means that the effective unit rate paid by a low energy user will be 6% less than a medium user and 14% less than a high user.

We should, as I have said before, ensure the standing charge covers only fixed costs irrespective of consumption and Ofgem should review this urgently. We should also remove the subsidies for warm homes, carbon schemes, renewable sources etc from energy bills and just let them cover the direct costs of energy, its distribution and administration. Then we will pay for the energy we use, and no more.

The Winter Fuel Payment is not relevant to the fact that low energy users are subsidising high users thanks to standing charges. That is wrong and moving to simple unit prices would mean that we would all pay for what we use.

Moving to simple unit pricing would avoid the need for price comparison websites. Many pensioners don’t check energy prices and switch suppliers to get the best price. Switching costs money, so those who don’t switch are subsidising those who do.

Let’s help our pensioners rather than exploit them.

This conversation is about pensions and pensioners; my comments are the effect the payments the State makes to them has on their energy bills. If we want a debate about the way energy prices affect everyone then that should be something Which? might instigate as a separate conversation.

Despite all the politicians’ huff-and-puff, the Winter Fuel Payment actually went down in 2011 [from £250/£400] and hasn’t been restored. Pensioners are expected to feel grateful every year when the Chancellor says he isn’t going to take it away.

Another aspect of the discussion about elderly people’s energy costs and the standing charge is that many are only ‘low users’ because they have had to turn off their heating to save money. Obviously this raises their unit costs. Their actual heating needs in terms of temperature and duration are probably significantly above average.

I can’t find any statistics on the uptake of the Warm Homes Discount scheme. I suspect there is a lot of under-claiming because eligible people don’t know about it or because they have nobody to help them get it. I checked my supplier E.On’s website to see how they promote it. It’s on the home page, right at the bottom together with all the usual information topics, and a link takes you to a helpful page. Claiming the discount involves communicating with both the energy supplier and the DWP. The website says : “Thank you for your interest in the 2014/15 Warm Home Discount scheme. Unfortunately we’ve reached our maximum number of applications for this year’s scheme and we are not accepting any more applications.” More obstacles to uptake. It’s right that access to the WHD is lmited to those on pension credit and involves a needs assessment but there should be a lot more outreach by both the welfare agencies and the energy companies to help qualifying people get it. I guess the target client cohort is not going to find it on-line themselves.

As a nation we seem to be walking around this problem poking a stick at it and seeing which bit twitches.

We have several Conversations where we can debate how energy affects everyone. My concern is that those living on the state pension often have difficulty with paying their energy bills. I believe it is very relevant to bring discussion of energy costs into this discussion.

We provide the public with a huge range of facilities, irrespective of ability to pay. Many never use their local library or museum, but it is there if they want it. My view is that electricity, gas and water are essential and the cost of providing them to homes should be met by the state, leaving us all to pay for what we use.

I want to see us billed for the true cost of the energy we consume, eliminating charges that are effectively taxes – subsidies for wind, solar, feed in tariffs, warm homes, smart meters and so on. That leaves raw energy, transmission cost, connection maintenance, meter reading and admin etc. It is not the job then of the commercial suppliers to arrange their charges to provide indiscriminate subsidy. That is the job of the state. As we have already said, subsidy should be targetted at those in need – only the state has the mechanism and authority to determine that.

Without the Winter Fuel Payment, we could afford to give everyone a higher state pension. I presume the rationale for having the Winter Fuel Payment is an acknowledgement that not everyone is good at budgeting and putting money aside to cope with large fuel bills due to cold winter weather. On that basis, I’m happy for it to continue.

Malcolm – I believe that energy pricing should be controlled by the state and not by the energy companies. I want the government to intervene and get rid of standing charges that mean that poor pensioners struggling with their fuel bills are paying more for a unit of energy than company directors on salaries of millions of pounds.

I read recently that 13 recipients had returned their WFP this last winter making an estimated total of 400 since the scheme began. A similar number have probably given theirs to a charity. We have an ancient winter fuel charity near us and they are happy to add to their funds in this way.

Not the State, please. Look at the irrational promises politicians make – particularly with an election in the offing.
It is argued that older people need to use more energy – they are at home all day, maybe in larger ex-family homes, not too well insulated, maybe medical issue, more cooking and washing, so they are potentially larger energy users. Whereas a wealthy healthy working couple in an energy efficient house, out all day will be a low user. Rolling all costs into a higher cost unit-only tariff will benefit the wealthy couple, and disadvantage the elderly. This is what indiscrimate subsidy leads to – you do not target it at those who need it most. So we should have a straightforward charging system, not a distorted on, and let the state intervene to help those genuinely in need – just as we try to do for the disabled, for example.

Wavechange – the Winter Fuel Payment is only paid to one pensioner in a household [or split equally between two] so if it were abolished and redistributed across the entire pension spectrum it would be a marginal upift. I am in favour of scrapping it altogether [which takes it off the political football pitch] and reallocating its total budget [including admin] to help for the most needy. As mentioned previously, the politicians want to keep it in play and now it’s been given a life extension.

Malcolm – You cannot deny that the standing charge means that low users of energy are subsidising high users. That is wrong.

I agree about benefits being targeted at those who need them. Thus get rid of standing charges and old people living in large, poorly insulated houses can be given benefits if they are eligible for them. Another approach would be to help them move to smaller and more energy efficient housing.

I am not suggesting that we re-nationalise energy, but we need the government to keep a check on the energy companies, whose prime responsibility is to their shareholders.

John – I don’t feel strongly about the Winter Fuel Payment and perhaps it would be better to target it at the needy or use it to boost the state pension. Without the payment the problem is that more people would struggle to pay higher winter energy bills. I have been told by my current energy supplier that it encourages its customers to build up a credit balance during the summer. If we end the WFP we might have to be more tolerant of the energy companies holding on to our money.

I think a thorough review of energy infrastructure charges should be a priority. Every time a new house is built, or office block put up, the developer makes a payment to Mr Grid for his network and this probably covers the cost of installing mains, upgrading transformers and distribution systems, and so on. I bet some of this also helps with fettling-up the existing network. These costs are then passed on to the purchasers of the new houses and offices in the price paid or rental charged. It appears to me that they then carry on making a contribution to the infrastructure for ever afterwards. Obviously there needs to be a regular charge for storage, transmission, maintenance, repairs and renewals but it should be as low as possible and open to Ofgem’s regulation. Metering and billling are supplier expenses but I can think of no other supply service where this is not absorbed in the retail price

John – Many are well aware of the cost of having a gas supply installed in rural areas, which can be prohibitive.

On that basis, I expect that there are charges for provision of utilities to new houses and other premises, though I have no idea whether or not they are realistic.

For many elderly people the heating bills terrify them. They are their biggest outlay. Many are stuck in an old house all day paying subsidies for renewable energy sources that will do nothing for them as well as various other levies and obligations, and paying standing charges that are totally disproportionate to their consumption. There’s more than one way to improve the state pension, and making it go further is one of them. And since the remedy is in the government’s hands it is right to put it in the debate. Many pensioners have lost their other half and have to manage on just one pension, and even if they have savings and other income, life is a struggle. They cannot just downsize or move to a more modern, energy efficient property, or go and live in a granny annexe miles way from where they have spent their lives. We can make energy bills fairer so we should; and we should do it structurally, not with silly notions of capping tariffs and other vote-catching conceits.

When they build new “affordable” homes or social housing, they have super insulation values, highly efficient heating systems, and low-maintenance finishes, but older people rarely seem to get a look-in with these properties as they don’t appear on the relevant allocation lists,.or the bedroom provision is “too generous” for them, or they just don’t have quite enough equity in their existing home to buy a new one.

As John points out, there are many more factors than the amount of state pension that affect how we cope financially in retirement.

Obviously there are differences depending on whether a person or a couple is living in their own home or rented property.

Neil Thomas says:
28 March 2015

If I couldn’t afford to heat my house, I would move to somewhere, cheaper, smaller, etc. etc. there are so many options….why is it the responsibility of the government.?

A lot of people would do what you say, Neil, but for some this is not affordable or practicable. Age, state of health both physical and mental, capability, and other circumstances affect it. To the extent that elderly people who cannot afford enough warmth because of the nature of their property without compromising some other aspect of their welfare will probably end up being a burden on the state which could be a lot more expensive than some help with their heating. It is not easy to raise enough money from the sale of a heat-losing house to meet the cost of something better. I’m glad you won’t be facing this problem.

Michael says:
28 March 2015

Britain’s welfare State is based on victorianised charity. Europe’s welfare State is based on 21st century solidarity.

Britain’s pensioners should not be forced to endure 1930’s means testing.

When the taxes I pay on the money I have worked hard for is given to help other people I want to know that it is being spent wisely by the state – so given to people who genuinely need it. Give an alternative method of a fair assessmenty that does not involve looking at those peoples’ need that does not involve seeing how much wealth they possess. Perhaps it should be called a “wealth check” instead of a “means test” – a rose by any other name.

I agree Malcolm. I am not aware of any planned major increase in the state pension in the near future, so additional support for pensioners must be done selectively.

Hopefully the percentage of people with a work-related pension will increase, and I believe the government should be concerned about what will happen to those affected if a pension fund fails. Pensioners can be left with financial problems despite careful planning.

I would like to see education to encourage more of the public to avoid living on credit wherever possible. That might mean a couple would be best to avoid having children until they can afford to do so.

Neil Thomas says:
1 April 2015

In my opinion the solution is simple. I started work in 1967 and there is a database of every payment I have made. If I asked Newcastle for it, I would be told it doesn’t exist. The German State Pension office provided me with that info so there should be no excuse from NI.
Any pension should be based on contributions. If you don’t pay, you don’t get. The next step is to help those who didn’t pay. Again this is fairly simple. The needy should be provided with food coupons and s small amount of cash to use as they wish.
This is a fairer system and would allow everyone to enjoy a better life based on their contributions. Why should someone who worked for less than 20 years get the same as someone who has worked for 50? And before anyone suggests that the person who has worked for 20 years could have paid in the same as a person who worked fo 50 years……the high earner should have made more of their wages.

canarybird says:
9 April 2015

Though it may seem irrelevant at this point in the discussion, I should just like to point out that the Spanish pension which is at the top of the list is the maximum obtainable state pènsion, based on 40 years national insurance contributions at the top of the scale. Pensions are based on an average of the final so-many years income from employment, subject to that maximum. Many people subsist on a minimum pension of 400 euros x 14 payments per annum and the average state pension is said to be around 850 x 14 euros. 14 payments means that you get a double pension payment before Christmas and again in June, which is handy! The equivalent of “rates” tends to be much lower, but winter heating in the cold parts of Spain – and there are many – is expensive.

karl says:
17 April 2015

Let’s get this into perspective.I wolived and worked in Germany, where the pensions are ‘earning linked’. so the more you ghave paid in over your working life (and the more tax you have paid in!!), the more you get back for your pension. In this country (rip off Britain!!)……..THERE IS ABSOLUTELY NO incentive whatsoever and people are just being ripped off!!!. For instance, my mother worked hard all her working life – had a good professional career. Her sister, who never worked much and always relied on sociial welfare most of the time, was NO worse off when it came to “pension time”.soo where on earth is the incentive in the UK to work hard????
It is time things changed here and the SOONER THE BETTER.

karl. I suppose the incentive is to save money into a private pension scheme, on which you get tax benfit on your contribution.

I presume that Karl is saying that someone who has worked hard and paid their national insurance contributions will receive as much in benefits as someone who receives the small state pension. That’s how the system works. We support those who don’t work, whether their is a good reason or not.

As Malcolm says, if you want to have a pension that depends on how much you pay in, you need a private pension.

It is interesting that amongst the welter of electioneering promises emanating from the parties at this general election not a word has been said about improving the UK state pension.

Ever since the UK state retirement pension was conceived [over a hundred years ago] it has been well-known that it was a basic, contribution-based pension that was not intended to provide all the money that a person might need to live on in their later years. It is based on a contribution record [number of contributing years] rather than the amount paid in, so the amount paid back in weekly pension in retirement is the same for everyone who has made the same number of contributions irrespective of the monetary value of those contributions. So there has always been an incentive to make additional personal provision and to plan for retirement. The extent to which people could do this obviously varies and will also depend on their family circumstances. There have been different state schemes for getting an additional pension requiring extra contributions but to obtain any significant uplift in retirement income an occupational pension scheme or a private pension scheme or an independent savings fund has been necessary.

There are various additional state benefits available to those pensioners who have no income other than the basic state pension. These benefits are funded from general taxation and this aspect of welfare support has always led to a degree of resentment that some people ‘get something for nothing’. However, the consensus is that a civilised society needs to have a safety net and that it’s a price worth paying to avoid a whole range of other social problems. To the extent that everybody pays taxes [like VAT and excise duties] there is nobody who is not contributing something, and the fact that the better-off pay more towards this social support than others is inevitable.

Germany has for a long time been a highly productive country with a very high percentage of the employable population in work and making compulsory and voluntary pension contributions. I presume, therefore, that there are not so many people retiring without a retirement pension [or with a bare minimum] but I do not know how such people are supported in their later years.

In some perverse way it’s a relief to find one topic that the manifestos have not thrown money at – money we do not have. So many childish bribes have been offered – £12500 tax free income, sell off housing association houses (where are the replacements?), £8bn for NHS. I do wish the country was run by knowledgeable professionals and not by schoolboys and people who have no experience of what real life is about. But they are all on gold-plated pensions, so why should they care? It is time all public pensions were put on the same basis as most of the rest of us have to live with.

christine fletcher says:
2 May 2015

My husband has been a funeral manager and well respected. He has never know funeral parlars have so many deaths.
Older people worked like slaves just after the war as i witnessed them work their buts off. Having half an hour on an average 42 hour week working like mad. Standing up all day. They worked like slaves and were poorly paid. Some lived in squalid houses. They wages were worked out by how much they produced. I had three jobs worked 100 hour week as a women on little and
nothing not like the sixties the government want you to believe.
The country is an utter disgrace how would you like after a life times work to live on £113 a week. You will always find some pig that says otherwise. In the sixties people worked very hard for little money wives went out at night queuing at busstops to get a bus to work when the husband came home..
I have been a homehelp and seen people with terrible deseases and living on nothing. We have the schoolboy culture in our politicians no humanity for anyone just vat and tax tax tax. The pension should go up a £100 for everyone who has worked. Myself i had cleaning job day and night to fit in with family life and my husband then did not want me working in an office.

[This comment has been edited to align with our commenting guidelines. Thanks, mods]

Leveret says:
27 May 2015

An amusing collection of views – I only came across this thread because I was trying to find out how much a poor Greek actually gets!
Neil Thomas and John Ward appear to be the most sensible and intelligent contributors.
There’s lot of nonsense from the ‘something for nothing’ brigade!
It is very difficult to make international comparisons. I was in Australia recently and discovered that the state pension is whittled away if your private pension and income is large. If large enough, you don’t get it at all, despite the fact that there are few oldies there! I still get my state pension although, quite rightly, it is taxed at my highest rate – it is absurd that my winter fuel allowance isn’t.