State pension means test warning as Labour has power to check your bank account (2024)

State pension means test warning as Labour has power to check your bank account (1)

It's hard to gauge how much support there is in Westminster for state pension means testing (Image: Getty)

Last week, I highlighted a suggestion by chancellor Rachel Reeves' newly appointed tax adviser Sir Edward Troup, that the state pension should be means tested. Earlier this month he told LBC: “If the public finances are in a bit of a state, perhaps wealthy pensioners should be giving up their full state pension.”

Sir Edward admitted that means testing pensioners would be hugely controversial but said a "debate needs to be had” and means testing “should be delivered”.

I originally thought this was his personal hobby horse but now I'm not so sure. The idea has clearly been kicking around Westminster for some time.

And it seems to have currency on the right as well as the left.

In fact, none other than right-wing Tory MP Suella Braverman called for exactly the same thing as Sir Edward, two months earlier.

In May, the former Home Secretary urged then PM Rishi Sunak to scrap the two-child benefit cap, which restricts Universal Credit and Child Tax Credit to the first two children born after April 6, 2017.

It was her suggestion for funding the move that surprised me.

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Braveman said: "This money could be found by getting more out of work claimants off welfare and back into work, and perhaps introducing some form of means testing for pensioners.”

That's a pretty loose phrase – "some form of means testing for pensioners". It may have been completely off the cuff, who knows.

It certainly wouldn't win the Tory party many votes, which Braverman might want to take into account should she become leader.

Something else has come to my attention.

On November 29 last year, during a debate on the government's new Data Protection Bill, Labour MP Sir Stephen Timms, noted that Conservative party ministers had just “rushed an amendment through the Commons, allowing it to look into the bank account of everybody claiming state pension”.

This made Sir Stephen very suspicious, as he warned: “Their only reason was that it might be useful one day. The only change which could make it useful would be to means test the state pension.”

Sir Stephen Timms, who has been an MP since 1994, served as chief secretary to the Treasury from 2006 to 2007. So he knows how it thinks.

Now Labour has inherited the power to look into your bank account and means test the state pension if it chooses to do so.

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    I don't want readers to worry overly, so I'll say I can't imagine Reeves introducing state pension means testing in the immediate future.

    It would be an administrative nightmare and would trigger a furious response.

    Express.co.uk reader no one important echoed the views of many, writing below my article: “After paying NI contributions for 49 years I AM entitled to the pension. If they [Labour] do try to do this they will have so many problems that they may never ever see power again."

    However, reader gudboy noted that means testing would “prove to be unrealistically difficult”.

    “To increase a rate of tax on pensions is one thing but to take a pension away COMPLETELY from some pensioners just because they have additional pensions is morally wrong, probably totally illegal, and if attempted will certainly hasten the Labour Party's demise.”

    That's my view too. Others who've looked into this issue take a more sceptical view.

    Robert wrote to say: “Please do me and a few million others a favour, please pursue the issue of means testing state pension.”

    He added: “We need clarity on this. Talk about pulling the rug out from under us at the last minute. Typical.”

    Yet some readers are in favour of means testing, including one who lived in Australia for 30 years, where the state pension is means tested.

    He wrote: “Overall the tests encourage people to be self sufficient, to build up resources through one's working life, rather than depend on the government.”

    I suspect a lot of MPs in Westminster would agree. So far, only Suella Braverman has shown her hand. But what were the Tories thinking in November?

    And more importantly, what is Reeves thinking today?

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    State pension means test warning as Labour has power to check your bank account (2024)

    FAQs

    Can you collect both a government pension and Social Security? ›

    How much will my Social Security benefits be reduced? We'll reduce your Social Security benefits by two- thirds of your government pension. For example, if you get a monthly civil service pension of $3,000, two-thirds of that, or $2,000, must be deducted from your Social Security benefits.

    What type of pension reduces Social Security benefits? ›

    Your benefit might be reduced if you get a pension from a government employer who wasn't required to withhold Social Security taxes. This reduction is called the “Government Pension Offset” (GPO).

    How does WEP affect my Social Security? ›

    The Windfall Elimination Provision (WEP) can affect how Social Security calculates your retirement or disability benefit. If you work for an employer who doesn't withhold Social Security taxes from your salary, any retirement or disability pension you get from that work can reduce your Social Security benefits.

    Does receiving a pension affect your Social Security benefits? ›

    Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes.

    How much will my Social Security be reduced if I have a FERS pension? ›

    So the short answer is no, your FERS pension is not going to reduce your Social Security. As a FERS employee you certainly can get your full Social Security while getting your FERS pension.

    Can you collect your pension and Social Security at the same time? ›

    You can retire with Social Security and a pension at the same time, but the Social Security Administration (SSA) might reduce your Social Security benefit if your pension is from a job at which you did not pay Social Security taxes on your wages. There are two different kinds of pensions: covered and noncovered.

    Does a pension count as income? ›

    More In Help. If you receive retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, all or some portion of the amounts you receive may be taxable unless the payment is a qualified distribution from a designated Roth account.

    What are pensions not covered by Social Security? ›

    A non-covered pension is a pension paid by an employer that does not withhold Social Security taxes from your salary, typically, state and local governments or non- U.S. employers.

    How do I get the $16728 Social Security bonus? ›

    Although there's no direct “bonus,” strategies exist to maximize your benefits. The Social Security Administration (SSA) calculates benefits based on lifetime earnings. Delaying benefits until age 70 can significantly increase your annual benefits, potentially up to $16,728.

    What is the maximum WEP for 2024? ›

    The WEP includes a guarantee that the reduction in the benefit amount caused by the WEP formula can never exceed more than one-half of the noncovered pension. Thus, for workers who become eligible for benefits in 2024, the maximum reduction under the WEP may be less than $587.

    What is the maximum monthly WEP reduction? ›

    The WEP does not become effective until you start to collect the non-covered government pension. A private pension has no impact on the WEP. The maximum WEP reduction in 2023 is $558. The maximum WEP reduction is applicable to people who have less than 20 years of “substantial earnings” in the Social Security system.

    Which states are impacted by WEP? ›

    In some states, the percentage of retired workers affected by the WEP was substantially higher than the national figure of 2.8 percent. More than one-tenth of the retired workers in Alaska and the District of Columbia were affected as well as about 5 percent of those in Colorado, Maine, Maryland, Nevada, and Ohio.

    What income does not count against Social Security? ›

    For the earnings limits, we don't count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains.

    How much is Social Security reduced if you have a pension? ›

    Windfall elimination provision

    The WEP may apply if you receive both a pension and Social Security benefits. In that case, the WEP can reduce your Social Security payments by up to 50% of your pension amount.

    How much money can you have in the bank on Social Security retirement? ›

    To be eligible for SSI, your assets must be less than $2,000 for an individual and less than $3,000 for a married couple. However, not all assets count towards the resource limits. The Social Security Administration lists 44 resource exclusions.

    Can you receive Social Security and federal retirement at the same time? ›

    Unlike most employer-sponsored pensions in the private sector, CSRS annuities were not intended to supplement Social Security benefits. Yet, most Federal workers who earn a CSRS annuity also receive Social Security benefits at some time.

    When should I take Social Security if I have a pension? ›

    You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.

    Could I get both retirement pay and also social benefits at the same time? ›

    There is nothing that precludes you from getting both a pension and Social Security benefits. But there are some types of pensions that can reduce Social Security payments.

    Is the government pension the same as Social Security? ›

    In the case of pensions, contributions are often made through payroll deductions. This means the employee doesn't really have a say in contributing; money is simply deposited for them (along with a contribution by their employer). Social Security, on the other hand, involves payroll taxes.

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