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Work incentives - not really

Gareth Morgan
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Managing director - Ferret, Cardiff

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Having got the 2020 tax,NI and NLW rates, I’ve had a deep look at the way work incentives actually work.  I’ve compared the differences between hours worked at 2019 National Living Wage and the same hours at 2020 NLW rates (and London Living Wage) to assess real net increases. Interesting cliff edges and depressingly low gains.  See https://benefitsinthefuture.com/2020-a-good-year-for-generous-work-incentives-how-the-government-is-really-doing/

Daphne
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Really interesting Gareth - I quite like all the numbers too ;)

Gareth Morgan
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Managing director - Ferret, Cardiff

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Daphne - 03 February 2020 01:45 PM

Really interesting Gareth - I quite like all the numbers too ;)

Thanks Daphne; I always thought you were sad.

Oldestrocker
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Yes a very good way to draw comparisons.

However this is not something new. Take a pensioner that receives an increase in his pension - sounds very good news. But if that pensioner just happens to claim Pension Credit and the uplift of the components only rise by say £4 a week and his state pension goes up by say £12 a week, he will only see that £4 in his bank each week. The only time when a pensioner would see the full rise of £12 is if no Pension Credit award was in place.

Gareth Morgan
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Oldestrocker - 06 February 2020 06:00 PM

Yes a very good way to draw comparisons.

However this is not something new. Take a pensioner that receives an increase in his pension - sounds very good news. But if that pensioner just happens to claim Pension Credit and the uplift of the components only rise by say £4 a week and his state pension goes up by say £12 a week, he will only see that £4 in his bank each week. The only time when a pensioner would see the full rise of £12 is if no Pension Credit award was in place.

Yes, I’ve been pointing that out to people in financial services for years, who keep insisting that annuities are the best choice for pensioners.  Pension freedoms greatest advantage was to stop compulsory annuitisation.  It opens up enormous choices which can make huge differences to benefits entitlement; see this 2015 piece for how capital drawdown can help. https://benefitsinthefuture.com/pension-wise-will-make-people-pound-foolish/