Flat Rate State Pension
Comments
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Silvertabby wrote: »The transitional arrangements weren't set up just to 'reduce' the pensions of those who had been contracted out, but also to protect those who had already built up more than £155 per week due to SERPS/SP2.
It would probably have been cheaper to just pay everyone £155 after April 2016 - but the screams from those who would have received £260 under the old scheme would have been as loud as the screams from those who mistakenly assumed that they would get £155 on top of their contracted out occupational pensions.
It might not have been your intention but even the quotation marks for the reduction of contracted out pensions is still wrong.
The transitional arrangements mean that no one should be worse off than they were under the old system, and those contracted out would still get the basic pension of £119, or whatever they were entitled to under the old system.0 -
“ The transitional arrangements weren't set up just to 'reduce' the pensions of those who had been contracted out, but also to protect those who had already built up more than £155 per week due to SERPS/SP2.
It would probably have been cheaper to just pay everyone £155 after April 2016 - but the screams from those who would have received £260 under the old scheme would have been as loud as the screams from those who mistakenly assumed that they would get £155 on top of their contracted out occupational pensions.
Originally posted by Silvertabby ”
It might not have been your intention but even the quotation marks for the reduction of contracted out pensions is still wrong.
The transitional arrangements mean that no one should be worse off than they were under the old system, and those contracted out would still get the basic pension of £119, or whatever they were entitled to under the old system. Posted by bigadaj
Yes I know, hence the q marks.0 -
Thanks for the explanations, though it seems that if there had been a deliberate attempt to make things opaque then they could hardly have done better. I think my levels of knowledge of how the state pension works are possibly marginally better than that of the man on the Clapham omnibus. Indeed I worked for DWP Pension for 10 years and was possibly one of the last cohort trained to calculate all elements of state pension from first principles before they deskilled it all and made an expensive computer to get it wrong. The basics seem pretty clear: pay more years NI, get more pension. That has always been the case. But I would hazard that there would be few in the Pensions Service who could actually tell you the amount by which your pension is going to be abated by virtue of contracting out. I guess we just have to trust the computer and plan on the basis that it will be lower rather than higher.0
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What abatement? No one will get less than originally expected and plenty will get more.
Some are in the lucky position of having a lowish starting amount equal to what they would have got under the old rules because they have benefitted from contracting out and have future years of work where they will gradually increase the amount they will receive to the full flat rate pension.
It seems this is a case of glass half empty or half full??0 -
Glass half full here.
I retired at 55 knowing I was going to get, at today's rate, £140 and all my planning was on that figure, that was all I could get. Along comes the new system and by using some of my savings I will be able to boost that to £153. Not a lot but a good investment of my savings.
MrsM had £101 with an option to buy in to £122. All of a sudden she has £123 and can up that to the magic £159. Even better still, as she looks after the grandchildren, the government will give her some of those contributions she was going to buy and save her around £3K.
What is not to like about the new pension.
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Maybe I am glass half empty, but I see it like this. I was contracted out and paid a lower rate of NI while building up a DB pension. That saved HMG money because I was not qualifying for SERPS/S2P, but I was paying NI and building up state pension. Those who remained contracted in paid more NI and earned themselves SERPS/S2P. That's fair. Now my basic state pension will be reduced on account of my DB pension, and I won't be getting any SERPS/S2P element. That is an abatement. But it was already reduced on account of my not qualifying for SERPS/S2P. It seems that this new arrangement benefits mainly those who have not taken care to plan and manage their own pension arrangements - as we were heavily encouraged to do. I'm beginning to think that I may as well have blasted the money away rather than make contributions.0
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Your pension has not been reduced. In your circumstances you will as a minimum receive exactly what you would have received if there had been no change, based on contributions made until the introduction of the new SP.
What you do gain is the opportunity to increase this to the new state pension level as well as retaining what you built up elsewhere.
So it actually benefits people who were contracted out providing they have some years left to pay NI. If you don't, you are no worse off than you would have been, as if you had been contracted out all your working life you would have only been entitled to the basic state pension, and the top up to the new state pension equivalent would have been delivered through your contracted out scheme.0 -
JezR, Ok I think I may be getting this. Under the "old rules" I would have qualified for the equivalent of £122.30. That is safe and nobody is taking it away. What I won't get is the £159.55. So how do I get it? I have a full NI record other than 3 student years and expect to be working and contributing into my 60s. Do I have to apply to pay some kind of enhanced NI in the years I have left working? And can I do that if I continue to be contracted out?0
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JezR, Ok I think I may be getting this. Under the "old rules" I would have qualified for the equivalent of £122.30. That is safe and nobody is taking it away. What I won't get is the £159.55. So how do I get it? I have a full NI record other than 3 student years and expect to be working and contributing into my 60s. Do I have to apply to pay some kind of enhanced NI in the years I have left working? And can I do that if I continue to be contracted out?
Each NI year after April 2016 beyond the normal 35 year limit gives you an extra 1/35th of the full new state pension until you have reached the £159.55 equivalent.
"Contracting out" was abolished as part of the new pension scheme.0 -
On 6 4 16, your "starting amount" for new state pension was calculated under old and new rules - your starting amount was the higher of the two.
Old rules BSP + (SERPS/S2P - deduction for contracting out).
New rules NSP - COPE. (RDA).
It is likely that the old rules calculation was the higher of the two.
http://webarchive.nationalarchives.gov.uk/20140723121148/https:/www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf
The figures in the above are out - the BSP at 6 4 16 was £119.30 and the NSP £155.65.0
This discussion has been closed.
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