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  • FIRST POST
    • 50Twuncle
    • By 50Twuncle 15th Oct 16, 11:32 AM
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    50Twuncle
    Contracted out pension
    • #1
    • 15th Oct 16, 11:32 AM
    Contracted out pension 15th Oct 16 at 11:32 AM
    I am wondering whether it is possible to make extra contributions to cover the difference between my "Contracted out" state pension and the pension that I would have received, had I not been "contracted out" ?
    or do the extra contributions only allow recipients to build up extra years (ie I currently have 29 years + potentially an extra 3 years (according to state pension forecast))
    What are the current number of years NI contributions required to receive a max state pension ?
Page 2
    • 50Twuncle
    • By 50Twuncle 17th Oct 16, 8:05 AM
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    50Twuncle
    What will normally happen is that you will get a letter from DWP saying you haven't qualified this year. You can then buy the year at a relatively cheap price. If you're told it's been partly paid for that's the best deal and just buy then.
    Originally posted by jamesd
    Never had any letter from DWP telling me whether I have qualified or not - in 36 years of employment !!
  • jamesd
    You won't get a letter if you have qualified. There was also a long period when they should have been sending them out but didn't. What should happen is a letter to only those who didn't qualify telling them how much they could pay to get the year to count, in addition to what they already had from work or credits.
    • 50Twuncle
    • By 50Twuncle 17th Oct 16, 9:53 AM
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    50Twuncle
    You won't get a letter if you have qualified. There was also a long period when they should have been sending them out but didn't. What should happen is a letter to only those who didn't qualify telling them how much they could pay to get the year to count, in addition to what they already had from work or credits.
    Originally posted by jamesd
    In the last 7 years - I have been earning under the NI qualifying amount (not paying NI) and still no letter !!
    • 50Twuncle
    • By 50Twuncle 17th Oct 16, 10:08 AM
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    50Twuncle
    My wife (who claims Carers Allowance £62 per week for looking after me) - receives her NI credits from that benefit - is there no equivalent from DLA/PIP to ensure that disabled people get a decent state pension ?
    • p00hsticks
    • By p00hsticks 17th Oct 16, 10:25 AM
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    p00hsticks
    My wife (who claims Carers Allowance £62 per week for looking after me) - receives her NI credits from that benefit - is there no equivalent from DLA/PIP to ensure that disabled people get a decent state pension ?
    Originally posted by 50Twuncle
    Disabilty and receipt of PIP / DLA does not necessarily preclude people from working and building up their NI record for state pension that way.

    If they are not working, then working age disabled people can get NI credits either by claiming ESA if they are sick, or JSA if they are actively seeking employment.
    • 50Twuncle
    • By 50Twuncle 17th Oct 16, 2:50 PM
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    50Twuncle
    Disabilty and receipt of PIP / DLA does not necessarily preclude people from working and building up their NI record for state pension that way.

    If they are not working, then working age disabled people can get NI credits either by claiming ESA if they are sick, or JSA if they are actively seeking employment.
    Originally posted by p00hsticks
    Only if they are entitled to claim ESA - which I am not (ill health pension)
    • 50Twuncle
    • By 50Twuncle 23rd Oct 16, 12:11 PM
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    50Twuncle
    OK I have done more research in to this
    I currently have 32 fulll years of contributions - worth £121.34 per week
    I need to make another 9 years to get the max £155.65 per week (plus any rises)
    making an unheard of 41 years work for max state pension
    Which will cost me a lot (approx £700 pa)
    But - had I been claiming ESA, my NI would have been paid for me (class 3)
    Instead - I am working (earning less than the minimum required to claim NI contributions) - hence my predicament
    What should I do now - to ensure that I receive the maximum pension in 14 years time ?
    • dunstonh
    • By dunstonh 23rd Oct 16, 1:20 PM
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    dunstonh
    making an unheard of 41 years work for max state pension
    It's not unheard of. Most people that start work in their late teens, early 20s will exceed 41 years qualification. It was not long ago that 40 years was the state pension qualification to get the maximum basic.

    What should I do now - to ensure that I receive the maximum pension in 14 years time ?
    Find out how much it will cost you in voluntary NI contributions. The online state pension forecast can do this.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • 50Twuncle
    • By 50Twuncle 23rd Oct 16, 1:36 PM
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    50Twuncle
    It's not unheard of. Most people that start work in their late teens, early 20s will exceed 41 years qualification. It was not long ago that 40 years was the state pension qualification to get the maximum basic.



    Find out how much it will cost you in voluntary NI contributions. The online state pension forecast can do this.
    Originally posted by dunstonh
    The state forcast thing only shows my missing years (4) with the amount needed to make up those missing years (not future years)
    • molerat
    • By molerat 23rd Oct 16, 2:41 PM
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    molerat
    OK I have done more research in to this
    I currently have 32 fulll years of contributions - worth £121.34 per week
    I need to make another 9 years to get the max £155.65 per week (plus any rises)
    making an unheard of 41 years work for max state pension
    Which will cost me a lot (approx £700 pa)
    But - had I been claiming ESA, my NI would have been paid for me (class 3)
    Instead - I am working (earning less than the minimum required to claim NI contributions) - hence my predicament
    What should I do now - to ensure that I receive the maximum pension in 14 years time ?
    Originally posted by 50Twuncle
    £155.65 -£121.34 / £4.45 = 7.7 (8) years required to reach full pension amount. 32+8 = 40, 4 years less than the amount needed for a male pre 2010 to reach full basic pension. As said before looking at the number of years previously accrued is a bit irrelevant during the transition period, you don't have 32 years any more you have £121.34.

    The cost of class 3 NI going forward should be current amount increased by CPI each year so fairly easy to do a rough cost forecast. If you have a reasonable life expectation then class 3s become a no brainer.
    Last edited by molerat; 23-10-2016 at 2:45 PM.
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    • xylophone
    • By xylophone 23rd Oct 16, 2:44 PM
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    xylophone
    Your starting amount for new state pension is calculated as the higher of your entitlements under the old scheme or the new scheme.

    Under the old scheme this will be a full BSP of £119.30 ( because you have 30 years NI) + any Additional Pension - a deduction because you were contracted out.

    The calculation under the new scheme will be 32/35 of £155.65 - the deduction because you were contracted out.

    It is likely that the old calculation gives you the higher amount which in your case appears to be £121.34.

    It would seem therefore that buying years earlier than 2016-17 would be pointless in your case.

    You can add qualifying years up to your SPA by voluntary Class 3 contributions. Each qualifying year adds £4.45.

    See http://www.thisismoney.co.uk/money/pensions/article-3535618/STEVE-WEBB-Buying-ups-paying-missing-NI-boost-state-pension.html

    https://www.theguardian.com/money/2016/oct/08/how-to-boost-state-pension

    You might wish to obtain a State Pension Forecast Letter

    https://www.gov.uk/government/publications/application-for-a-state-pension-statement

    and then ring DWP ( if necessary) to confirm your position?
    Last edited by xylophone; 23-10-2016 at 2:47 PM. Reason: typo
    • Gers
    • By Gers 23rd Oct 16, 2:58 PM
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    Gers
    making an unheard of 41 years work for max state pension
    Originally posted by 50Twuncle
    I have 46 years of full and contracted out NI contributions - female aged 62.5 years - and still needed 2 more years of NI to receive a full state pension in 2019. I only had to pay for 17 weeks for 2015 / 16 as I was working very part time and received NI credits and now I have agreed to more hours until May 2017 I'll wait to see how much I need to pay then.

    I started work aged 16 years and, thankfully, haven't been our of work since. Even though I ceased full time work in April of 2015 my skills are still in demand.

    My COPE deduction is listed as something nearing £50.00 a week. The small amount I will pay for class 3 contributions makes it a good deal for me.

    Good luck in working it out!
    Last edited by Gers; 23-10-2016 at 3:01 PM.
    • bigfreddiel
    • By bigfreddiel 23rd Oct 16, 7:51 PM
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    bigfreddiel
    I have two contracted out occupational pensions. My current state pension forecast is just over £120 per week.

    I intend to retire early next year. If I purchase another 6 years of Class 3 NICs my SP is forecast to be just over £147 per week at current rates when I reach 66.

    How is that "nothing to gain"?
    Originally posted by Deneb
    Well obviously it depends if you've made 35+ years of contributions. If you have there is nothing to gain.

    Cheers fj
    • molerat
    • By molerat 23rd Oct 16, 8:00 PM
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    molerat
    Well obviously it depends if you've made 35+ years of contributions. If you have there is nothing to gain.

    Cheers fj
    Originally posted by bigfreddiel
    You need to differentiate between pre and post 2016 years. Someone with 35+ pre 2016 years and contracted out can gain by buying post 2016 years.
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    • BoxerfanUK
    • By BoxerfanUK 24th Oct 16, 6:36 PM
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    BoxerfanUK
    From 6 April 2016 each new year of paying in or buying years with dates of 2016-17 and later (but not earlier years!) will add 1/35th of the flat rate until the flat rate cap level is reached.

    The 2015-16 tax year will be included in calculations around November or December this year.
    Originally posted by jamesd
    jamesd

    Am I reading right that the 15-16 tax year is not yet included in current pension forecast calculations?

    I recently got a forecast online which states my foundation amount to 5th April 16 is £130.92, so is this figure only based on contributions up to the 5th April 15?

    I've been contracted out for over 33 years (PCSPS)and worked out I would need to pay NI for another 5.5 years to achieve full SP amount, but if what you are saying is correct it may only be 4.5 years.

    Also, if I stop work before then and pay class 3 NI can I pay for the .5 year or do I have to pay for a full year for it to count?
    • molerat
    • By molerat 24th Oct 16, 8:00 PM
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    molerat
    It is up to whatever year it states, some are updated to 2016 and others still show 2015. Only full years count so you have to decide if it is worth paying a full year contribution to get a part year benefit.
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    • 50Twuncle
    • By 50Twuncle 13th Nov 16, 11:39 AM
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    50Twuncle
    How long did it take to receive a pension forecast from HMRC ?
    I sent off a form BR19 on 27/10 and it claims that you should receive are response within 10 days - nothing yet !!
    • Linton
    • By Linton 13th Nov 16, 11:54 AM
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    Linton
    ....

    Under the old scheme this will be a full BSP of £119.30 ( because you have 30 years NI) + any Additional Pension - a deduction because you were contracted out.

    ....
    Originally posted by xylophone
    Surely under the old scheme you get the full BSP and any Additional Pension (SERPS as was). There isnt a deduction because of contracting out, you just dont get the AP/SERPS for those years.
    • xylophone
    • By xylophone 13th Nov 16, 12:50 PM
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    xylophone
    Surely under the old scheme you get the full BSP and any Additional Pension (SERPS as was). There isnt a deduction because of contracting out, you just dont get the AP/SERPS for those years.
    See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447195/new-state-pension--effect-of-being-contracted-out.pdf
    • Linton
    • By Linton 13th Nov 16, 1:27 PM
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    Linton
    Surely under the old scheme you get the full BSP and any Additional Pension (SERPS as was). There isnt a deduction because of contracting out, you just dont get the AP/SERPS for those years.
    by Linton
    From my reading of your reference it looks like we were both sort of right! The AP used in the calculation under the old scheme is more or less what would have been earned had the employee been contracted in. So the COD simply resets it back to what AP was actually earned. This is precisely the case for the period 1979-1998. Later contracting out get a little more complicated!

    So COD under the old scheme cant reduce the pension to less than the corresponding BSP whereas COD under the new scheme does.
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