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  • FIRST POST
    • DancingBadger
    • By DancingBadger 16th Jun 17, 6:08 PM
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    DancingBadger
    State Pension Forecast
    • #1
    • 16th Jun 17, 6:08 PM
    State Pension Forecast 16th Jun 17 at 6:08 PM
    Apologies for asking a question already posed by many posters on this board, but after getting a bit cross-eyed trawling through countless threads I haven't really got definitive answers.

    OH has just turned 62 and has another four years until he reaches SPA. An online pension forecast in April 2014 states his projected SP as £218.33 and goes on to mention a possible reduction due to contracting out.

    As he's decided to semi-retire (working possibly 3-4 days a month at most), he's obtained another online forecast today, which estimates £237.12 pw at age 66. It also states he cannot improve the forecast any more (he has 45 qualifying years) and will need to pay NI (if working until June 2021) to fund other state benefits and fund the NHS, etc.

    Questions:

    1. Am I correct in thinking that if he fully retires for the next four years and therefore doesn't make any further NI contributions, the forecast will remain the same?

    2. It appears forecasts obtained after April 2016 no longer make any mention of COPE. Is this because the contracted out calculation has already been factored into forecasts made after April 2016?

    3. (Tongue in cheek) For planning purposes, is it safe to assume his SP will be as forecast from June 2021?
Page 1
    • Silvertabby
    • By Silvertabby 16th Jun 17, 6:34 PM
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    Silvertabby
    • #2
    • 16th Jun 17, 6:34 PM
    • #2
    • 16th Jun 17, 6:34 PM
    1. Yes. Even if he continues to work/pay NI it won't increase (except for cost of living increases).

    2. Yes

    3. Maybe (plus cost of living increases) Change that to 'probably' if he has checked his NI conts years/contracted out years (he can't have many of those, if any) and they are correct as at April 2016.
    Last edited by Silvertabby; 16-06-2017 at 9:14 PM.
    • molerat
    • By molerat 16th Jun 17, 6:54 PM
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    molerat
    • #3
    • 16th Jun 17, 6:54 PM
    • #3
    • 16th Jun 17, 6:54 PM
    1.

    2. Contracting out would be mentioned if he had been (unless of course this well above new max amount which we have rarely heard here brings about another variation of the forecast). The earlier forecasts had a blanket "if contracted out" statement.

    3.The first £159.55 will increase with the triple lock and the remainder will increase with CPI going forward.
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    • Dazed and confused
    • By Dazed and confused 16th Jun 17, 6:55 PM
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    Dazed and confused
    • #4
    • 16th Jun 17, 6:55 PM
    • #4
    • 16th Jun 17, 6:55 PM
    Disagree on point 1, the forecast will increase each year in line with whatever increase the government chooses to give us.

    This April the standard new State Pension forecast amount increased by £3.90/week.
    • Silvertabby
    • By Silvertabby 16th Jun 17, 9:13 PM
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    Silvertabby
    • #5
    • 16th Jun 17, 9:13 PM
    • #5
    • 16th Jun 17, 9:13 PM
    3.The first £159.55 will increase with the triple lock and the remainder will increase with CPI going forward.
    Are you sure? This is under the old rules, so I think only the £122 per week basic State pension will increase by the triple lock (for as long as it applies), with CPI for the remainder.
    • molerat
    • By molerat 16th Jun 17, 9:31 PM
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    molerat
    • #6
    • 16th Jun 17, 9:31 PM
    • #6
    • 16th Jun 17, 9:31 PM
    Calculated under old rules but paid under new.

    Can't immediately find a .gov link but https://www.moneyadviceservice.org.uk/en/articles/the-state-pension-rules-and-changes-explained
    If you had built up substantial entitlement to Additional State Pension this might mean that you have already earned a pension under the old system which is worth more than £159.55 a week.
    If this applies to you, you will get the full new State Pension amount and you’ll also keep any amount above this as a ‘protected payment’ which will increase by inflation.
    which seems to be a cut and paste from nidirect.gov.uk
    Last edited by molerat; 16-06-2017 at 10:22 PM.
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    • xylophone
    • By xylophone 16th Jun 17, 11:07 PM
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    xylophone
    • #7
    • 16th Jun 17, 11:07 PM
    • #7
    • 16th Jun 17, 11:07 PM
    See https://www.gov.uk/new-state-pension/how-its-calculated


    If your starting amount is more than the full new State Pension

    The part of your starting amount which is above the full new State Pension is called your ‘protected payment’. This is paid on top of the full new State Pension.

    Annual increases

    The new State Pension increases each year by whichever is the highest:


    earnings – the average percentage growth in wages (in Great Britain)

    prices – the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)

    2.5%

    If you have a protected payment, it increases each year in line with the CPI.
    • jem16
    • By jem16 17th Jun 17, 9:28 AM
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    jem16
    • #8
    • 17th Jun 17, 9:28 AM
    • #8
    • 17th Jun 17, 9:28 AM
    1. Am I correct in thinking that if he fully retires for the next four years and therefore doesn't make any further NI contributions, the forecast will remain the same?
    Originally posted by DancingBadger
    The forecast is assuming that your husband continues to pay NI until state pension age. If he does not pay any NI then that figure will reduce.

    Forecasts usually give two figures;

    1. Entitlement built up as of when the forecast was issued.

    2. An estimate of what could be achieved if you continue to pay NI until state pension age.

    Figure under 1 would rise only with inflation. Figure under 2 would reduce if no NI was being paid.
    • xylophone
    • By xylophone 17th Jun 17, 9:42 AM
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    xylophone
    • #9
    • 17th Jun 17, 9:42 AM
    • #9
    • 17th Jun 17, 9:42 AM
    The forecast is assuming that your husband continues to pay NI until state pension age. If he does not pay any NI then that figure will reduce.
    The OP's husband's "starting amount" was already in excess of full NSP at 6.4.16.

    He will have to continue to pay NI if earning over LEL but this will not increase the state pension - the state pension will only increase as indicated post 7 above.

    http://www.roffeswayne.com/wp-content/uploads/2014/06/Changes-to-the-UK-State-Pension-from-6-April-2016.pdf

    Your starting amount exceeds the full new state pension

    The excess above the new full state pension is protected and this ‘protected payment’ will be made in addition to the full state pension. Any qualifying years after 5 April 2016 will not increase your State Pension.
    • jem16
    • By jem16 17th Jun 17, 10:07 AM
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    jem16
    The OP's husband's "starting amount" was already in excess of full NSP at 6.4.16.
    Originally posted by xylophone
    Apologies - I misread the figure as £137.12 as opposed to £237.12.

    OP - please ignore my last post.
    • DancingBadger
    • By DancingBadger 18th Jun 17, 12:16 PM
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    DancingBadger
    Thank you all for your responses.

    1. We're not really concerned whether this latest forecast will increase (although it would be nice, of course); just that it won't decrease over the next four years if he decides to retire completely - which seems to be the case.

    2. OH thinks he contracted out of SERPS in 1983 to go into a final salary scheme and never opted back in. That scheme closed and was replaced with a DC scheme. In 2005, he was made redundant has been freelancing since then. This is the bit which is unsettling. I was hoping this latest forecast would have taken account of all this, especially as his NI record is all "full", with the exception of 2012/13 for reasons we don't understand.

    • Silvertabby
    • By Silvertabby 18th Jun 17, 12:50 PM
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    Silvertabby
    DWP is being very misleading in using the term 'full' NI. It actually means 'paid for full financial year', not necessarily 'full' for the new single tier pension.

    If your OH was contracted out of SERPS from 1983 until 2005 (or later) then his State pension forecast does sound a bit on the high side... is he sure he was contracted out?
    • Dazed and confused
    • By Dazed and confused 18th Jun 17, 12:53 PM
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    Dazed and confused
    Did you read point 1 before submitting your post, might just be me but I have absolutely no idea if you think it won't decrease or are concerned that it is the case that it will decrease?

    Why do you think his latest forecast doesn't take it all into account. Opting out of SERPS has no effect whatsoever on the original basic state pension, that entitlement would still have built up each year and each year working (with NI which met the limits etc) would be another year banked towards the state pension.
    • DancingBadger
    • By DancingBadger 18th Jun 17, 1:28 PM
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    • 113 Thanks
    DancingBadger
    DWP is being very misleading in using the term 'full' NI. It actually means 'paid for full financial year', not necessarily 'full' for the new single tier pension.
    Originally posted by Silvertabby
    Uncertainty about the accuracy of DWP communications and its record-keeping is the root of my OP.

    Could you explain the difference, please?

    If your OH was contracted out of SERPS from 1983 until 2005 (or later) then his State pension forecast does sound a bit on the high side... is he sure he was contracted out?
    He says he's sure he did. The problem is he's in the broadcast industry, and although he worked at just one site when he was employed, as a result of the ITV franchise system he actually had three different employers over the years, all with their own schemes.
    • DancingBadger
    • By DancingBadger 18th Jun 17, 1:40 PM
    • 142 Posts
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    DancingBadger
    Did you read point 1 before submitting your post, might just be me but I have absolutely no idea if you think it won't decrease or are concerned that it is the case that it will decrease?
    Originally posted by Dazed and confused
    Concerned that it will decrease.

    Why do you think his latest forecast doesn't take it all into account. Opting out of SERPS has no effect whatsoever on the original basic state pension, that entitlement would still have built up each year and each year working (with NI which met the limits etc) would be another year banked towards the state pension.
    It's the SERPS element which is a concern. Some posters on earlier threads on this subject have said having opted out will reduce the SP, which I understand. However, given the time difference between the 2014 forecast and this recent one, I was hoping his contribution record, taking into account opting-out, would be up to date now.
    • Silvertabby
    • By Silvertabby 18th Jun 17, 5:10 PM
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    Silvertabby
    “ DWP is being very misleading in using the term 'full' NI. It actually means 'paid for full financial year', not necessarily 'full' for the new single tier pension.
    Originally posted by Silvertabby
    Uncertainty about the accuracy of DWP communications and its record-keeping is the root of my OP.

    Could you explain the difference, please?
    In DWP speak 'full' NI just means you have contributed for a full financial year, but that year only counts towards the new single tier pension if you paid the full rate of NI and not the reduced rate if you were contracted out.

    In my case, I was contracted out from 1978 until I retired in 2016, even though my DWP forecast says I have 40 years of 'full' NI contributions. My State pension will therefore be calculated under the old rules, as that is better than my (tiny !) State pension under the new rules.

    It's not quite so clear cut for someone who has bits of contracted in/contracted out service, although their pension will still be the better of the old or new rules. As your OH's pension is more than the current single tier pension of £159 per week, he must be under the old rules - and I'm guessing that he must have been a relatively high earner to have accrued that rate of SERPS/SP2 (and that not all of his occupational pensions were actually contracted out).
    Last edited by Silvertabby; 18-06-2017 at 5:12 PM.
    • xylophone
    • By xylophone 18th Jun 17, 7:12 PM
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    xylophone
    The OP's husband seems to have started work in the early seventies, before SERPS started in 1978 - he is likely to have a small amount of Graduated pension.

    He was not contracted out into a DB pension until 1983 so will have some SERPS.

    The DB Scheme was closed at some point and a DC pension was set up.

    The OP's husband would have accrued SERPS/ S2P from that point.

    The OP says that her husband was made redundant in 2005, not that the DB Scheme closed then.

    Since then he has been freelancing.

    The calculation at at 6 4 16 would have been £119.30 + (GRAD + SERPS/S2P - deduction for contracting out). (Old Rules)

    £155.65 - COPE. (New Rules)

    He would have received the higher of the two.

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447195/new-state-pension--effect-of-being-contracted-out.pdf

    It would seem that his Grad/SERPS/S2P was high enough to wholly negate the Contracted Out Deduction.

    For somebody who had not been contracted out at all, the old state pension could have been in excess of £280 a week at 6.4.16.

    The OP's husband could ring DWP to check his situation.
    • DancingBadger
    • By DancingBadger 19th Jun 17, 7:47 PM
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    DancingBadger
    Yes, he was a high earner who started work before 1978.

    As xylophone suggested, probably the best way forward would be to speak to the DWP in the hope of getting confirmation. The alternative is to go into our loft, which is currently as hot as Hades, and dig out his old paperwork.
    • GunJack
    • By GunJack 19th Jun 17, 9:26 PM
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    GunJack
    Yes, he was a high earner who started work before 1978.

    As xylophone suggested, probably the best way forward would be to speak to the DWP in the hope of getting confirmation. The alternative is to go into our loft, which is currently as hot as Hades, and dig out his old paperwork.
    Originally posted by DancingBadger
    ...and also check on the status of his occupational pension(s) while you're at it
    ......Gettin' There, Wherever There is......
    • ProDave
    • By ProDave 19th Jun 17, 10:34 PM
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    • 479 Thanks
    ProDave
    Can I just hijack this thread to ask one simple question?

    I checked mine tonight. the one thing I did not understand is the number of years NI contributions you have to make. Mine shows I have already made 38 years of NI contributions, but tells me I have to make another 8 years before I will get the full pension. That's 46 years of NI contributions.

    I am sure it used to only be 40 years required?
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