Full Stamp

Doonhamer

My mum has just reached 60. She has payed the "big stamp" which I don't know much about (is this SERPS). Anyway. last year she got an estimate that her pension would be about £77. Now, just after her 60th birthday she phoned them up and they said it would only be £65 because she has been off sick for the last 8 months. Is this right. She got sick pay doesn't that pay your stamp? They said something about it being based on the last years pay. But what if she had gave up work at 59, surely she would still get a pension at 60. Can she loose £12 a month for the rest of her life because she was unlucky enough to have a serious injury when she was 59?

The pension guy at the DHSS was friendly on the phone to her and said once she got a confirmation letter of the exact amount to phone him back and he would help sort things out.

Anyone got any experience of this type of situation?

CIS

There was two types of NI at one time for married women, the 'Small Stamp' which didn't count towards most benefits or the state pension, and the 'big stamp', the normal rate NI.

It sounds like the £77 was a prediction based on her Basic Pension + Additional State Pension, they use the last full year of NI on record at any time to predict the future pension (realistically its the only way to estimate a pension at pension age).

The last year she had on record was a lower income than that which was earned in previous years, therefore her predicted pension was showing a higher rate than was actually earned, so when the year was actually calculated and added to that pension which was already earned, the figure was lower.

If she had a Contracted Out Deduction from being a member of a pension scheme prior to 1997, then this is re-valued each year and can be re-valued at a faster rate than the Additional Pension it is offset against. This has the net effect of also lowering the value of the pension.

eg :

Forecast from April 2000 would predict forward on the record from 1998/99 of £xxxx, if you then got a forecast in April 2001. it would predict forward using the 1999/2000 year, but the details for the 1989/1999 year would now be on record.

If the 1999/2000 years income was lower than the 1998/99 income, then the previously projected figure would be too high and the pension would be adjusted to take in to account ther actual income from 1998/99.

Doonhamer

Thanks CIS, it still seems odd to me though. Is the additonal state pension based on final years earnings? I thought it would be calculated yearly. Seems a lot to drop by £12 in the year, the guy she spoke to said it was because she had not paid enough NI in the last year.

I'll let you know the final outcome when we get it all sorted out.

CIS

Its easy to get confused, most people who phoned/wrote in pension forecasting when I was there didn't understand the complicated rules araound Pensions (not that all of the staff did either).

State Second Pension is caclulated yearly, but the projection is based on the last full years record.

eg

April 2002 State pension Forecast - calculates £25 AP earned to date, £3 of that in the 01/02 tax year, forecast projects £3 AP for 2002/03, giving a projected pension of £28.

April 2003 State pension Forecast - calculates £25 AP earned to 2001/02 , then calculates 2002/03 AP and finds it to be only 25p through being out of work, forecast now shows actual AP of £25.25, instead of the previously estimated £28.

Couple that loss through AP with the loss of approx £2 per week through not achieving a qualifying year , and the revaluation of any COD, the £12 per month could be accounted for quite easily.

Doonhamer

Thanks again CIS I understand the first part. It's the qualifying year bit I'm not so sure about. If she was receiving state sickness benefit would that not pay her "stamp". I know that when my wife was not working for 3 years hers was paid because she was receiving child benefit for the kids. Or am I confusing two different things?

CIS

When she was looking after children, she would have received HRP (Home Responsibilities Protection), this does not give a qualifying year, it reduces the number of years needed for a full pension. (gives a slight % difference in the value of each year).

Was she receiving sick pay through work ?, also, how much in total did she earn across that tax year ?

Doonhamer

She was off work for the 6 months before her 60th birthday but has just started back at work now 1 week after her birthday. She got the statutory amount of sick pay from her employer plus a bit on top. I think on her pay slip it said sickness benefit but I need to check. It was only a part time job paying about £6 per hour and she generally worked about 24 - 30 hours till July when she went sick. Her retirement date was the end of January.

CIS

In the last full tax year prior to her pension age (04/05), she would have earned a qualifying year if she earned at least £4108, if she earned less than this , even by 1p , she would not achieve a qualifying year.

anything since last april, would not count towards her pension in anyway.

Doonhamer

Got it sorted, seems they did not have the data for the last full year, once they get that confirmed the payments should be in line with the original estimate.

Thanks again.