State Pension For Married Women

Pobby

The serps or sp2,does this also apply to someone like myself who has been self employed for over 20 years.I do have some serps showing on my pension forcast.Over the the 20 year period I have had some excellent years and some stinkers.

mleonard79

Thanks Debt_free_chick and CIS

So her NI contributions for the last tax year may or may not have been credited yet so that could increase the amount slightly. I'll make sure to check it again in Jan to see. Can't see that making a huge difference though and definitely not downwards so its not a worry!

Quote:
So when she reaches 60 she should get at least £100.55 per week according to this

Thats assuming she carries on under the same circumstances as she is now, if her income goes up or down the amount of AP will change.

Barring illness or other unforseen circumstances there should be no change in circumstances other than perhaps slight yearly wage increases. My mum plans to work til 65 thus she'll definitely be working til 60 so I can't see any way the sum will be less than £100.55 per week. Of course its dependent on assumptions but I think they're reasonably safe ones.

Quote:
The forecast said that her total additional state pension is £60.49 but there is a contracted out deduction of £45.82 leaving £14.67.

The COD will be for the time she was in an occupational scheme and is a government calcualted figure on what the pension should be worth, but as most have underperformed the amount they pay is less than the COD that has been deducted - theres nothing you can do about it though.

That's interesting - my mum gets £397 a month from her BT occupational pension so perhaps that's an exception when it comes to underperforming. Of course I don't know how much she paid into it to get this and what the contracted out part is worth in comparison to what the Govt would have given her but I feel its a pretty good pension sum for the loss of £45 p/w or £180 p/mnth. What do you think this means in terms of her Norwich Union Pension as its obviously not contracted out? She doesn't pay anything to them for it, its just a scheme whereby they pay an amount for a pension for her every year.

Remember that if you take the increments option, your giving up £100 x 52 = £5200 for each yr, to get back an extra pension of £520 p/a, so even 1 yr of deferral for increments would lose you £4700. (less than any tax you would pay if you claimed it staright away)

I'm a little confused by this. From reading the pension site I got the impression that you received 10.4% increase for each year you deferred making it a 52% increase for 5 years. So a 52% increase would be £52.29 extra which would give a pension of £152.84 per week which would be an extra £2,719.08 per year but you would have given up the right to £26,143 to get that. As I say I'm not a maths genius so maybe I'm missing something simple with these sums.

With a lump sum, you would give up £5200 and get a lumpsum of around £5370, if your paying 22% then you have made a loss of £1100, afte 5 yrs you could get £30580 in return for giving up £26000 in pension, at 22% tax your £3000. Unles your going to be in the 0% or 10% tax band at the date of claim (or teh following tax yr), you'll lose out which ever method you take.
Today 1:52 PM

Sorry for being a little dense but I'm a little confused by these figures too. The lump sum of £5370 - is that what you would get in the first year with the interest at 6.5% added on? Also is this interest taxed every year? When you say you'd make a loss of £1100 after 5 years what is that loss being compared to? £30,580 - I take it this is the figure with the compound interest at 6.5% added on. If so what is the £3000 figure? I thought the tax on that lump sum at 22% would be £6727? Or is the £3000 a loss too? Sorry like I said my maths brain isn't the best. I really appreciate any help with the figures.

I do understand about the lump sum being taxed at 22% though! As my mum earns over £15K per year if she took her pension at 65 she would definitely be taxed 22% on it as that's the highest band of tax she pays. However if she retired at 65 and took her pension at 66 instead (living off her BT Pension, N Union Pension and some savings that first retired year) she should get the full lump sum and be taxed at 0% instead - have I got this right? I know at 65 your tax free entitlement goes up to over £7000 and she would earn less than that if she didn't take her state pension. If she could do that it would definitely make the lump sum the better option I think. What do you think? That would of course make her lump sum a 6-year one so it would be even more. Thanks for all the help - I'm getting there slowly and surely with this.

Regards

Michelle

CIS

S2P and SERPS aren't accrued for any earnings where your S/Employed, any SERPS must date from before the period where you became S/Employed.

CIS

I'm a little confused by this. From reading the pension site I got the impression that you received 10.4% increase for each year you deferred making it a 52% increase for 5 years. So a 52% increase would be £52.29 extra which would give a pension of £152.84 per week which would be an extra £2,719.08 per year but you would have given up the right to £26,143 to get that. As I say I'm not a maths genius so maybe I'm missing something simple with these sums.

That would be right over 5yrs ( I used a figure over 1yr), but remember that the only money your gaining is the extra the increments give you on top of your normal pension, thats £52*52 or £2700 p/a, but you've lost 5 yrs of pension @ £5200p/a, so you give up £26000 for an extra £2700p/a, it would take you 10yrs nearly to earn back what you had given up.


The £5300 is the amount predicted that you will earn after 1 yr at a rate of 6.5% (from the booklet), so if you took the lump sum insated of your pension, you would have given up £5200 pension, to get £5300 lumpsum, a net Profit.

But , I took in to account the 22% tax in the figures I showed, that would mean that ,potentially you could make a loss, depending on your tax band.

The amount isn't taxed every year, its only taxed when you claim it. The lump sum uses a special rule, which means that it isnt taxed in teh normal way.

Normally all income is added together and taxed on whatever band it falls in to,but the lump sum is ignored when they work your income for tax .
They look at all of your income and determine the maximum tax rate that you pay at on the income you have, the lump sum is then taxed at this rate, rather than added to your other income for tax purposes.

Doing it this way stops people from pusing towards the 40% tax band if they have a lump of 20-30K.

EdInvestor

The COD will be for the time she was in an occupational scheme and is a government calcualted figure on what the pension should be worth, but as most have underperformed the amount they pay is less than the COD that has been deducted - theres nothing you can do about it though.

Presumably this won't apply if she was contracted out into the BT final salary scheme?

It would be more likely if the pension was a company money purchase scheme or private pension?

mleonard79

Hi Margaret Claire

Sorry - replying to you separately as my last post was about the maths part and ended up pretty long!

Yeah it is very good news for my mum and I'm very grateful for all your advice and help that got the ball rolling. I see what you mean about people having misconceptions about pensions due to old attitudes. It is all very interesting hearing about the changes since the 1800s. I studied History at uni so still get interested in these things!

As for me well its a long story so I'll try to shorten it as much as poss! In fact its only doing this over the last week and getting an unnecessary bill from the Inland Revenue for NI contributions at the same time that's got me thinking about it at all. I was a sickly child with chronic acute bronchial asthma and have always been prone to every infection going. When I was 16 and still at school I took very ill with an infection that lasted over a month. I was never able to return to school after it and ended up housebound with severe ME (Chronic Fatigue as its now known) until I was 18. During this time I never claimed for anything - well you don't think of those kind of things at that age and my mum looked after me. So i'm assuming I have no NI contributions for those years.

When I was 19 I recovered sufficiently to go to university (I was lucky enough to have gained more than the necessary qualifications before I took ill.) I was still perhaps not recovered enough to do this as I struggled but I was so eager to go since I was a lot better that I kind of rushed into it. Anyway I managed to complete a 3 year degree but had to take a few semesters off here and there due to recurring illness so I ended up completing it in 4.5 years. I'm not sure if you get any years credited for uni?

During that time I worked part-time jobs whenever I was well enough to and worked in the US for three summers. I doubt any of the part-time stuff contributes significantly to my NI contributions though. I got my degree in 2004 and decided not to look for a proper job/career just yet as I had a few debts I wanted to pay off. I worked as a hosplitality supervisor at sporting events for different agencies for over a year and a half. I don't know if this counts as full time work though as it was a hotch potch of different jobs for different companies on an agency basis. I worked hard while I could as much as my health allowed.

I also started doing Mystey Shopping as a side thing. As this is classed as self-employed I had to register for self-assessment even although I earn no more than £500-1000 a year through it! I wanted to do everything legally and properly though so I registered and have been completing online tax returns for the last 3 years. They always owe me money so its not an onerous task! As my self-employed earnings are so low I'm exempted from paying Class 3 NI contributions - the Inland Revenue forget that quite often though and send me bills like the one I got a few days ago! I phone them up and they say sorry and tell me to disregard them.

Anyway, I've had a major health set-back since last July when I contracted a very bad flu (I get the flu jab but this one got through the radar) which lasted several weeks and brought the ME back. Not as bad as it was when I was 16 thankfully but sufficiently bad that I can't work now other than doing a little bit of Mystery Shopping when I feel able to - as this is something you have a set number of weeks to complete I can go and do it on a good day if you know what I mean. I can't do shift work though as I never know what's going to be a good day and what's going to be a bad and it's simply untenable to say to an employer I may be well enough to work for you on certain days but I couldn't tell you which days! I'm back living with my mum now hence why I'm sorting out her finances at the moment - it gives me something to do when I'm well enough and it makes me feel good to help her out as she's helped me so much.

Due to how hard I worked in the US during the summers and the work I did here I not only cleared my debts but build up savings too. I was very careful with my money as you never know when you might get ill. Therefore since I took ill again last year I've just been living off of my savings and my small Mystery Shopping earnings (the self-employed coupled with the PAYE companies still can't amount to more than a couple of thousand a year though.) I didn't even think of looking into benefits as I assumed I wouldn't be entitled to anything with that kind of savings and I would feel a little fraudulent asking for money when I have that in the bank. I've never been the kind of person who would think of claiming for benefits if there was any other option. I wholeheartedly agree with those who are ill or in need getting the benefits they deserve but I do think there's a lot of abuse of this system and I am adverse to ever claiming anything if I have alternatives. Also with something like ME I'd be scared they'd spy on you on a good day and then say you're a benefit cheat or something!! I know I'm probably paranoid. I do feel a little peeved, however, that if I had just squandered all my hard earned money I would probably be entitled to several different benefits but since I've been sensible and saved I'm probably penalised for that! It doesn't seem to make much sense. But like I say I'd rather have my own money than rely on the state to keep me.

The NI contributions, however, are as I say something that just hadn't occurred to me up until this week. So when I phoned up to complain about the bill I asked the assistant about them and he asked why I wasn't claiming any benefits and I told him. He was very sympathetic and said that even if I may not be entitled to some beneifts due to my savings or small earnings just by applying for some I could get my NI contributions credited. So I'm now thinking of looking into that as I don't feel its dishonest to want that. I expect I can't get anything back for the time I haven't claimed though. As this is not really about pensoins, however, I think I'll start a new thread about it in the benefits or health moneysaving board and see if any of the experts on there know what I should do. Just thought I'd explain it to you as you've been so kind. Thanks a lot.

Regards,

Michelle

CIS

Are you claiming WTC ?, if you can claim it , then depending on the income, then you may be able to receive the credits through that.

Otherwise , if S/E is your only employment, its worth paying the class 2 as the final reward more than worth it.

mleonard79

Hi again CIS

Thanks for that. Yeah I agree that deferring and taking the percentage would take a long time for you to see a profit. I do think the lump sum sounds like the best idea.

But , I took in to account the 22% tax in the figures I showed, that would mean that ,potentially you could make a loss, depending on your tax band.

Does this mean that your lump sum figure over 5 years of £30,580 is after tax? I would have thought that would be the figure before tax and they'd then take £6700 in tax leaving her with £23,853 as a final lump sum? What do you think of my idea that she doesn't claim her pension til she's 66 thus avoiding the tax and getting a larger lump sum? I just want to make sure this isn't against any rules as to save her £6700 in tax seems a good saving! Thanks again.

Regards

Michelle

CIS

Presumably this won't apply if she was contracted out into the BT final salary scheme?

It would be more likely if the pension was a company money purchase scheme or private pension?

I presume your talking about the revaluation ?

I only know the basics of revaluation and that some schemes have fallen short of the COD revaluation rates, Iam not up on the rates which are standard for each type of scheme. ( alot of what I did know,I forgotten), is the final salary normally S148,limited or fixed ?

mleonard79

CIS wrote:

Are you claiming WTC ?, if you can claim it , then depending on the income, then you may be able to receive the credits through that.

Otherwise , if S/E is your only employment, its worth paying the class 2 as the final reward more than worth it.

I take it you're talking about my situation and not my mum's here - i know I've confused myself with the different scenarios!! I don't know what WTC is but no matter as I don't claim anything at all and never have. S/E isn't my only employment as technically I'm employed by several Mystery Shopping companies but it doesn't amount to much income as I can't do much work with the illness. I'd estimate its £1500 to £2000 a year at the very most, maybe even less (and that's for my employed and self-employed earnings put together!) My self-employed earnings have not amounted to more than £500 the last two years.

As for paying the class 2 contributions I'm not sure about that as I think they want several hundred every year and that seems a little unfair when I hardly work. I don't know though it's all very confusing. As I say I've only just started thinking about it due to working this out for my mum and probbly would never have realised I've got a problem if I hadn't been doing this.

Regards

Michelle