Early-retirement wannabe

bristrew

Linton said:

michaels said:

The_Doc said:

or if you have a bit of time to kill, see
In simplistic terms, the maximum number of NI years obtained prior to 2016 is 30 and 35 are needed to get the maximum of the "New State Pension". So, yes, people need to keep making voluntary contributions even if they are not working/retired to get to 35.

Nope, in 2016 and in my 40s I already had the full state pension entitlement which means it doesn't matter how much more NI I pay in the next 20 years to retirement I won't get any more state pension - fair or what?!

Turns out that contracting out was the way to go but who knew there would be an effectively retrospective rule change meaning those who contracted out kept their gains and those who didn't had their SERPS / S2P contributions confiscated.

Not true. In 2016 you were assigned the higher of the pensions you would have accrued up to that date under the new and old rules.   So if you had high SERPs taking you above the new pension level you kept it. No-one ended up with a lower pension than that they had already paid for.

But those who were contracted out get something for their post 2016 NI payments as the increase from the starting point they were allocated and can get to the full new state pension (and they keep their contracted out pension),

Those who were contracted out do get a higher amount than the new state pension but that is a fixed point and does not increase when more NI payments are made but just with the increase in the state pension.

bristrew

Corrected as their is no damn edit button here!

Those who were NOT contracted out do get a higher amount than the new state pension but that is a fixed point and does not increase when more NI payments are made but just with the increase in the state pension.

michaels

bristrew said:

Corrected as their is no damn edit button here!

Those who were NOT contracted out do get a higher amount than the new state pension but that is a fixed point and does not increase when more NI payments are made but just with the increase in the state pension.

Or those who were right on the cusp do not get any higher state pension but nor do they get any value from the NI pensions they are making now whereas had they been contracted out they would have the value of the contracted out payment sand their current contributions would be increasing their state pension entitlement.  Why should those who contracted out get more state pension from the NI payments they are making now but those who didn't get zilch?  I paid in all those years helping to pay the state pension of others when I could have contracted out and had the money for myself and now having helped out before I get nothing for my NI payments whereas those who didn't pay in as much because they contracted out get extra pension benefits from the NI they are paying now.  If I had my time again I would have been more selfish.

itwasntme001

michaels said:

bristrew said:

Corrected as their is no damn edit button here!

Those who were NOT contracted out do get a higher amount than the new state pension but that is a fixed point and does not increase when more NI payments are made but just with the increase in the state pension.

Or those who were right on the cusp do not get any higher state pension but nor do they get any value from the NI pensions they are making now whereas had they been contracted out they would have the value of the contracted out payment sand their current contributions would be increasing their state pension entitlement.  Why should those who contracted out get more state pension from the NI payments they are making now but those who didn't get zilch?  I paid in all those years helping to pay the state pension of others when I could have contracted out and had the money for myself and now having helped out before I get nothing for my NI payments whereas those who didn't pay in as much because they contracted out get extra pension benefits from the NI they are paying now.  If I had my time again I would have been more selfish.

If there is one thing you learn about life it is this:  Always be selfish!  It is the rational way to play the game because everyone else thinks the same way.  Milk whatever you can milk.  Let others pay for it.

jamesd

LeadFarmer said:

someone I know who retired before the state pension age told me they later discovered that to receive their full state pension they had to keep paying National Insurance in a voluntary format, otherwise they would have received a smaller state pension.

LeadFarmer said:

he thought, but discovered that from 2016 there were changes to the pension rules requiring him to keep paying NI whilst retired, and this had nothing to do with being 'contracted out'.

The Police pension is a contracted out pension and the 2016 changes offer an extra benefit to people in those that people who weren't contracted out can't get. As explained to someone else:

When you retired you had accrued at least these pension benefits:

1. Basic State Pension entitlement of 1/30th for each year worked (years before 2016), credited or purchased.. 1/30th of the current BSP of £134.25 a week is £4.475 a week. You fully meet the requirements for the full Basic State Pension system that you paid into with 37 or whatever 30+ years and hence are entitled to at least its full £134.25 a week.
2. In the work pension you were contracted out of getting most of the earnings-related part of the state pension. This is instead paid out as part of your teaching pension, or in some like TPS paid less NI and got more cash pay. A person not in a defined benefit pension would be getting a similar amount as part of their Additional State Pension. Compare the two people but look only at the state pension part and you'd get a misleading picture.
3.A small amount of earnings-related Additional State Pension because contracting out wasn't 100%. A couple of Pounds a week.

Your statement tells you what you had accrued when you retired because in your circumstances the old rules (the ones when you paid in) will be used. You get whichever of the old or new rules calculations pays you the most. In your case the 2016 rule change didn't increase or decrease your state pension entitlement by even a penny and you'll get exactly what you signed up to and paid for (though that's ignoring the other ways it became more generous to you over the years, you actually get more than you'd be entitled to if the rules for each year you paid in were used).

Under the rules when you retired before 2016 you could not increase your state pension by buying more years because there was no increase for having more than 30 years towards the basic state pension and you already had that. Closed case, nothing doable by you to get a higher state pension.

In 2016 a single tier state pension was introduced. This eliminated all future earnings-related state pension accruals and substituted 1/35th of the single tier pension per year from 2016 earned, credited or purchased. To partially compensate for this the single tier pension rate was set (today) at up to £175.20 a week and accrual at 1/35th of this per year, £5.006 a year.

And that's where you got lucky and have the opportunity now to buy cheap extra state pension that you haven't paid for and couldn't have bought under the rules when you retired.

The single tier pension of £172.20 isn't just a pension rate, it's a cap on accrual from working, credits or buying more years. Someone with your work record but not having lots of years in a defined benefit pension would be over that because their earnings-related pension bit is paid as part of the state pension. But you haven't reached that state pension cap yet because most of your earnings-related bit is being paid by the work or you paid less NI and doesn't count towards it.

So, your state pension position has improved because of the 2016 change by:
1. it was impossible to buy years to get more when you retired but you can now buy years to increase to £172.70. Or you can do nothing and keep everything you were entitled to when you retired
2. years purchased from 2016 get you £5.006 a week more instead of £4.475 a week.

Assuming your life expectancy is normal you should smile broadly, take the windfall opportunity that you never earned or paid for and buy those extra years. You're one of the clear winners from the 2016 changes and you should be celebrating that, not feeling slighted.

Whether the last year should be bought depends on how close the other years take you to the cap. If they get you to say £172.19 the final year would get only an extra penny a week and wouldn't be worth doing.

itm2

The_Doc said:

or if you have a bit of time to kill, see https://www.gov.uk/new-state-pension/how-its-calculated
In simplistic terms, the maximum number of NI years obtained prior to 2016 is 30 and 35 are needed to get the maximum of the "New State Pension". So, yes, people need to keep making voluntary contributions even if they are not working/retired to get to 35.

I was born in 1960 (and have already retired), so my state pension age is currently 66. I only have 30 years of NI contribs, but was contracted out for a while and my State Pension Forecast says that "£180.21 is the most you can get. You cannot improve your forecast any more".
So I guess the 35 year rule doesn't apply to me? (i.e. no more NI contribs required)

The_Doc

itm2 said:

"£180.21 is the most you can get. You cannot improve your forecast any more".

So I guess the 35 year rule doesn't apply to me? (i.e. no more NI contribs required)

You cannot improve the forecast, but you may not get what is forecast unless you have the full number of NI contribution years (35). For example, I too was contracted out and my forecast is £175.20. But the estimate based on current NI record is £163.23. It says that I will need 3 more years to get the full forecasted amount.

itm2

The_Doc said:

itm2 said:

"£180.21 is the most you can get. You cannot improve your forecast any more".

So I guess the 35 year rule doesn't apply to me? (i.e. no more NI contribs required)

You cannot improve the forecast, but you may not get what is forecast unless you have the full number of NI contribution years (35). For example, I too was contracted out and my forecast is £175.20. But the estimate based on current NI record is £163.23. It says that I will need 3 more years to get the full forecasted amount.

Jeez that's confusing! So is there any way I can get a clearer idea of what I will actually receive at age 66?

The_Doc

Yesitm2 said:

Jeez that's confusing! So is there any way I can get a clearer idea of what I will actually receive at age 66?

The government gateway website ("Pension / View Your State Pension Forecast" section) will tell exactly how much you will get if you do nothing (no further contributions) and how many years contributions you need to make if you want to get the full forecasted amount. Else call HMRC if you dont have access to the website.

itm2

The_Doc said:

Yesitm2 said:

Jeez that's confusing! So is there any way I can get a clearer idea of what I will actually receive at age 66?

The government gateway website ("Pension / View Your State Pension Forecast" section) will tell exactly how much you will get if you do nothing (no further contributions) and how many years contributions you need to make if you want to get the full forecasted amount. Else call HMRC if you dont have access to the website.

That's where I got the forecast. This is what it said:

"You can get your State Pension on 6 May 2026. Your forecast is £180.21 a week £783.59 a month, £9,403.10 a year

Your forecast

• is not a guarantee and is based on the current law
• is based on your National Insurance record up to 5 April 2019
• does not include any increase due to inflation

£180.21 is the most you can get

You cannot improve your forecast any more.

If you’re working you may still need to pay National Insurance contributions until 6 May 2026 as they fund other state benefits and the NHS."

So you're saying that if I don't have 35 qualifying years at retirement age I may get less than this, but there is no way of knowing how much I'll get now?