MSE News: Flat-rate state pension could be £155 a week

WillowCat

bilbo51 wrote: »

Which could lead to the possibility of your getting less than the current £97 state pension if your SERPS/S2P clawback (aka offset) is greater than ~£43... (£140- £43 = £97) even though you've paid 30 years contributions I think.

Yes, that's my understanding too - and why I'm getting quite annoyed about the proposals.

When I started working I honestly thought that by the time I retired the state pension wouldn't be available to me. However as I got older, it was still in existence so I changed my views and made it a fundamental part of my pension planning - especially as the returns on my private pension were going nowhere, and annuity rates are really low now.

Being contracted out, I never expected any SERPS/S2P pension, but thought I was getting basic state pension plus contracted out pension plus private pot.

Now it looks like flat rate pension minus notional serps will, for me, be less than the current basic rate pension.

margaretclare

So what were you contracted out into?

The only reason for being contracted out was that you were in an occupational pension.

DH gets quite a lot of SERPS because he was never contracted out into any employer's scheme. I was contracted out into the NHS scheme but I get some SERPS for the jobs I did outside the NHS.

dunstonh

It has been suggested that the potential clawback amount on contracted out benefits would be £40 of the £140. However, there is little known yet on how it would be achieved.

For example, someone could have £150pw from contracting out for 10 years whilst being contracted in for 20. Whilst another could have £30pw for being contracted out for all their life. So, would the reductions be on a monetary value basis or number of years/NI paid? We don't know.

bilbo51

margaretclare wrote: »

The only reason for being contracted out was that you were in an occupational pension.

Not necessarily. Some people contracted out into a private fund. Not an occupational pension.

JimmyTheWig

WillowCat wrote: »

Now it looks like flat rate pension minus notional serps will, for me, be less than the current basic rate pension.

Lets say that your serps is estimated to have been worth £50pw.
At some point in the past you made the decision to not have the £50pw from serps but to invest that money in a private pension. You did that on the assumption that that would give you more than £50 per week.

And it sounds like that's still the case. You are forgoing £50 of state pension for an increase in private pension that you hope will be worth more than £50.
If it was the right decision with the old rules, it's the right decision with the new rules.
If it's not going to be worth £50pw then it was the decision to contract out at fault rather than the proposed changes.

bilbo51

JimmyTheWig wrote: »

Lets say that your serps is estimated to have been worth £50pw.
At some point in the past you made the decision to not have the £50pw from serps but to invest that money in a private pension. You did that on the assumption that that would give you more than £50 per week.

And it sounds like that's still the case. You are forgoing £50 of state pension for an increase in private pension that you hope will be worth more than £50.
If it was the right decision with the old rules, it's the right decision with the new rules.
If it's not going to be worth £50pw then it was the decision to contract out at fault rather than the proposed changes.

It isn't 'still the case' though is it? Under the "old rules", the minimum state pension one could get with full contributions was (still is) £97. Under the "new rules" there's a possibility that one could get less.

margaretclare

bilbo51 wrote: »

Not necessarily. Some people contracted out into a private fund. Not an occupational pension.

OK. But that private fund is going to provide an additional pension, same as an occupational one.

StevieJ

bilbo51 wrote: »

Which could lead to the possibility of your getting less than the current £97 state pension if your SERPS/S2P clawback (aka offset) is greater than ~£43... (£140- £43 = £97) even though you've paid 30 years contributions I think.

I don't trust this govt and I suspect that may be the case but do you have any specifics in the green paper that may be pointing at that?

bilbo51

StevieJ wrote: »

I don't trust this govt and I suspect that may be the case but do you have any specifics in the green paper that may be pointing at that?

From the consultation document p32:

As an example, consider someone who reaches State Pension age retiring with a state [FONT=FS Me,FS Me][FONT=FS Me,FS Me]pension worth £177.60 a week. If this person was contracted out of SERPS between 1978 and [/FONT][/FONT]1997 and accrued a Guaranteed Minimum Pension of £40 a week – which their scheme will pay – they will receive £137.60 a week directly from their state pension.

Play with the figures. If the GMP were say £60 and the state pension was worth say £150, then they would receive £90 per week...?

I'd appreciate it if a pensions expert could step in here to correct me if this situation is impossible and these figures could never obtain.

Perhaps they'd put a bound on the minimum payable. And maybe they wouldn't.

JimmyTheWig

bilbo51 wrote: »

It isn't 'still the case' though is it? Under the "old rules", the minimum state pension one could get with full contributions was (still is) £97. Under the "new rules" there's a possibility that one could get less.

Yes, like all people where serps would have been more than £43 a week, someone whose serps would have come to £50pw will be worse off under the new scheme.
But that would have been the case whether they opted out or not.