New State Pension Proposals

zagfles

artic99 wrote: »

Having been contracted out for 9 years but with 30+ years still to work would the 30 years with full contributions when the options removed next year negate a deduction? If not, from just the state pension point of view I'd have been better off not working/paying NI at all for the contributing 9 years which seems a bit odd

Yes it will be one of the (many) anomolies with the switchover. But if you hadn't contracted out, those extra years would be still have counted for nothing and you'd have paid higher NI in those years (and so would your employer). So it does maintain fairness between those who did and didn't contract out.

jeanniebeanie_2

Does this mean that anyone over 55 who contacted out should grab their 25% cash and any pension they can as soon as they can with 100% spouse before the option disappears, gaining at least several years benefit from being opted out?

dunstonh

jeanniebeanie wrote: »

Does this mean that anyone over 55 who contacted out should grab their 25% cash and any pension they can as soon as they can with 100% spouse before the option disappears, gaining at least several years benefit from being opted out?

No. You can either do drawdown or still buy an annuity with spouse option. You are just not forced to buy a spouse annuity (even when there is no spouse). As it stands, the maximum spouse option is 50% on protected rights. You will be able to go no spouse or 100% spouse on the new rules (or some percentage in between).

jeanniebeanie_2

What I am not understanding is whether there is any benefit to taking as much of the protected rights as early as possible post 55?

It is not clear to me, and I apologise if you have tried to explain, if having already taken the protected rights before the new rules (age55), whether at age 66 say, the new 'universal' pension would be reduced by the same amount as if the protected rights had been left untouched.

I read an example that if the contracted out pension was say £40 per week then that would be the amount the state pension would be reduced by. If you take that at 55 plus 25% cash then the contracted out pension would be lower but you could take that for eleven years before, at age 66 the new rules pension kicks in. Lower contracted out pension, lower reduction on state
pension?

zagfles

jeanniebeanie wrote: »

What I am not understanding is whether there is any benefit to taking as much of the protected rights as early as possible post 55?

It is not clear to me, and I apologise if you have tried to explain, if having already taken the protected rights before the new rules (age55), whether at age 66 say, the new 'universal' pension would be reduced by the same amount as if the protected rights had been left untouched.

I read an example that if the contracted out pension was say £40 per week then that would be the amount the state pension would be reduced by. If you take that at 55 plus 25% cash then the contracted out pension would be lower but you could take that for eleven years before, at age 66 the new rules pension kicks in. Lower contracted out pension, lower reduction on state
pension?

Where did you read that? As I remember the green paper doesn't mention how this will be done, just a vague reference to an "offset".

There is no way you'd gain by doing what you suggest. They will account for this, and anyway they'll probably work it out on contracted out years, not what you actually get from your contracted out pension.

bilbo51

zagfles wrote: »

Where did you read that? As I remember the green paper doesn't mention how this will be done, just a vague reference to an "offset".

The example is in the green paper. Page 29

"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."

zagfles

bilbo51 wrote: »

The example is in the green paper. Page 29

"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."

But that's talking about the way things are now (the new flat pension isn't going to be £177.60).

They then go on to say:

Under single-tier, contracting out would end with the closure of the State Second Pension. However, it could take a significant amount of time for members of contracted-out schemes to work through the system. This means that the need to apply an offset to take account of periods spent contracted out of the State Second Pension would continue under single tier.

i.e. it sounds like the offset would be based on time contracted out, not what the contracted out pension pays out. Particularly for money purchase/personal "protected rights" pensions, as it would be far too easy to artifically lower the actual pension by eg taking a lump sum/taking it early. The govt aren't that stupid:D, they'll have this covered.

jeanniebeanie_2

The £177.60 quoted IS under the new scheme I think, taking into account the addition of already accumulated S2P which is safe.

i.e. it sounds like the offset would be based on time contracted out, not what the contracted out pension pays out. Particularly for money purchase/personal "protected rights" pensions, as it would be far too easy to artifically lower the actual pension by eg taking a lump sum/taking it early. The govt aren't that stupid, they'll have this covered.

I was kinda hoping they were that stupid!

I suppose it is too early yet to know exactly how the offset will work, but realistically there will be no advantage I guess. Ah well, it was a nice albeit brief, musing.

Jaycee_Dove

As a self employed woman due to retire a year or so before this new deal comes in (nearly two years later than I had expected to do before the changes - BTW - for those saying we are retiring earlier so should not whine) the biggest issue seems to be over the second state pension.

Self employed people do not get this under the old rules but in effect do under the new rules. That makes a big difference in finak pension assessment.

Having worked 30+ years I have now been a carer for some years and was hoping to defer my pension to try to match the pension I would have had with this second pension. But I cannot do that and retain my carer's allowance which puts me confused as to how to cope with these changes.

Looks like I will be seriously disadvantaged by this new plan.

Any suggestions how I might try to deal with this?

dunstonh

Any suggestions how I might try to deal with this?

Part of the reason the self employed don't get S2P is that less NI is paid. The saving should be used to increase private provision.