MSE News: Budget 2012: Single state pension plan confirmed

zagfles

cyclonebri1 wrote: »

Is it 35 years of contributions or 35 years of pension credit or both or either, you get my drift??

NI credits will count. AIUI.

BLB53

This is being phased out, see http://www.pensionsadvisoryservice.o...urance-credits

Think it's roughly in line with the increased women's pension age.

Thanks for that - looks like I still may get 2 years NI credit. If so, that will take me to 34 yrs - I might be able to 'buy' the missing year to get to 35.

Froglet

Errata wrote: »

If there is no serps/sp2/gp and the pensioner is not eligible for pension credit because they have an annuity pension and some savings, they're stuffed and will lose out by a considerable amount each and every week.
This anomaly has already been noticed and commented on all over the place. They become second class pensioners.

This to me is the most unfair part of it all.Hubby will miss out by a few months.He will have a small annuity and we have savings but not a lot .Too much to claim pension credit though.So by doing without all these years to have the safety net of an annuity and savings we lose out.

Wish we hadn't bothered!! I wonder if the fact there will be an awful lot of people in the same boat will influence the result of the next election!

zagfles

Froglet wrote: »

This to me is the most unfair part of it all.Hubby will miss out by a few months.He will have a small annuity and we have savings but not a lot .Too much to claim pension credit though.So by doing without all these years to have the safety net of an annuity and savings we lose out.

Wish we hadn't bothered!! I wonder if the fact there will be an awful lot of people in the same boat will influence the result of the next election!

But that's the problem with the current rules, blame Gordon Brown!

SnowMan

zagfles wrote: »

But that's the problem with the current rules, blame Gordon Brown!

It was a shame that Gordon Brown failed to implement the Pension Commission report produced by Lord Turner. It left the whole means tested pension credit mess.

The current proposed changes effectively follow on from what the Pensions Commission were originally suggesting. In fact the current proposals are more radical because Lord Turner wanted to phase in the move to flat pension over a much longer period.

cyclonebri1

zagfles wrote: »

NI credits will count. AIUI.

But the qualification period has increased from 30 to 35 years for actual worked years???


It doesn't affect me or 'er indoors but It must be driving some folks nuts if this is to be the case. :mad:

SnowMan

cyclonebri1 wrote: »

But the qualification period has increased from 30 to 35 years for actual worked years???


It doesn't affect me or 'er indoors but It must be driving some folks nuts if this is to be the case. :mad:

Only those who read the press reports and haven't really thought about how the 35 year rule will work.

Those reaching SPA post 2017 currently with 30 years credits could in many cases be beneficiaries of the changes. This is because of the protection of accrued state pension rights to 2017 (that protection is based on the old system). In some cases that person has already accrued the £144 partly through basic state pension and partly through having contracted out of SERPS but will then have an opportunity to accrue some extra state pension on top of this.

We think we think but do we?

martyn4764

SnowMan wrote: »

This is because of the protection of accrued state pension rights to 2017 (that protection is based on the old system).

In case I'm misunderstanding what you're saying, could I ask:

I'm a few months away from 30 years of NI contributions; does this mean that, as I will have accrued full pension rights under the current system prior to the introduction of the new system, I won't need the extra 5 years' contributions in order to qualify for the full amount of Universal pension when I retire in 20 years or thereabouts?

BLB53

I'm a few months away from 30 years of NI contributions; does this mean that, as I will have accrued full pension rights under the current system prior to the introduction of the new system, I won't need the extra 5 years' contributions in order to qualify for the full amount of Universal pension when I retire in 20 years or thereabouts?

As I understand the proposals, if your retirement date is after April 2017, you will need 35 yrs NI (or credits) to qualify for the full state pension of £144.

However they will look at your situation and if you have qualified under the old system with 30 yrs NI (or credits) and have built up serps/SP2 entitlements and these combined with the old state pension (likely to be around £120 or so by 2017) amount to more than £144, then you will get the higher amount under the new system even though you may have less then 35 yrs.

So nobody will get less than you would have got, but those who have built up entitlement over many years may feel as if they have had their pockets picked as they will now get very little more then everyone else.

Thats my reading (but I may have got it wrong!)

SnowMan

martyn4764 wrote: »

In case I'm misunderstanding what you're saying, could I ask:

I'm a few months away from 30 years of NI contributions; does this mean that, as I will have accrued full pension rights under the current system prior to the introduction of the new system, I won't need the extra 5 years' contributions in order to qualify for the full amount of Universal pension when I retire in 20 years or thereabouts?

That is quite hard to answer as it depends on what existing additional state pension you have currently accrued (SERPS, S2P etc).

But broadly speaking if you have already accrued £37 of additional state pension currently (£144 - £107 the current full basic state pension ) then you won't need the extra 5 years to get the £144 flat rate pension under the proposals.

It is probably easiest to give some examples, I'll assume you have 30 years accrued contributions for simplicity (and you probably haven't accrued as much as £50 SERPS but it helps the explanation to use that figure):


EXAMPLE 1
- 30 years existing contributions,
- contracted-in throughout in the past.
- currently accrued additional state pension (SERPS, S2P etc) of £50.

The guarantee (called the Foundation Amount in the white paper terminology) is that you will get at least £157 (= 107 full basic state pension + 50 state additional pension). So you are getting the full flat rate pension of £144, in fact £13 more.


EXAMPLE 2
- 30 years existing contributions,
- contracted-out throughout in the past.
- No additional state pension through SERPS and S2P because contracted-out.
- A contracted-out company scheme pension of £110, made up of £50 resulting from the contracting-out of SERPS and £60 from the employee and employers own personal contributions to the scheme.

In this case you get a guarantee that your flat rate pension will be at least £107 (full basic rate pension as you have 30 years).

So you are not getting the full flat rate pension of £144 directly but you are indirectly because of the £50 of company scheme pension that has really come from contracting-out of SERPS which added to the £107 state pension takes you £13 above £144.

However the real quirk here if you are able to pay another 5 years of qualifying contributions post 2017 you will end up with the £110 scheme pension plus a full £144 of flat rate pension.

So indirectly you are getting £194 of state pension (144 + 50) albeit some of the state pension, £50, is being provided indirectly by the company scheme.