MSE News: Budget 2012: Single state pension plan confirmed

gadgetmind

I've calculated that I'll get *just* over the flat rate based on my S2P by 2017. My wife will also get full flat rate but will need to make class 2 contributions for a few years post retirement (but pre SP) to reach the 35 years.

Based on the value of our protected rights pots when I merged them into our SIPPs, we'll also get about £55 a week (in today's terms) via drawdown from these pots. I wish I'd contracted out for longer as even with more "rebate derived" deductions, we could get to full flat rate via class 2.

peterg1965

pensions_white_paper_says wrote: »

An individual’s National Insurance record will be valued using single-tier rules as at the implementation of the single-tier pension. Where an individual has previously been contracted out of the additional State Pension, a deduction will be applied, reflecting the fact that they have paid lower National Insurance contributions whilst they were contracted out, as is consistent with current practice.
.

Can someone add some clarity, if any exists at this stage?

I am in a Final Salary scheme and by 2017 will have something like 35 years contracted out NI contrbutions towards the old system. I understand that after April 2017 I will pay 1.4% higher NI contributions as I am contrated back in, so what will be the level of deduction/abatement on my years of NI contributions towards the single tier pension? How many more years will I have to contribute to qualify for the full amount?

Having skimmed the white paper, I cant see an actual statement to answer this.

Errata

zagfles wrote: »

I suspect there are incredibly few people who get a full basic pension but no SERPS/S2P, or benefits from a contracted-out plan (which would also be deducted from the flat rate pension), and no pension credit.

ETA: other than perhaps the self-employed

Suspect all you like, the number is 10 million - hardly an incredible few.

Old_Slaphead

peterg1965 wrote: »

Can someone add some clarity, if any exists at this stage?

I am in a Final Salary scheme and by 2017 will have something like 35 years contracted out NI contrbutions towards the old system. I understand that after April 2017 I will pay 1.4% higher NI contributions as I am contrated back in, so what will be the level of deduction/abatement on my years of NI contributions towards the single tier pension? How many more years will I have to contribute to qualify for the full amount?

Having skimmed the white paper, I cant see an actual statement to answer this.

My reading of it was that you'll get the £107 but have the opportunityto clawback the difference over approx 9 years at £4.11 pa.

So by 2026 you'll be back to the £144 at today's values

Old_Slaphead

gadgetmind wrote: »

I *just* managed to understand my own position, and it wasn't easy. No way do I think I could go through it all for someone else! I don't think even the Pensions Service understand it.

Based on your deliberations (and I know the calcs are complicated 'cos I've given up trying to figure them out) could you estimate what someone on an average salary, say £25,000, would accrue in S2P over 12 months (assuming current 'rules')?

gadgetmind

Old_Slaphead wrote: »

could you estimate what someone on an average salary, say £25,000, would accrue in S2P over 12 months (assuming current 'rules')?

Not enough info, sorry!

See the worked examples here.

http://www.scottishlife.co.uk/scotlife/web/site/Adviser/TechnicalCentralArea/Informationguidance/General/TheStateSecondPensionExplainedPage.asp

I cheated and looked at what accruals I was getting between statements. Note that S2P accrued so far is also boosted along with state pension.

This is partly why S2P had to die - no-one has got a sodding clue what they'll get.

gadgetmind

BTW, I guesstimate about £120 a year, so an extra £2.30 a week. Note however that the link to earnings is currently being tapered off to (from memory) £1.70.

You therefore want to use, accrued to date + 5 * ((£2.30 + £1.70) /2) to work out what extra you'll have by 2017.

Of course, as per previous, this then gets boosted by rpi five times.

The above could be wrong, very wrong. A few years ago, I read the blurb, shook my head in disbelief, put what I could into spreadsheet, and moved on. Now I just check each year to see if my S2P is going up as I expected and it's slightly ahead so far.

StevieJ

Old_Slaphead wrote: »

My reading of it was that you'll get the £107 but have the opportunityto clawback the difference over approx 9 years at £4.11 pa.

So by 2026 you'll be back to the £144 at today's values

So if you are not working it is probably not worth paying the voluntary contributions but if you are working it is a bit of a bonus on what previously would have been barren contributions. Is that right?

StevieJ

zagfles wrote: »

This is being phased out, see http://www.pensionsadvisoryservice.org.uk/state-pensions/national-insurance-credits

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

Another cliff edge not only do people who are borne after 5th Oct 1954 have to work a year longer but they lose 1 years NI credit as well. There are going to be some seriously p1ssed off people.

gadgetmind

StevieJ wrote: »

not only do people who are borne after 5th Oct 1954 have to work a year longer.

Don't confuse retirement age and state pension age. Most people retire before state pension kicks in and I'd expect this to be even more common in future.