MSE News: Budget 2012: Single state pension plan confirmed

Simonwilson

@ dunstonh Thanks for your reply,

So £40 I the max deduction regardless of the level of your contracted out pension income, correct?

Also could you please point out where this was suggested as I read a lot of articles and the government papers published on their sites and failed to find this,

Also I've come to know this 140 pounds is in today's money and when introduced it will be £155, I hope they have so sort of formula ready then to have a max deduction rate, like £40 of £140 is 29%, will they (hopefully) also use same sort of formula I calculate on future pensions levels? As I believe in future they might just take off £55 (as max deduction for contracted out) which is higher then at today's level, and !try pull a fast one ,

I'm sorry for the silly questions but I can honestly tell you I have no faith in the government with my money, Ive been a tax payer all my life so far and when ever I have a bit of hope of something to look foward to I get knocked back.

Thank you for your time .

dunstonh

So £40 I the max deduction regardless of the level of your contracted out pension income, correct?

That was the figure that appeared in the media at the time.

Also could you please point out where this was suggested as I read a lot of articles and the government papers published on their sites and failed to find this,

It doesnt appear in the government papers. It was a Q&A on how contracted out could be dealt with fairly and it was suggested that the deduction shouldnt go any lower than the basic state pension (which was virtually £100pw at the time).

The last bits I read on this is that the contracted in/out issue is one that is causing major headaches. There are different proposals being considered (such as extending the eligibility for S2P to the self-employed and job seekers) and how should contracted out through personal pensions be treated compared to contracted out with occupational pensions which has a different level of impact.

There is so much that is unknown and subject to change and quite a lot of it comes from "unnamed sources" that you just cant tell. Best thing to do at this stage is stick to what has been the most common position to take on planning. Assume basic state pension will be paid at your qualifying level and anything above that is bonus.

taktikback

well -I was contracted out for 16 years and have been contracted in for the last 10. By the time this legislation gets passed, that will probably be 14.

So does that mean £140 minus 16 years @ £? per week pension, plus 14 (more recent) years at £? plus a bit. By the sound of it - it'll be about £140 i.e cost neutral -except of course that the government are going to take my extra NI for the 17 years I have before retirement and presumably spend it on someone else.....now that's the dodgy bit...

Simonwilson

Dunstonh

You mentioned above it would be based on a like for like basis, but when I retire on this current system (and if I stayed contracted in) I would be getting a full state pension of about £180, in simple terms does this mean £90 is from basic & £90 is from S2p serps whatever you want to call it? Making it a 50 50 divide? Or does most come from basic pension?

Would this then mean the £140 would be divided into 2, to leave me with £70? And rest from my
Own scheme (whatever the amount)

Is my above formula 50 50 correct?!
Also I know you say the govt. claim it's max is £40 deduction but I dont believe this one bit.

Hope you could put my mind at rest.

dunstonh

You mentioned above it would be based on a like for like basis, but when I retire on this current system (and if I stayed contracted in) I would be getting a full state pension of about £180, in simple terms does this mean £90 is from basic & £90 is from S2p serps whatever you want to call it? Making it a 50 50 divide? Or does most come from basic pension?

The basic state pension (assuming full qualification) is £107.45 pw. If you got £180 it would be £107.45 as basic and the rest as additional state pensions (which can be made up of graduated, SERPS and S2P). So, not 50/50

When you contract out of SERPS/S2P, the govt knows how much your additional state pensions would have paid if you remained contracted in. So, they can reduce any future single state pension by that amount. If you get more or less through your contracted out pension then that is just luck/bad luck just as it is on the current system.

molerat

I spent the majority of my working life contracted out so from my forecast at today's rates I have the full 30 years + £15.25 in S2P / SERPS / Grad. Am I correct in thinking, from what has been suggested so far, that my pension will go up to "£140" + £15.25 but the government can /will claw back a maximum of the difference between the "£140" and the old basic £107.45 (hopefully adjusted). Surely touching that £15.25 would lead to legal challenges as that is paid for.

Simonwilson

Dunstonh

I'm confused by

"So, they can reduce any future single state pension by that amount."

Currently, IF I stayed in I would get £180 (£107 basic, £73 serp/s2p)

So could I take this as....from the future single payment (£140) they would minis £73? Or do you mean they would deduct at same ratio from
That £140? Whatever is the value of the s2p serp from that single payment!

Sorry about the confusion in confused and p**d of to say the least with all this new universal pension.

dunstonh

So could I take this as....from the future single payment (£140) they would minis £73? Or do you mean they would deduct at same ratio from

They wouldnt deduct anything as it is contracted in. The deduction is only if you contracted out.

Simonwilson

Dunstonh

What I ment was would they deduct £73 from the future ) £140 single payment , as that's the amount I would have gained if I stayed in? This is my main concern, thanks

Simonwilson

Dunstonh

You also mentioned it would be a like for like basis, currently people who stay IN can get up to £150 additional state pension , but let's say some one builds up a £100 additional state pension, and added on with basic pension this means around £207 a week, if this person had contracted out(whatever he gets is his luck obviously), and when the flat rate is bought in would the govt look at his "£207" if stayed in (which is nearly 50/50) and then get his £140 and divide that up by 50/50 leaving £70? !Which is my main concern,?

Pls could you also answer my above query also separately,

Your help is being appreciated thanks