MSE News: Government outlines flat-rate state pension

cootuk

There's a big shock for contracted out employees - the increase may only be a headline 1.4% to contract back in, but that's really 13% increase in NI as it's 10.6% to 12%.
For average wages that could be £20-30pm extra taken, plus maybe a deficit in qualifying years for not being contacted in to serps/s2p

Paul_Herring

cootuk wrote: »

There's a big shock for contracted out employees - the increase may only be a headline 1.4% to contract back in, but that's really 13% increase in NI as it's 10.6% to 12%.

Hyperbole!

It's an increase of 1.4% of gross wage, a 13% increase of the amount currently taken. They're the same number.

In fact, the same amount (12%) will be taken from payslips - the 1.4% is actually rebated into a pension fund some time later - the 'increase' will be experienced as a lack of rebates into said fund.

You don't write for a newspaper do you?

molerat

gadgetmind wrote: »

It's possible to earn enough to gain a qualifying year but to still pay no NI. Getting a pension statement is the only way to be sure.

However, even if you have exactly 30 years, you'll get £144 * (30/35) = £123 anyway.

If you currently have S2P that takes you above this, then you'll get the higher amount.

SP statements as of this morning are still only showing "30 years", something that DWP need to get sorted sharpish.

jamesmorgan

cootuk wrote: »

There's a big shock for contracted out employees - the increase may only be a headline 1.4% to contract back in, but that's really 13% increase in NI as it's 10.6% to 12%.
For average wages that could be £20-30pm extra taken, plus maybe a deficit in qualifying years for not being contacted in to serps/s2p

Actually the bigger issue is the increase in employer's NI by 3.4%. Whilst it may be convenient to think of this as an employer issue, it is simply tax that the employer is paying on your behalf. The rationale was that the rebate was there to fund SERPS equivalent benefits within the employees pension. As this rebate disappears so will these pension related benefits. The simplest way to think of it is that employer contributions into contracted out pensions will need to reduce by 3.4% (of employee salary). Each scheme is different, but benefits will need to be reduced to reflect this.

twentyfour11

My pension forecast is about £107.50 pw and I am 65 on 30th May 2016. in 2017 the new system comes in and I would have got £144 pw so I am about £36.50 pw worse off because I am a year to old.

Would I be able to defer my pension for one year to get the higher flat rate?

Thanks

gadgetmind

twentyfour11 wrote: »

Would I be able to defer my pension for one year to get the higher flat rate?

You can defer but won't move onto the new system as a result.

However, you are able to claim pension two years before many on the new system, so that extra £11,128 in pension will cover almost six years of the extra £1898 per year that they'll get so they won't start winning until age 73.

Swings and roundabouts.

p00hsticks

twentyfour11 wrote: »

Would I be able to defer my pension for one year to get the higher flat rate?

I'm afraid not.

jamesmorgan

twentyfour11 wrote: »

My pension forecast is about £107.50 pw and I am 65 on 30th May 2016. in 2017 the new system comes in and I would have got £144 pw so I am about £36.50 pw worse off because I am a year to old.

Would I be able to defer my pension for one year to get the higher flat rate?

Thanks

No, deferral will not change what scheme you are on. However, if your only pension is the basic state pension then you would currently be eligible for pension credits (to bring your pension up to around £144).

If you are eligible for SERPS/S2P then this would boost the basic state pension you will be getting. If you contracted out of SERPS/S2P then you should have contracted out benefits that provide a similar boost.

The main group of possible losers are people who are only eligible for the basic state pension, but have high levels of savings so won't be eligible for pension credits.

twentyfour11

I am self employed.....so I guess I am a loser out of this system.

gadgetmind

twentyfour11 wrote: »

I am self employed.....so I guess I am a loser out of this system.

As you're retiring before it's implemented, it's entirely neutral and you'll be getting exactly what you've been expecting all along.

I wouldn't be at all surprising if NI for the self employed didn't go up in the future to cover it earning a much bigger pension.

However. it does seem to be an anomaly that some who've paid at the lower rate of NI (lower than employed people and possibly self employed in the future) may get the full flat rate. As this will be on top of whatever provision they will have provided for themselves with what they've saved on NI over the years, they are certainly winners.