The State Pension Forecast

Sterlingtimes

[1] Does the State Pension Forecast accurately reflect all NI contributions made by a person during his/her working life (up to the date of the forecast) and all NI contributions not made, all periods of contracting-in and all periods of contracting out?

[2] Is it a calculation upon which we can individually depend? The assumptions behind the calculations are not provided. It is uncheckable by the individual.

[3] Does it continue to accrue additional amounts (£1.70 per week) every year until end March 2017?

[4] Is the full amount of the forecast subject to indexation until retirement day?

dunstonh

1 - yes (assuming data is correct - most are)
2 - yes (assuming data is correct - most are)
3 - it would be logical to assume the forecast would take current position into account until such time the legislation is passed and software updated
4 - yes - The figures are normally presented in todays terms. However, you will get whatever they would be increased to over the years.

Sterlingtimes

Thank you, dunstonh.

Your answers are reassuring.

noh

I checked mine today online and noted it took into account all NI contributions up until April 2012. Therefore it is up to date only as far as the start of the current financial year.

Old_Slaphead

If you were contracted out I would treat the amount shown on additional benefits with caution.

The statement says "The amount of ASP could be lower than the estimate if you were contracted out of additional State Pension anytime between 6/4/78 and 5/4/97".

benny5

Old_Slaphead wrote: »

If you were contracted out I would treat the amount shown on additional benefits with caution.
The statement says "The amount of ASP could be lower than the estimate if you were contracted out of additional State Pension anytime between 6/4/78 and 5/4/97".

Sorry for jumping in on this thread but my pension forecast carries this qualification and with less than two years to retirement it would be nice to have some degree of confidence in the ‘Additional State Pension’ projection.

My working history looks something like this;
Between 1969-75. I have a Graduated Pension value.
Between 1978-88. I contributed to SERPS.
Between 1989-01. Opted out of serps into a Personal Pension plan.
Since 2002 I have been back into SERPS/SP2.

Given that the Pension Services are in possession of my contribution history, also, as my retirement will be prior to the proposed flat-rate state pension, what can impact on these figures?

Thanks,
Benny.

Perelandra

Sterlingtimes wrote: »

[3] Does it continue to accrue additional amounts (£1.70 per week) every year until end March 2017?

I don't believe it does this, no. I think it only includes the S2P amounts for the years that have already happened.

xylophone

as my retirement will be prior to the proposed flat-rate state pension,

Then you fall to be treated under current rules.

You will receive a small amount of graduated pension and the basic state pension to which your contributions entitle you (looks like full - this will be £110.15 from 6 April) - it uprates with the triple link.

With regard to the ASP, a calculation will be done to calculate your entitlement less a Contracted Out Deduction for 89-01.

The ASP increases before it comes into payment with average earnings and in payment with CPI.

Presumably you had an arrangement in place for the contracted out deductions? (Formerly Protected Rights but see http://www.censusfinancial.co.uk/News/The-end-of-Protected-Rights)

http://www.mypersonalfinances.co.uk/SC_Docs/doclibrary/Guide_to_state_pension.pdf have a look at page 50.

benny5

xylophone wrote: »

You will receive a small amount of graduated pension and the basic state pension to which your contributions entitle you (looks like full - this will be £110.15 from 6 April) - it uprates with the triple link.

This part seems straightforward.

xylophone wrote: »

With regard to the ASP, a calculation will be done to calculate your entitlement less a Contracted Out Deduction for 89-01.

This is the bit I'm trying to get my head around.
1) The documentation refers to ‘Contracted-out deductions earned between 6 April 1978 to 5 April 1997’. My 'out period' was '89-'01. (13 years) or (8 years) to 1997.

2) Am I wrong in assuming the ASP figures on my forecast already recognises the 'contracted out' period?

xylophone wrote: »

Presumably you had an arrangement in place for the contracted out deductions? (Formerly Protected Rights but see http://www.censusfinancial.co.uk/News/The-end-of-Protected-Rights)

Yes. That was through HSBC.

Thanks,

Benny.

.

SeekTruth

benny5 wrote: »

1) The documentation refers to ‘Contracted-out deductions earned between 6 April 1978 to 5 April 1997’. My 'out period' was '89-'01. (13 years) or (8 years) to 1997.

2) Am I wrong in assuming the ASP figures on my forecast already recognises the 'contracted out' period?

In effect treat your 89-01 contracted out period as two separate periods, the first from 89-97 and the second from 97-01.

You are actually credited with SERPS (or ASP if you prefer to call it that) for your contracted out service from 89-97. However, to counteract the benefit you derived from paying reduced NI contributions a Contracted Out Deduction (COD) will be deducted from your State Pension.

At April 97 the system simplified (until S2P in 2002) and for contracted out service you no longer accrued any SERPS and so there is no need for COD for this element of service.

I think on your State Pension Forecast the phrase 'Payable Additional Pension' is used (at least the first time Additional Pension is mentioned). This means the Additional Pension after deduction of COD. Going back a few years the Pension Forecast did actually give the total Additional Pension figure and explicitly deducted the COD from this.

benny5

SeekTruth wrote: »

In effect treat your 89-01 contracted out period as two separate periods, the first from 89-97 and the second from 97-01.

You are actually credited with SERPS (or ASP if you prefer to call it that) for your contracted out service from 89-97. However, to counteract the benefit you derived from paying reduced NI contributions a Contracted Out Deduction (COD) will be deducted from your State Pension.

At April 97 the system simplified (until S2P in 2002) and for contracted out service you no longer accrued any SERPS and so there is no need for COD for this element of service.

I think on your State Pension Forecast the phrase 'Payable Additional Pension' is used (at least the first time Additional Pension is mentioned). This means the Additional Pension after deduction of COD. Going back a few years the Pension Forecast did actually give the total Additional Pension figure and explicitly deducted the COD from this.

Thank you SeekTruth,

At last I have a better understanding of the significance and impacts these opt out periods have on forecasts.

I have unearthed some old forecasts and yes the earlier projections, up to late 2006, did provide a breakdown of the constituent elements of the ASP. (e.g. 2006: £84, less contracted out deduction £21, total; £63).

By August 2012 the format had changed and yes the term ‘Payable Additional Pension’ had appeared with a single value marginally greater than the net figure above.

The very latest forecast has been simplified even further with just a single paragraph summarising the total additional State Pension and Graduated Retirement Benefit accrued from NI contributions.

So, all in all, I don’t anticipate any major deviations from the latest projection.

Once again thank you and regards.
Benny.