FRSP - Not everyone gets £144

bigfreddiel

If you're due to get £107 state penson then you won't be due to get £144 under the proposed flat rate scheme should you be reaching state pension age after April 2017.

This was stated by the pensions minister in the very last few seconds of Moneybox live on Radio 4 last Wednesday.

To quote the minister "we won't be paying £144 to people who have contracted out" and a sp of £107 implies that you have contracted out.

This isn't exactly how the news media is describing the situation.

I strongly suggest you listen to the last few seconds of the program on iPlayer or downoad the podcastto hear for yourself.

cheers

fj

Linton

This is as described elsewhere in this forum by SnowMan. The income from your contracted out personal pension should at least take you back up to £144. So you would be in the same position as someone who had been contracted in.

bigfreddiel

That's correct, if you've contracted out you've made your own occupational/private pension provision to pay the difference.

How many people know if they've contracted out tho'? I'm sure this will be a surprise to a lot of people come 2017 (or whenever the FRSP starts) when they receive their first payment.

cheers

fj

DavidLaGuardia

bigfreddiel wrote: »

T
How many people know if they've contracted out tho'? I'm sure this will be a surprise to a lot of people come 2017 (or whenever the FRSP starts) when they receive their first payment.

cheers

fj

They are going to have protected rights via a personal pension cotract (one would assume they know about that) or via the contracting out of an occupational scheme. The sure way to estimate pension rights before retirement is to go on line https://secure.thepensionservice.gov.uk/statepensionforecast/default.aspx or submit a BR19 form http://www.nidirect.gov.uk/state-pension-statement-br19.pdf for a forecast once the changes have been established.

jamesd

bigfreddiel wrote: »

How many people know if they've contracted out tho'?

Easy to start: around 80% of people have been contracted out at some point, so start by guessing that you've been contracted out for a while.

Then the HMRC Contracted Out Pensions Helpline can tell you each year you've been contracted out and which place was getting any contracted out rebates.

It'll still surprise quite a lot of people who haven't taken an interest in their retirement planning. Hopefully there will be clear notices sent out at some point to tell people about their current entitlements and contracted out periods. Sent to the whole population at the addresses HMRC and DWP have them, say, with cross-checks and enquiry letters used if there's a data inconsistency between the agencies.

chris_m

bigfreddiel wrote: »

How many people know if they've contracted out tho'? I'm sure this will be a surprise to a lot of people come 2017 (or whenever the FRSP starts) when they receive their first payment.

It might show on their payslips. I know it did on mine against the NI deduction figure, until we were contracted back in a few years ago.

gadgetmind

bigfreddiel wrote: »

This isn't exactly how the news media is describing the situation.

Ignore the news media and read the white paper, or at least the executive summary.

http://www.dwp.gov.uk/policy/pensions-reform/state-pension/

http://www.dwp.gov.uk/docs/single-tier-pension-executive-summary.pdf

All you'll get from the media is woffle and confusion, so go straight to the facts and ignore the editorial.

jamesd

bigfreddiel wrote: »

If you're due to get £107 state penson then you won't be due to get £144 under the proposed flat rate scheme should you be reaching state pension age after April 2017.

This was stated by the pensions minister in the very last few seconds of Moneybox live on Radio 4 last Wednesday.

To quote the minister "we won't be paying £144 to people who have contracted out" and a sp of £107 implies that you have contracted out.

It depends.

If you have been contracted out you'll have a deduction that'll increase the number of years of contributions it takes you to get to £144 under the new system.

If you are close to retirement in 2017 then you won't have time to get those years, so you won't get £144 from the state pension.

If you are not so close to retirement and have some mixture of contracted in and contracted out you might have time to get to the full £144 state pension.

In both cases you'd also get whatever the private pension paid, whether that's a personal pension or some private of government final salary or similar one.

bilbo51

gadgetmind wrote: »

Ignore the news media and read the white paper, or at least the executive summary...

All you'll get from the media is woffle and confusion, so go straight to the facts and ignore the editorial.

Of course, the thing that is missing from the white paper is exactly how the "rebate derived amount" is to be calculated... leading to uncertainty if not confusion.

SnowMan

bilbo51 wrote: »

Of course, the thing that is missing from the white paper is exactly how the "rebate derived amount" is to be calculated... leading to uncertainty if not confusion.

The draft pensions bill indicates 'the rebate derived amount' is equal to the 'contracted out deduction' shown on many pensions statements see this post.

In many cases the new scheme guarantee is a long way from biting and so the exact calculation of the rebate derived amount won't matter. Of course in many cases the precise calculation does matter.

gadgetmind

I guess contracted out deduction is only for those contracting out to a final salary scheme? I contracted out to a protected rights pot and don't see any such figure.

However, I was contracted in for long enough (maybe a decade?) for my SP+S2P to be >£144 so am protected by the "no worse than now" rule.