FRSP - Not everyone gets £144

Linton

vvvvvvvvvvvvvvvv wrote: »

Its probably explained elsewhere but what happens if you are contracted out now but in 2017 you will be contacted in again,you then work say another 15 years as a "contracted in" employee to retirement age.What do i get for the 15 years contracted back in qualifying years?

The whole concept of a second state pension disappears in 2017 - its all merged into the single NI contribution. The new scheme is a single tier pension.

Tancred

Linton wrote: »

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.

Does this not apply only for those who contracted out for a period prior to 1997? if you contracted out for, say, a 2 year period after 1997 it should not make any difference.

Linton

Tancred wrote: »

Does this not apply only for those who contracted out for a period prior to 1997? if you contracted out for, say, a 2 year period after 1997 it should not make any difference.

I dont know how the ASP calculation works for post 1997.

Certainly for pre-1997 a total ASP entitlement is calculated assuming you contracted-in and then an amount deducted to allow for the S2P/SERPS that went into a private pension. And it is on the entitlement, not the actual pension received that the 2017 calculation is based. In that case what I have suggested works and should be fair.

It may be that contracted-out post 1997 ASP never goes into the original entitlement calculation and in that case it would make sense not to have any deduction for contracted-out.

The nett zero effect of contracting out would seem to be what is intended, but as far as I know the details of the 2017 calculation have not been published so the implementation is unknown.

Tancred

Linton wrote: »

I dont know how the ASP calculation works for post 1997.

Certainly for pre-1997 a total ASP entitlement is calculated assuming you contracted-in and then an amount deducted to allow for the S2P/SERPS that went into a private pension. And it is on the entitlement, not the actual pension received that the 2017 calculation is based. In that case what I have suggested works and should be fair.

It may be that contracted-out post 1997 ASP never goes into the original entitlement calculation and in that case it would make sense not to have any deduction for contracted-out.

The nett zero effect of contracting out would seem to be what is intended, but as far as I know the details of the 2017 calculation have not been published so the implementation is unknown.

It's all as clear as mud. I've asked HMRC for a statement of my NI contributions since the age of 18. If there is anything missing I would want to know why. I had three short periods of contracting out before 1997 but as I then left the (public sector) organisations without any preserved pension benefits I was bought back into the contracted in scheme. I then had another period of being contracted out in 2009-2011 and this time bought some additional pension years and have a small preserved final salary fund. What would the effect of this have on my state pension entitlement?

Linton

From my understanding:

Its the larger of

1) £107 X (NI Years/30) + your ASP/SERPS/S2P for your contracted in period

2) £144 X (NI Years/35) - some deduction based on your contracted out period.

Notes

---

- The NI factor only applies if its less than 1.
- The deduction calculation for (2) hasnt been published
- Your FS pension and whether you bought extra years for that doesnt affect your state pension.
- you also get the income generated from your non-FS contracted out private pension
- theoretically, part of your FS pension is awarded because of your contributions and part arises from the contracted-out payments. That is why the deduction for (2) may include the FS pension contracted out period.

jamesd

If you're contracted out into a personal pension what the forecasts have done is not increase your current and estimated entitlement to additional state pension. No deduction, just not added initially. When contracted in, the additional state pension portion does increase each year and so did the forecast.

Tancred

Linton wrote: »

From my understanding:

Its the larger of

1) £107 X (NI Years/30) + your ASP/SERPS/S2P for your contracted in period

2) £144 X (NI Years/35) - some deduction based on your contracted out period.

Notes

---

- The NI factor only applies if its less than 1.
- The deduction calculation for (2) hasnt been published
- Your FS pension and whether you bought extra years for that doesnt affect your state pension.
- you also get the income generated from your non-FS contracted out private pension
- theoretically, part of your FS pension is awarded because of your contributions and part arises from the contracted-out payments. That is why the deduction for (2) may include the FS pension contracted out period.

As the difference between £107 and £144 is £37, I assume that if you were contracted out for a period of 3 years then you would lose 8.6% of that £37, given that 3 is 8.6% of 35 years of contribution? Is this a logical assumption?

Linton

Tancred wrote: »

As the difference between £107 and £144 is £37, I assume that if you were contracted out for a period of 3 years then you would lose 8.6% of that £37, given that 3 is 8.6% of 35 years of contribution? Is this a logical assumption?

I dont think its logical in that your SERPS/S2P/ASP is a cash sum determined by the total number of years working and has nothing to do with the 30/35 years requirement for a full basic pension. It would seem better to me to base it on the ASP you have actually earned vs the ASP you would have earned had you been contracted in. However at the moment no-one knows.

Tancred

Linton wrote: »

I dont think its logical in that your SERPS/S2P/ASP is a cash sum determined by the total number of years working and has nothing to do with the 30/35 years requirement for a full basic pension. It would seem better to me to base it on the ASP you have actually earned vs the ASP you would have earned had you been contracted in. However at the moment no-one knows.

And this is the worrying thing.

My online state pension statement gives me a current value of c.£96 for 27 years of contributions since age 18 and £23.35 of S2P earned so far - I've had a few years of being contracted out. Assuming the forecast is accurate (which it may not be) how much S2P would I accumulate, in today's money, by 2017? And would this be the amount I get instead of the £144, regardless of the 35 years qualifying period under the new system?

gadgetmind

Tancred wrote: »

how much S2P would I accumulate, in today's money, by 2017?

My damp finger suggests about a tenner extra, possibly more.

And would this be the amount I get instead of the £144, regardless of the 35 years qualifying period under the new system?

As per recent emails, you'll get whichever is largest as a foundation amount. If this is less than £144 (I think you will be just under) then each extra year after 2017 will give you another 1/35th of £144 (just over 4 quid) a week more until you get to £144.