Contracting Out and New State Pension

Linton

In your case as both contracted-in and COD will be fairly high, FA will be £107+contracted-in as this should exceed £144. So your final State Pension will be £107+contracted-in as you will not gain any more after 2017.

tony4147

So am I correct that I will get £107 + 26 years contracted in (if I work until 67 and starting age was 19) + what ever my contracted out money is worth when I'm 67 (at present £33k)?

Therefore £107 + (26/35)*37 = £134.5 + contracted out pension

BTW, I am trying to get a state pension forcast

Linton

tony4147 wrote: »

So am I correct that I will get £107 + 26 years contracted in (if I work until 67 and starting age was 19) + what ever my contracted out money is worth when I'm 67 (at present £33k)?

Therefore £107 + (26/35)*37 = £134.5 + contracted out pension

BTW, I am trying to get a state pension forcast

No. Your contracted-in pension has got nothing directly to do with number of years employed nor with the £37 difference between the old and new basic pension. It just increases the longer you work depending on your income at that time. So its simply an amount which you will have accrued upto 2017. Beyond 2017 no more can be accrued. There are no years based adjustment factors.

I am guessing that your contracted-in pension will be more than £37 but we wont know until you get your Forecast.

tony4147

Sorry about this, how do you get the £37 on top of the £107?

bigchipper

I will have around 41 year NI contributions in 2017 mostly contracted out.

Seems unfair that The Foundation Amount calculation deducts an amount for the contracted out period where contributions are deemed insufficient, but no credit is given or offset made for the period where excess years' contributions have been made.

Linton

bigchipper wrote: »

I will have around 41 year NI contributions in 2017 mostly contracted out.

Seems unfair that The Foundation Amount calculation deducts an amount for the contracted out period where contributions are deemed insufficient, but no credit is given or offset made for the period where excess years' contributions have been made.

I dont see how it is unfair. The Foundation Amount which is basically an initial valuation of your State Pension at 2017 cannot be less than what it would have been under the old (current) system. So you wont lose any accrued benefits. However some people will gain more. But these will tend to be people who would have benefited from Pension Credits when they retired.

Linton

tony4147 wrote: »

Sorry about this, how do you get the £37 on top of the £107?

The new system has a basic pension of £144. The current system's equivalent is £107. My guess of your contracted-in being more than £37 was based on mine which has fewer years.

bigchipper

Linton wrote: »

your State Pension at 2017 cannot be less than what it would have been under the old (current) system. So you wont lose any accrued benefits.

Just seems odd to me that there was a deduction for times when you have not been paying enough but no account is taken if you had paid more than required.

Its a moot point anyway if, as you say, the SP is guaranteed to be at least as much as it was calculated to be in 2017 under the old rules. Incidentally, would the Foundation Amount be index linked in some way as, although my SPA is not until 2024, I intend to stop working in 2018 and would not purchase much further pension under the new arrangements?

Linton

bigchipper wrote: »

Just seems odd to me that there was a deduction for times when you have not been paying enough but no account is taken if you had paid more than required.

Its a moot point anyway if, as you say, the SP is guaranteed to be at least as much as it was calculated to be in 2017 under the old rules. Incidentally, would the Foundation Amount be index linked in some way as, although my SPA is not until 2024, I intend to stop working in 2018 and would not purchase much further pension under the new arrangements?

The pensions are index linked with a triple guarantee of best of inflation / wages / 2.5%. The £144 and £107 numbers are the current ones, its much easier to talk and give examples around those than to add in the complications of index-linking.

tony4147

To be honest I don't fully understand it all, it's not made easy.
Would there be any benefit or negative when I'm 55 in pulling 25% lump sum from my 22 years of contracted out contributions that are now in a private pension.