Question on new pension rates in 2017

wideshoes

My husband is due to retire in May 2014, so of course would not qualify for the new pension rate that is due in 2017.
If he elected to remain in work until May 2017 (another 3 years) would he be entitled to the full £144. He has worked consistently since leaving school at 15 with just 3 months of unemployment during that time.
Also where is the best possible place to get advice....besides here!

Torry_Quine

As far as I'm aware the pension you get is determined by the date you reach state pension age even if you defer it so no he wouldn't get it. He would however stop paying NI when he reaches state pension age.

Jack_Griffin

Hi wideshoes,

The previous poster is wrong.

First step is check what he is entitled to, go here https://www.gov.uk/state-pension-statement and follow the steps to get a pension statement, this will tell you what he should get as it stands.

It is likely to be more than £144 already given his work record, what he gets depends on the SERPS entitlement he has built up, in which case he gets the higher amount anyway.

The second thing is what happens if you defer taking the pension, that information is here. https://www.gov.uk/deferring-state-pension/what-you-may-get

I'm not sure about SERPS entitlement, I assume this continues to build up if you stay at work and pay NI, though after 2017 no one will be able to build up any more SERPS. Can anyone else confirm that?

PS Above post contains a few incorrect/inaccurate statements which other posters correct below, you live & learn..but advice to get a pension statement is good & the main point of my post.

zagfles

wideshoes wrote: »

My husband is due to retire in May 2014, so of course would not qualify for the new pension rate that is due in 2017.
If he elected to remain in work until May 2017 (another 3 years) would he be entitled to the full £144. He has worked consistently since leaving school at 15 with just 3 months of unemployment during that time.
Also where is the best possible place to get advice....besides here!

It's got nothing to do with when he retires, it's to do with when he reaches state pension age. If it's before the new scheme comes in, then he'll be under the old rules. See the white paper http://www.dwp.gov.uk/docs/single-tier-pension.pdf

But why do you think he'll be better off under the new scheme? How much would he get under the current scheme? If he's worked all his life then he'll surely have a reasonable amount in SERPS/S2P or from a contracted out scheme?

zagfles

Jack_Griffin wrote: »

Hi wideshoes,

The previous poster is wrong.

How exactly was the PP wrong?

jamesd

Wideshoes, whether someone gets the new flat rate cut to the state pensions for employees depends on when they reach state pension age, not when they take the state pension.

Your husband is safe from the cuts.

Those who will be covered by the new system who've already worked until almost retirement age will also get transitional protection that means they only lose out a little bit over time due to different inflation increases used for the amount by which the current system payout exceeds the flat rate payout.

The new system is a large cut to the state pensions for those who like your husband work for a full working life after the new system comes in, because the amount people are entitled to for each year worked grows by less and is capped at only 35 years, while under the current system the earnings-related (SERPS and now S2P) portions increase for a whole working life, not stopping after only 30 or 35 years. The current rules can easily produce state pensions in the £180-200 and up to £250 a week range, depending on how much someone has been earning, well above the £144 level.

For those who haven't worked much or who were self-employed the new system is likely to result in an increase in state pension payout - the new system takes the money from the ones who worked to pay it to those who didn't. No cuts for this group, in general an increase instead, a larger one for those who are in a couple both of whom aren't entitled to much under current rules.

He should ask for a state pension statement. That'll tell him what he's entitled to for both the Basic State Pension and the Additional State Pension under the current rules and he won't get any less than that.

The Additional State Pension portion will continue to increase while he works until he reaches his state pension age. Once he's reached state pension age continuing to work won't produce an increase in the state pensions he's entitled to because he won't be paying NI any more.

If he wants an increase above what he's entitled to in May 2014 he has the option of deferring taking the state pension. Under current rules that increases by 10.4% for each full year it's not claimed, or pro-rated for shorter periods. It doesn't make any difference whether he's working or not working when he's deferring, all that matters is that he hasn't claimed the state pension.

It's also possible to start taking the state pension then stop and defer for a while. This additional bit of deferring can only be done once per lifetime.

For a man in normal good health it's generally a good idea to defer for between one and three years if money allows that. For a woman, between two and five years, because women usually live longer, so get the higher payouts for longer.

Jack_Griffin wrote: »

I'm not sure about SERPS entitlement, I assume this builds up if you continue to work and pay tax. Can anyone else comfirm that?

SERPS was abolished and replaced by S2P, which accumulates at a higher rate for low earners and lower rate for everyone else. SERPS and S2P continue to produce increasing the amount of Additional State Pension for each year that is worked, up to a full working life, until state pension age is reached. The increases stop once state pension age is reached because from that age there is no more NI taken from the employee. Whether income tax is still being paid makes no difference.

Jack_Griffin

So does the deferment 10% p.a. increase work even if you don't pay NI?

I did not realise you did not pay NI after retirement age, I thought it was not solely for pensions.

The rules are a bit Byzantine.

CLAPTON

Jack_Griffin wrote: »

So does the deferment 10% p.a. increase work even if you don't pay NI?

I did not realise you did not pay NI after retirement age, I thought it was not solely for pensions.

The rules are a bit Byzantine.

Yes of course it does, as the 10% only works once you have reached state pension age and once there you don't pay NI whether you work or not.

NI is basically just a tax although it does qualify you for certain benefits but it isn't 'only' for pensions.

In any event the rules say you don't pay NI once you reach state pension age.

jaffa_cake__

No, he would get the rate he was entitled to once he reached state pension age, bit don't forget state pension gets uprated every April.

jamesd

Yes, the deferral still works fine whenever you do it, regardless of whether you're working, paying NI or paying tax or doing some or none of those things. All that matters is are you taking the state pension or not. If not, it's deferred and increasing.

jaffa_cake__

Also, once the reform takes place if you defer your State Pension you will not have the option of a lump sum payment whenever you choose to claim your pension.