Will my Final Salary pension suffer a NI shortfall?

aerofly

Hi, after the new State Pension proposals I am a little unsure how it will affect my situation and I wonder if anyone has any answers.
I took early retirement from my job with BT last March aged 57, having spent 39 years with the company. Therefore I will not qualify for a State Pension until sometime after 2020.
However my existing company pension is partly final salary, and the government are saying those workers with final salary pensions will have to pay extra NI to cover the new State Pension increase.
My ultimate question is then, considering I have now stopped paying NI since early retirement, will this preclude me from receiving the new State Pension increase after 2017, ie. will there be a shortfall in my NI contributions in order to qualify?.
Any ideas please?

Andy_L

At the moment active members of most final salary pension schemes are "contracted-out" of SERPS or the 2nd state pension. This means they only receive the basic state pension but they (and, I think, their employer?) pay a reduced rate of NI.This option will end under the new system and thus everyone pays the same rate of NI (except, possibly, the self-employed)
My current understand is that you will only receive the current basic state pension (£107/wk) not the new £144/wk pension. If you wish to get more you would have to start work again & pay NI - there is no option to back date paying NI to get the extra pension

Linton

aerofly wrote: »

Hi, after the new State Pension proposals I am a little unsure how it will affect my situation and I wonder if anyone has any answers.
I took early retirement from my job with BT last March aged 57, having spent 39 years with the company. Therefore I will not qualify for a State Pension until sometime after 2020.
However my existing company pension is partly final salary, and the government are saying those workers with final salary pensions will have to pay extra NI to cover the new State Pension increase.
My ultimate question is then, considering I have now stopped paying NI since early retirement, will this preclude me from receiving the new State Pension increase after 2017, ie. will there be a shortfall in my NI contributions in order to qualify?.
Any ideas please?

Assuming your BT pension is mostly final salary with reduced NI contribution and you have no or minimal SERPS/S2P/ASP entitlement:

Roughly speaking from my understanding of the new scheme, you would expect to get a State Pension somewhere around the current one of £107/week, and so not benefit from the increase. Actually for many people it isnt an increase at all, its more of an incorporation of the current SERPs/S2P/ASP into the basic pension.

In your case, with a FS pension you paid less than full NI during your working life, the idea being that SERPs was effectively included into your Final Salary scheme with a greater contribution and greater benefit than would have otherwise been the case.

I say "roughly" in my first paragraph because the complex rules for SERPs/S2P/ASP changed several times over the past 40 years and so the calculation of the value of the reduced NI contributions whilst contracted out is also very complex, depending on how much you earned and when.

Any full annual NI paid if you work during the 3 years after 2017 will increase the £107 by £144/35.