contracted out query

gericom10

how do I tell if my company pension is contracted out? as I have a forecast from the The Pension Service that gives me the following figures

Pension breakdown 05/04/2006 09/11/2024 estimated

basic pension £61.98 £87.30
Payable additional pension £23.04 £61.05

toatal weekly State Pension £85.02 £148.35


If I am not contracted out, (and I cannot find anywhere that says I am,) as I intend to retire at 52 how much will I have to keep giving toward the State Pension each year to get the higher figure when I reach 65.

BTW the Pension forecast says that I have 31 qualifying years so earned 71% so far.

Seems £148.35 a week looks really good to me, especially alongside my company pension and private one.

dunstonh

You wont be able to retire using pensions at age 52. By 2024, the minimum start date for personal pensions will be age 55. The state retirement age will be 66 in 2024 as well.

SERPS/S2P is shown under additional pension. So you have some built up.

gericom10

I intend to stop work at 52, and travel, and will exercise my right to 25% lump sum in 2009 to finance it.

as I don't intend working again, I just wanted to know, can I still keep up with the NI contributions to get the higher amount when I get to 65

How much NI contributions do I have to pay annually toward ensuring that I get the higher figure?

jamesd

At present the forecast says that you are entitled to £61.98 based on the current rules, not the 30 year rule that is to be introduced. If entitled to the full pension you will get £87.30 instead. For the full basic state pension, you'd need voluntary contributions of a few pounds a week if you don't already have 30 years of contributions. Since you do, this is not relevant and you won’t need to make any more unless the planned change doesn't happen.

At present the forecast says that your payable additional pension is £23.04 based on contributions made so far. If you continued working and earning what you said you earn you would get £61.05 instead. Since you won't be doing that you must ignore the 61.05 figure. You can't make contributions to this fund except by working.

If you were to stop work at this moment, based on the full years recorded so far, probably not including contributions made in 2006, you will get 87.30 + 23.04 = 110.34 per week, 5737 per year.

To get the difference between 61.05 and 23.04 to match the forecast additional state pension you will need a personal pension paying 38.01 a week, 1977 a year. Using 5% as an annuity rate that would take a pension fund value of 40,000. So, you would need to ensure that you have at least that much in a pension fund when the state pension commences, then buy an annuity with it. Being cautions and assuming ten years of growth at 5% that would take a fund value of 25,000 when you retire early at 52.

To confirm that you're not currently opted out in a work scheme, look for the text "Our records show that you are not currently a member of a contracted-out pension scheme. This forecast has been calculated on the assumption that you do not join one in the future". If this text is present, your work scheme is not contracted out.