Confused about state-pension and all the changes

Linton

elantan wrote: »

James i read what you have written and think i understand it .. can i just check my personal circumstances with you if you dont mind.

i have paid NI for all the years i have worked ( currently 24 as i am 40 years old) at no time did i contract out ( think i have that right) when i have had my forecast through ( i get one every year from DWP) it shows basic plus additional state pension.

if i understand you correctly, i will no longer get any more additional state pension, but i havnt lost out on the additional state pension i currently have? so i will get £144 ( at 2016 rate) plus the amount i have accrued that is currently my second state pension per week?

is this right?

my husband who was contracted out will get a basic state pension plus a very small accrued second pension ( if i remember right everyone had to opt back in a few years ago) his second state pension is tiny compared to mine ( less that £10 a week) so he will get the £144 plus the tiny bit ( approx £10) a week.

is this right ?

No I am afraid your understanding is wrong. When the new scheme starts your pension accrued so far will be calculated under the new and old rules, so £144 (or pro rata for your NI years) + nothing versus £109 (again pro rata) +S2P. You will be awarded whichever is the higher as the starting point for the new scheme. It will then be increased for each NI year up to a total of 35.

It gets a lot more complicated if you were contracted out for any time. The old calculation is on the basis of the S2P you would have got contracted in minus something to allow for your private replacement for S2P which of course you wont lose. However the basic principle is the same - the S2P earned so far is used to fill the gap between £109 and £144. If there is anything left over you keep it.

elantan

thanks Linton ... i am more confused than ever now lol ...

will try and work that out (and no doubt get it wrong) and land up having to ask more questions

is the £144 plus NI ( pro rata) for the years from 2016 till i retire or from the day i started working?

is the £109 plus NI for the years i have worked until 2016?

can you see why i am confused or am i complicating things way way too much ?

elantan

right i have got my pension forecasts here

in 2011 my estimated pension was £95.07 with an estimated pension at retirement of £160.72 made up of

2011

basic pension £74.91
additional state pension £20.16

total £95.07


pension estimated at 2039

basic state pension £102.15
additional state pension £58.57

total £160.72

in 2012 i recieved the state pension forecast stating
£104.38 ( they did not give me an estimated one for when i retire)


23 qualifying years worth £82.38 expected to go up at a rate of £3.58 a year till i reach 30 qualifying years

with £22 a week additional benefit estimated to go up by £1.70 additional benefit a week every year

the 2011 and 2012 pension forecasts were totally different


i think i have worked it out that in 2016 my estimated pension would be £136.10 so i would be put on the £144 a week pension,

i wonder if pensions are designed to be so complicated that people just accept what they are given

redbuzzard

kidmugsy wrote: »

Presumably the changes can't be treated as definitive until the relevant Bill is passed - I assume that that will be the Finance Bill. So we should know by, what, July?

Agreed - I shall just wait for the forecasts to catch up. I have 39 years, and my current forecast is c £118 pw, based on a bit of S2P and a fair bit of contracting out. no idea how that will pan out, but I don't think I can't do much about it so I'll worry about something else. I'll be interested to hear what, if anything, happens to the deferral/suspension increments.

The draft legislation has just been updated, if anybody has troublesome insomnia -

https://www.gov.uk/government/publications/draft-pensions-bill

Linton

elantan wrote: »

thanks Linton ... i am more confused than ever now lol ...

will try and work that out (and no doubt get it wrong) and land up having to ask more questions

is the £144 plus NI ( pro rata) for the years from 2016 till i retire or from the day i started working?

is the £109 plus NI for the years i have worked until 2016?

can you see why i am confused or am i complicating things way way too much ?

It is somewhat complicated, I will try again:

The slate is wiped clean in April 2016 and the pension you have accrued to date is set up to be the larger of what you have accrued up till that date under the old existing rules including S2P and what you would have accrued had the new rules been in place - £144 * NI Years/35. From April 2016, S2P will cease to exist. Your pension will then be increased by £144/35 for each year you pay NI until 35 years are reached.

So say you have been working for 20 years in April 2016. You will have accrued £109* 20/30 = £72.7 basic pension under the old rules and £144 * 20/35 = £82.3 pension under the new rules. Now assume you have also accrued £15 S2P. So your accrued pension in April 2016 is set as £72.7+£15 = £87.7, this being larger than the £82.3 from the new rules. Your final pension assuming you work the 15 years to get 35 years NI will be £87.7 + £144*15/35 = £149.4.

Edit: this is for contracted-in S2P. It gets more complicated for contracted-out.

Edit 2: This case is wrong. Accrual ceases after you reach £144 not when you reach 35 years. You only get to keep the extra if you have already accrued more than £144 by April 2016.

elantan

Ahhhh Linton yes i understand that way completely thanks very much ... i think i worked it out that i will be roughly £14.58 a week more than the £144 ... which isnt going to be great considering i have paid the s2p

but thanks i now understand how i works

jamesd

Linton, are you sure it continues to increase above £144 if you work more years, until you have 35 worked?

Linton

jamesd wrote: »

Linton, are you sure it continues to increase above £144 if you work more years, until you have 35 worked?

Apologies - you are right, I have rechecked with the official documentation. Accrual ceases when you reach £144 rather than 35 years. I will edit my post. This also incidentally has the effect that you could gain from working more than 35 years if this is required to bring your pension back up to £144 after the deductions made if you had spent most of your life contracted out.

If in April 2016 you have already accrued more than £144 then you keep it: you dont lose anything you have already accrued.