Contracted Out & Flat Rate Pension

solanum55

I am puzzled by all this news surrounding the proposed flat rate pension.

I will reach state pension age in 2018 with a NI record of 31 years contracted out and around 8 years contracted in.

I understand that the new proposed flat rate pension will be reduced for people who have been contracted out. Although the calculations are complex, my initial assessment is that the new Flat Rate Pension, less my reduction will only give a figure of around £55.
Does that mean that if I was 65 now i would retire on £107 state pension but in 2018 i will only get £55 a week state pension?

xylophone

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

wakeupalarm

You are only contracted out of Serps/S2P so you will have over 35 years contributions required for the new capped rate pension.

You will receive £144 capped rate state pension plus you will get to keep your contracted out pension pot.

In contrast virtually everyone born after 1966 with a similar record to yours will end up with a lower state pension than under the current system.

http://www.thisismoney.co.uk/money/pensions/article-2360205/Flat-rate-state-pension-check-winner-loser-2016.html

zagfles

wakeupalarm wrote: »

You are only contracted out of Serps/S2P so you will have over 35 years contributions required for the new capped rate pension.

You will receive £144 capped rate state pension plus you will get to keep your contracted out pension pot.

This isn't right - a deduction will be made for contracting out (the "rebate derived amount"), and as the OP says this would likely reduce the amount payable under the new scheme calculation massively.

BUT - a calculation is done under the old rules at switchover and you get whichever is the higher - so under the old rules the OP would get the current basic pension ie about £110 plus any SERPS. Which will be higher than the calculation under the new rules.

Then the last couple of years contributions (if working) will add about £4.11pa. So might get around £130 or so, unlikely to get the full £144.

BobQ

solanum55 wrote: »

I am puzzled by all this news surrounding the proposed flat rate pension.

I will reach state pension age in 2018 with a NI record of 31 years contracted out and around 8 years contracted in.

I understand that the new proposed flat rate pension will be reduced for people who have been contracted out. Although the calculations are complex, my initial assessment is that the new Flat Rate Pension, less my reduction will only give a figure of around £55.
Does that mean that if I was 65 now i would retire on £107 state pension but in 2018 i will only get £55 a week state pension?

As a minimum you will get as much as you would have got under the existing rules. After 2016 (if the plans go ahead ) there will be no contracting out. For the last two years of your work you will pay the full NI contributions. Hpwever, you can earn additional pension from the time the scheme comes in which will add to your pension at a rate of £4.11 per year.

In 2018 you will get more than £107.

wakeupalarm

Zagfiles, your right, I was thinking of people with at least 10 years after the changes who will have the opportunity to make up any reduced amount to £144. Someone like the OP with only 2 years after the changes are introduced will still be better off under the new rules than they would have been under the old rules though.