Contracted Out Penalty

Dimey

The HMRC/NI have told a friend of mine that if you were contracted out for any period, no matter how short during 6/4/1978 to 5/4/1997 you will not receive any graduated pension or Serps for the whole 19 year period.

My friend was contracted out for an 8 year period with company pension from Sep 1985 to Sep 1993 so expected to not receive graduated pension or Serps for 8 years.

However, because this 8 year period was within 1978-1997 the HMRC/NI says my friend gets no graduated pension or Serps (whichever was applicable at the time) for the other 11 years too. Even though he paid full NI & graduated pension/Serps for those 11 years.

Does this sound correct?

If so, should he get a refund of his 11 years of grad/Serp contributions that HMRC accepted while knowing they were not required?

xylophone

Are you saying that your friend is now receiving a state pension and the amount shown on his pension statement for pre 97 Additional State Pension is less than his Contracted Out Deduction?

With regard to graduated pension see here http://www.financialadvice.net/State_Graduated_Retirement_Pension_Scheme/zone/354

Dimey

He's just about to start getting the pension.

HMRC have deducted £23.90 per week from what he would have been entitled to because they say his 8yrs of contracting are increased to 19 years. Due to any period between 1978 and 1997 being rounded up to 19 years. Even if you only contracted out for 1 year, you'd be penalised by the full 19 years.

Sorry I'm not explaining this well.

xylophone

https://forums.moneysavingexpert.com/discussion/4532605

See posts 12 and 23 - does this help at all?

He has had a statement from the Occupational Pension provider? See post 33

Dimey

Thanks. Going to have to get my head round those posts. They look absolutely relevant.

He's already been receiving the occupational pension for the past 6 years. The one he paid in for, for 8yrs 1985-1993.

Why - do you think there should be something on that occupational pension statement showing "contracted out" for the period?

xylophone

Did his occupational pension provider not contact him when he reached 65 to advise him of his pre 88 GMP, post 88 GMP and excess?

See post 33.

Dimey

Thanks Xylophone, I'll go ask.

xylophone

Thanks Xylophone, I'll go ask.

http://www.barnett-waddingham.co.uk/news/2012/07/revaluation-for-early-leavers/ He might find this worth a look.

Dimey

Yes he did get a statement from the occupational pension. He's going to dig it out and check, using your post 33 as guidance.

I've read all the other thread you supplied, thanks. Very informative. It takes some time to get your head into the jargon! I'm going to be in the same position myself in a few years so it's good for me to start learning.

We are going to query back to HMRC/Pension service and if we still don't understand their response I'll post the actual figures on here so you can see the specifics. I'm sure that will be less frustrating than my vague questions. Ha Ha.

Thanks so much for your help.

xylophone

in a few years

After 6 April 2016? This would be worth a look. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

Dimey

xylophone wrote: »

After 6 April 2016? This would be worth a look. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

Thanks xylophone.

I just scanned the document and will read in depth later but am I right in thinking that when the £144 flat rate pension comes in then any contracted out periods will be deducted from the £144?

If so that's so unfair given that we will not be getting anything for 40+ years of graduated, serps and s2p additional contributions we paid.