National Insurance contribution on pension

GP147

I have just retired at the age of 60, I don't intend to work again (maybe a small part time job). I have worked full time for 44 years so I see no problems with my contribution towards my state pension. If I do not work again will my pension have NIC deducted from it? If so at what rate? Help please?!!!

mania112

Only tax is payable on pension income (if applicable) - no NICs in any case.

GP147

Thank you, makes a difference not paying NIC

SeekTruth

GP147 wrote: »

... I have worked full time for 44 years so I see no problems with my contribution towards my state pension....

This is not necessarily true. Assuming you reach State Pension Age after April 2016 then a initial entitlement (Foundation Amount) will be calculated on transition to Single Tier Pension. The Foundation Amount is actually the higher of two different calculations, one based on the current pension system and one based on the new Single Tier system. If you were ever Contracted Out then a Rebate Derived Amount will be subtracted from the calculation on the Single Tier basis. This could mean that you will need extra NI years after 2016 to reach the full Single Tier pension.

xylophone

While NI is not payable on pension income, it is on employment income if you have not reached state pension age.
http://www.hmrc.gov.uk/ni/intro/basics.htm

JohnB47

SeekTruth wrote: »

This is not necessarily true. Assuming you reach State Pension Age after April 2016 then a initial entitlement (Foundation Amount) will be calculated on transition to Single Tier Pension. The Foundation Amount is actually the higher of two different calculations, one based on the current pension system and one based on the new Single Tier system. If you were ever Contracted Out then a Rebate Derived Amount will be subtracted from the calculation on the Single Tier basis. This could mean that you will need extra NI years after 2016 to reach the full Single Tier pension.

That suggests that someone who was contracted out for a significant number of years will be worse off if they retire after April 2016, compared to before then. I thought there would be no substantial difference, unless you had many years to go to reach spa.

Linton

JohnB47 wrote: »

That suggests that someone who was contracted out for a significant number of years will be worse off if they retire after April 2016, compared to before then. I thought there would be no substantial difference, unless you had many years to go to reach spa.

They will be no worse off if they retire soon after April 2016 compared with before BUT they will be worse off in terms of state pension compared with people who didnt contract out. BUT (again) the difference should be made up, or more, by their contracted out pension. BUT (yet again) people with contracted out DB pensions wont directly see this benefit as their contracted out pension is already considered to include the contracted out pension. BUT people with large contracted out pensions do have the opportunity to earn extra NI years beyond the 35 base up to the point where they do get the increased basic SP.

So lots of swings and roundabouts.

SeekTruth

Linton wrote: »

They will be no worse off if they retire soon after April 2016 compared with before ...

So lots of swings and roundabouts.

To add a few more swings, or is it roundabouts?

Those reaching State Pension Age on 6th April 2016 when compared with those reaching SPA on 5th April 2016 will suffer if:
a) they defer their pension and opt for an increased pension
b) they pre-decease their spouse (obviously it is the spouse that suffers here unless the pensioner puts aside savings, or takes other steps, to compensate)
c) they have any GMP (ie were contracted out of SERPS at any time between April 1978 and April 1997)

JohnB47

SeekTruth wrote: »

To add a few more swings, or is it roundabouts?

Those reaching State Pension Age on 6th April 2016 when compared with those reaching SPA on 5th April 2016 will suffer if:
a) they defer their pension and opt for an increased pension
b) they pre-decease their spouse (obviously it is the spouse that suffers here unless the pensioner puts aside savings, or takes other steps, to compensate)
c) they have any GMP (ie were contracted out of SERPS at any time between April 1978 and April 1997)

Thanks folks.

I think I will be in camp c). I was in the BT scheme (The Post office to start with) from 1973 to 1998 and have been in receipt of my BT pension since 2001, aged 50. Presumably I was contracted out for all of that time?

So I will be worse off reaching spa in December 2016, compared to someone in the exact same circumstances reaching spa before April 2016? Nothing I can do about it of course.

xylophone

1973 to 1998

See http://www.financialadvice.net/state_graduated_retirement_pension_scheme/zone/354

You left BT in 2001 to work for another employer? Were you contracted in or out?

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

Have you requested a state pension forecast? https://www.gov.uk/state-pension-statement
http://www.moneymarketing.co.uk/news-and-analysis/pensions/john-greenwood-the-deafening-silence-on-state-pension-forecasts/2005104.article

JohnB47

xylophone wrote: »

See http://www.financialadvice.net/state_graduated_retirement_pension_scheme/zone/354

You left BT in 2001 to work for another employer? Were you contracted in or out?

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

Have you requested a state pension forecast? https://www.gov.uk/state-pension-statement
http://www.moneymarketing.co.uk/news-and-analysis/pensions/john-greenwood-the-deafening-silence-on-state-pension-forecasts/2005104.article

Thanks.

Actually I left BT in 1998. Was unemployed for about 10 months, then took part time work (no pension contributions) for about a year. Then unemployed for about 6 months, then employed part time (contributing to local govmt. pension scheme) for 6 years (2002 - 2008), then made redundant. Unemployed for about 5 months, then started working part time for NHS in 2009. Still working for them and contributing to their pension scheme (five years now).

Yes I have had pension statements, the most recent was for the period to April 2013, which said (in summary):

"We estimate that your State Pension, based on your National Insurance contributions record to date, is £127.92 a week.

The amount of basic State Pension you get depends on how many qualifying years you have on your National Insurance contributions record. You currently need 30 qualifying years to get a full basic State Pension, worth £110.15 a week.

So far you have 42 qualifying years, worth £110.15 a week.

You may get Graduated Retirement Benefit if you paid graduated National Insurance contributions between 6 April 1961 and 5 April 1975.

We estimate that your additional State Pension and Graduated Retirement Benefit, based on your National Insurance contributions record to date, is £17.77 a week.

The amount of additional State Pension could be lower than the estimate shown in this statement, especially if you were contracted out of the additional State Pension anytime between 6 April 1978 and 5 April 1997. "

After reading a lot of posts on this I decided that it didn't really matter which side of April 2016 you retired, if it was only a few months one side or the other. You might be up a few quid or down a few. The recent posts on this thread seem to suggest differently.

Is there any way to estimate, from my forecast and my employment history, what my pension would actually be?

Cheers.