MSE News: Pensioners to be given £25 a week state pension boost

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  • edited 4 April 2014 at 8:40AM
    brewerdavebrewerdave Forumite
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    edited 4 April 2014 at 8:40AM
    Doesn't seem a bad deal to me - both myself and my wife will just qualify- in addition to a modest DB pension,already in payment I have 4 relatively small DC scheme pensions,3 of which are around £10k value. My thinking is that these 3 schemes converted to cash after the new pensions legislation and taxed,would allow me to buy £25 extra pw for my wife who is younger than me and only has a relatively small DB pension. She would get the £25 untaxed and as she is 3 years younger than me,it will presumably be in payment for longer.
    To minimise the tax I would obviously have to phase the cashing in over the next three tax years.
    Can't see any way that the same three pots would give me a CPI linked,joint life annuity pay out of anywhere near £1300 pa after tax-unless I've missed something??
  • JuliusCaesarJuliusCaesar Forumite
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    I wonder if anyone understands the proposals sufficiently to advise me.


    I am 62 and took early retirement in 2007. I have an occupational pension and a small income from self-employment that has always been below the threshold for compulsory Class 2 NICs (I have a Small Earnings Exception).


    I have 38 years of NI contributions, about 30 of which relate to "contracted out" employment (which is what pays my pension) and am due to receive my state pension in 2017.


    My question is: if I started paying Class 2 NICs to increase the number/proportion of years of NICs that are not contracted out, would that increase my pension in 2017?
  • SeekTruthSeekTruth Forumite
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    I wonder if anyone understands the proposals sufficiently to advise me.


    I am 62 and took early retirement in 2007. I have an occupational pension and a small income from self-employment that has always been below the threshold for compulsory Class 2 NICs (I have a Small Earnings Exception).


    I have 38 years of NI contributions, about 30 of which relate to "contracted out" employment (which is what pays my pension) and am due to receive my state pension in 2017.


    My question is: if I started paying Class 2 NICs to increase the number/proportion of years of NICs that are not contracted out, would that increase my pension in 2017?

    My understanding, for what it's worth, is that in your particular case buying additional years of NI before April 2016 will have absolutely zero effect on your Transition Amount (the amount calculated at conversion from current pension scheme to Single Tier). This is because you already have more than 35 years.

    You say you reach State Pension Age in 2017. If this is after 6th April 2017 then it may be worthwhile to buy NIC for the year 2016/17. This is because if your Transition Amount is less than the Single Tier amount then additional years of NIC after April 2016 will increase your pension (up to a maximum of the Single Tier Amount).
  • edited 4 April 2014 at 3:43PM
    Jaycee_DoveJaycee_Dove Forumite
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    edited 4 April 2014 at 3:43PM
    Just to update my earlier post.


    I had a figure provided on the exact amount I will have gained by deferring for 12 months. It comes to £13.09 per week onto my pension or a lump sum of £6630.40.


    That comes from simply choosing not to take a pension of about £123 x 52 weeks.


    This puts in context what you could buy for the same sum if you purchase NIC 3 A on the new offer. If £890 = £ 1 pw extra, this deal would bring in an extra £7. 45 pw on your pension. Assuming you spent that same lump sum to buy extra pw on your pension. And a little less if you just totted up the £123 x 52 weeks and bought NIC 3A using that money.


    So if you have money and cannot/do not wish to defer buying the extra money pw via NIC 3A is a good deal compared to the sort of interest you would get from £6630 in an annuity and a superb deal compared with an ISA.


    However, deferring the same sum is almost twice as good in terms of the extra pw return. It also has no need to find actual cash to pay to the government (as it is funded by money you simply forgo).


    Though there are other plusses of the NIC 3A offer such as the inheritance factor.
  • uk1uk1 Forumite
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    Jaycee, some of us are justified in having a further beef.

    The voluntary additional nic contributions we were hassled for and paid - having given up holidays to find the cash - and now have an excess contribution record. If an insurance company misled us in that way it would be a misselling claim. A double stitch up for those that really did the right thing. A decent government would at least transfer the excess actual voluntary contributions into 3a.
  • brewerdavebrewerdave Forumite
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    uk1 wrote: »
    The voluntary additional nic contributions we were hassled for and paid - having given up holidays to find the cash - and now have an excess contribution record. If an insurance company misled us in that way it would be a misselling claim. A double stitch up for those that really did the right thing. A decent government would at least transfer the excess actual voluntary contributions into 3a.


    .....a "decent" government? ...Watch out for low flying pink pigs!!!:rotfl:
  • brewerdavebrewerdave Forumite
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    Deferral of the State pension for a year or two is an interesting alternative for me (provided that I can keep her indoors at work for 2 or 3 more years!!) - however, I thought that the 10.4% increase was only applied to the basic State pension? ie not to any additional pension earned?
    The biggest advantage of NIC 3a to me still seems to be a relatively cheap way of improving my wife's future finances rather than an annuity.
  • uk1uk1 Forumite
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    brewerdave wrote: »
    Deferral of the State pension for a year or two is an interesting alternative for me (provided that I can keep her indoors at work for 2 or 3 more years!!) - however, I thought that the 10.4% increase was only applied to the basic State pension? ie not to any additional pension earned?
    The biggest advantage of NIC 3a to me still seems to be a relatively cheap way of improving my wife's future finances rather than an annuity.

    I'm considering both for my wife as well ...

    The implication on the 3a calculator page is that the additional pension has to be started immediately the 3a cash is handed over with no deferral. That then seems to also halt any further main pension deferral.

    Hope someone can confirm or correct ...
  • uk1uk1 Forumite
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    I don't know whether I am being thick, but the government 3a calculator seems to be taking date at next birthday rather than last one.
  • edited 5 April 2014 at 7:34PM
    Jaycee_DoveJaycee_Dove Forumite
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    edited 5 April 2014 at 7:34PM
    uk1 wrote: »
    Jaycee, some of us are justified in having a further beef.

    The voluntary additional nic contributions we were hassled for and paid - having given up holidays to find the cash - and now have an excess contribution record. If an insurance company misled us in that way it would be a misselling claim. A double stitch up for those that really did the right thing. A decent government would at least transfer the excess actual voluntary contributions into 3a.


    I agree, I actually bought a couple of now useless extra years myself to make up for my carer's role. When I expected to need over 40 years. Just never bothered to add that to my list of misfortunes as I thought I had moaned enough. :)
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