MSE News: Guest Comment: What you need to know about the new State Pension

michaels

So all my SERPS/S2P payments will get me precisely nothing whereas had I contracted out for 10 years I would be able to gain a pension from the contracted out amount and still easily qualify for the full 35 years to get the full state pension given the ever increasing retirement age

At what point does deciding not to honour commitments made in return for specific payments become theft. If a private sector company had taken premiums and then unilaterally decided not to pay out then they would rightly have been prosecuted.

jem16

michaels wrote: »

So all my SERPS/S2P payments will get me precisely nothing whereas had I contracted out for 10 years I would be able to gain a pension from the contracted out amount and still easily qualify for the full 35 years to get the full state pension given the ever increasing retirement age

If at April 2016, your current entitlement to basic state pension + SERPS/S2P is higher than your entitlement under the new rules, then you will get the higher of the two.

Uptonspring

I am a woman born in 1955.I have seen my state pension age rise from 60 to 65, and then 66.
I thought that having 30 years of NI contributions was enough to get me a full state pension - but OH NO ! they have moved the goalposts again, and I now have to have 35 years of contributions.
I cannot keep up with all these changes in a short time, and I am sure that as I reach my state pension age in 2021, they will have moved the goalposts again, and maybe again.

p00hsticks

Uptonspring wrote: »

I am a woman born in 1955.I have seen my state pension age rise from 60 to 65, and then 66.
I thought that having 30 years of NI contributions was enough to get me a full state pension - but OH NO ! they have moved the goalposts again, and I now have to have 35 years of contributions.

During the majority of your working life (up to 2010) , you will have expected to only get a full state pension if you had 39 years NI contributions (five less than a man, who needed 44) so this is one area where you are actually better off compared with the first 55 years of your life.

BoxerfanUK

hugheskevi wrote: »

I'd argue that those who have decent amount of contracted-out deserve a mention as probable gainers. Public sector workers also gain, as well as being contracted-out, their public service pension arrangements will not be changed due to contracting-out abolition (private sector DB schemes are permitted to offset the reduction in contracted-out rebates). They will pay higher National Insurance contributions though.

Hugheskevi. Can you explain what you mean, as I thought being contracted out meant not getting the higher state pension!

I started work at 16 and at 24 joined the Civil Service. I took formal retirement in February at age 55 and was therefore contracted out for 31 years. I'm currently re-employed with the same employer in a much lower grade and plan to fully retire @ age 59 when I reach 45/80 in Classic, so I will only have just over 8 years NI credits when I wasn't contracted out from age 16 to 24 and don't plan to work from age 59 until I can draw state OAP @ age 66.

I'm also led to believe that when I claim my state pension my CS pension is reduced although I have no idea how much it will reduce by... or why!!

Oblivion

"What you need to know about the new State Pension" Hah!

What I know about the state pension is that Pension Services don't answer correspondence! Three times I've written concerning an apparent error in my pension payment and every letter has been ignored.

Steve Webb, you need to get your department sorted out, it's a shambles.

hugheskevi

Hugheskevi. Can you explain what you mean, as I thought being contracted out meant not getting the higher state pension!

That is correct in terms of calculating your pension under the 2016 system on day 1, but after that more State Pension can be accrued to get to the full amount.

Take two people aged 36 in 2016 who qualified for State Pension every year from age 16 who are identical in every way, except that one was contracted in all their life whilst the other was contracted out (gloss over the fact contracting-out into a Defined Contribution scheme ended in 2012, that isn't material for the example).

In 2016, their entitlement under the new system is calculated. The contracted out person would get roughly the amount of pension they are entitled to under the existing system, around £75 per week (£113.80 times (20 qualifying years divided by the required 30 years)). The contracted-in person would get more due to being contracted-in and having additional pension, lets say they have £120 p/w.

After the 2016 system starts, it will take the contracted-in person 7 years (so age 43) until they qualify for the full amount after which they stop accruing any further pension (but still pay full National Insurance). It will take the contracted-out person 18 years (so age 54) before they cease to accrue more pension.

At retirement, they both receive the same pension, but the contracted-out person has a separate contracted-out pension pot which may well be worth several tens of thousands of pounds, and also paid lower National Insurance contributions in their lifetime due to being contracted-out. By contracting-out, they are far better off than the person who remained contracted-in.

In your own personal circumstances, you may wish to consider paying Class 2 self-employed NI contributions after you leave employment, or Class 3 voluntary contributions although they are far more expensive, if you don't qualify for the full single tier amount when you leave employment (as seems likely).

Pincher

There was this really early Peter Ustinov movie, in which he played this computer man who likes to confusing people by using the phrase "Always adjust for the nominal factor".


I wish they would just come clean, and say they can't afford the state pension, and apply a universal discount on what you were going to get. This should apply to all the civil service pensions as well. So lets say we can afford to pay out £100bilion in 2014, but only £85billion for 2015. They announce a 15% reduction from 6th April 2015, and all the active civil service pensions and personal state pensions are reduced by 15% for that year.


The money you saved in your company or personal pension system is not affected.


I think I have just saved £1billion and more on-going costs on pension reform, IT infrastructure, staff re-training, etc. A knighthood please.

jem16

Uptonspring wrote: »

I am a woman born in 1955.I have seen my state pension age rise from 60 to 65, and then 66.

I cannot keep up with all these changes in a short time, and I am sure that as I reach my state pension age in 2021, they will have moved the goalposts again, and maybe again.

The change from 60 to 65 has been known since 1995, almost 20 years so hardly a short time.

Southend1

Pincher wrote: »

There was this really early Peter Ustinov movie, in which he played this computer man who likes to confusing people by using the phrase "Always adjust for the nominal factor".


I wish they would just come clean, and say they can't afford the state pension, and apply a universal discount on what you were going to get. This should apply to all the civil service pensions as well. So lets say we can afford to pay out £100bilion in 2014, but only £85billion for 2015. They announce a 15% reduction from 6th April 2015, and all the active civil service pensions and personal state pensions are reduced by 15% for that year.


The money you saved in your company or personal pension system is not affected.


I think I have just saved £1billion and more on-going costs on pension reform, IT infrastructure, staff re-training, etc. A knighthood please.

The state pension is affordable, as are all public sector pensions. It's not that they can't be paid rather the politicians would prefer not to pay so much and use the money for other purposes, for example allowing big companies to avoid paying tax or giving billions of pounds to incompetent bankers