State pension estimates for 2016 +

roxy28

Dad did a statement online with the gateway service, it says its not a pension forcast, but its the amount he would recieve up to now 2014/15.

It says we estimate to date on our records, that a pension of £136.35 a week.
This is £113 + £ 23.35 ASP + GRB.
His pension was a LGPS scheme so was contracted out, he worked at the council from 1971 till 2006.
In reality when he gets his pension in around 7 years, will the ASP + GRB be wiped out and get around the £113 from the current pension +inflation.

SeekTruth

Bootsox wrote: »

Is this all one ginormous scam, where is the £143 I was promised?

Can I recommend cultivating a healthy dose of cynicism regarding what you read in the papers.

SeekTruth

roxy28 wrote: »

Dad did a statement online with the gateway service, it says its not a pension forcast, but its the amount he would recieve up to now 2014/15.

It says we estimate to date on our records, that a pension of £136.35 a week.
This is £113 + £ 23.35 ASP + GRB.
His pension was a LGPS scheme so was contracted out, he worked at the council from 1971 till 2006.
In reality when he gets his pension in around 7 years, will the ASP + GRB be wiped out and get around the £113 from the current pension +inflation.

No. He will get at least the £113 + £23.35 + GRB as his Foundation Amount (as at April 2016). If he accumulates more years of National Insurance contribution after April 2016 then this will be increased by approximately £4/wk for each year of contributions (but will not be increased above the full rate of the single tier pension: £148ish in today's money)

roxy28

SeekTruth wrote: »

No. He will get at least the £113 + £23.35 + GRB as his Foundation Amount (as at April 2016). If he accumulates more years of National Insurance contribution after April 2016 then this will be increased by approximately £4/wk for each year of contributions (but will not be increased above the full rate of the single tier pension: £148ish in today's money)

Ok thanks for quick reply, its the contracted out which seems to be causing him the problem understanding it.

Bootsox

This "contracting out" is a state sponsored scam. You contract out, still pay a fortune in NICs anyway and, in return, you get a lower pension.

It is one of these things that probably started out ok but morphed into a complete non-benefit as the amount of NICs spiralled out of control.

Any benefit to the employer through reduced NICs would have been negated by Brown's plundering of final salary pension schemes in the late nineties.

jamesd

Bootsox wrote: »

This "contracting out" is a state sponsored scam. You contract out, still pay a fortune in NICs anyway and, in return, you get a lower pension.

Not usually so. You contract out and either your personal pension or your work pension gets the rebates, then under flat rate rules you just continue accruing more state pension until you either reach the full flat rate cap or stop working. Meanwhile you keep the money in your personal pension pot and the employer pension scheme is required by law to pay at least as much as the state pension would have paid if it hadn't contracted you out.

There are some exceptions where people are close enough to state pension age that they won't have time to get to the full flat rate state pension after being contracted out, though.

warwicktiger

"This "contracting out" is a state sponsored scam. You contract out, still pay a fortune in NICs anyway and, in return, you get a lower pension."

Don't forget, the idea of the NI scheme was that your nics also paid for unemployment, sick, maternity and other benefits, not just your state pension. Of course over the years it just became an extra income tax in all but name.

SeekTruth

roxy28 wrote: »

Ok thanks for quick reply, its the contracted out which seems to be causing him the problem understanding it.

It is true that contracting out has reduced your father's state pension entitlement from what it would otherwise have been, but his pension scheme (LGPS) had to meet certain conditions to enable contracting out. State Pension forecasts used to show explicitly the Contracting Out Deduction (COD), but now they just show the result after the COD has been applied. So, his £23.35 ASP+GRB is what remains after the COD has been applied. Obviously I have no knowledge of his particular case, but for the sake of explanation assume his COD was £100. In that case he would have accumulated a total of £123.35 of GRB/SERPS/S2P over the years, which after the deduction of the £100 COD leaves a net AP of £23.35.

Incidentally, some may wonder how your father gained any AP if he was always contracted out. Firstly, his GRB is from pre-1975 and, if I remember correctly, contracting out didn't apply. I don't think he could gain any net AP from SERPS (1978 - 2002). Under S2P (2002 - ) it is possible to gain AP even though contracted out as long as your pay isn't too high. Furthermore, you say your father left the council in 2006, so maybe he has had contracted in employment since then.

greenglide

Incidentally, some may wonder how your father gained any AP if he was always contracted out. Firstly, his GRB is from pre-1975 and, if I remember correctly, contracting out didn't apply. I don't think he could gain any net AP from SERPS (1978 - 2002). Under S2P (2002 - ) it is possible to gain AP even though contracted out as long as your pay isn't too high.

Before the changes in 1998 it was possible to get a small amount of payable AP if you were contracted out because of different calculations of the GMP and the COD. Post 98 this stopped and contracted out people got no AP which, I suspect, was the original intention.

I thought that under S2P the same was true and that contacting out meant no AP. The change in the rules meant low earners who were not contracted out got more AP than they would previously?

xylophone

http://en.wikipedia.org/wiki/State_Second_Pension

http://www.barnett-waddingham.co.uk/comment-insight/briefings/2014/10/21/end-db-contracting-out-and-gmp-reconciliations/