State pension estimates for 2016 +

jamesd

We think similarly but if the contracted out deduction could reduce the state pension so far below the current basic state pension that would be a very unpleasant surprise. I assume that means that the GMP calculation is far higher than the ASP accrual rate. It doesn't seem reasonable or logical to me for the contracted out deduction to take the state pension below the BSP level since all that was used to fund the contracting out is the ASP part, so I'd expect complete loss of ASP top be the worst case.

jem16

jamesd wrote: »

It doesn't seem reasonable or logical to me for the contracted out deduction to take the state pension below the BSP level since all that was used to fund the contracting out is the ASP part, so I'd expect complete loss of ASP top be the worst case.

My mistake - it didn't go as low as £40pw - it was £70pw but well below current basic rate pension.

This was from an actual forecast. See this thread;

https://forums.moneysavingexpert.com/discussion/5081883

jamesd

Thanks. Very interesting that it is deducting from the flat rate more than just the removal of the ASP.

That would be particularly interesting for those who have no GMP after contracting out into a personal pension and who got no addition to their ASP for the contracted out years. Instead of having to replace only the lost ASP they might have to replace some notional higher amount that doesn't actually exist.

SeekTruth

okydoky wrote: »

Hi, born in 1956, my SP is due in 2022
Latest forecast shows 41 qualifying years so basic of £113.10 plus ASP + GRB of £73.53.
(In fact I took voluntary redundancy late 2012 and have since "retired".)
My Pension Forecast has the caveat about being contracted out between 1978 and 1997 - in fact I was Contracted Out between 1993 and 2005, so my question is :-
Will my ASP be reduced pro rata for the 12 years I was Contracted Out, or will it only be reduced for the 4 years between 1993 and 1997?
Anybody know the answer to this one?
Many thanks

You reach State Pension Age (SPA) after April 2016 and so go through the transition calculation to the New State Pension (aka Single Tier Pension).

The transition calculation, to calculate your Foundation Amount, takes place as at April 2016. Your Foundation Amount is the higher of two figures, one based on current state pension calculations and one based on New State Pension calculations. In your case the two figures will be:

1. Based on current calculations a figure of £186.63 (=£113.10 + £73.53) in today's money, which will be subject to inflation changes to April 2016. Incidentally, you describe the £73.53 figure as GRB; in fact this will be mostly (all?) SERPS and S2P.
2. Based on New State Pension calculations, the full new figure of £148.40 (this is the illustrative figure currently being used in official forecasts) minus the Rebate Derived Amount (RDA). The RDA is based on pay during your Contracted Out service.

We know that the higher of these two figures is going to be the first one, even without bothering to estimate your RDA. So your Foundation Amount will be £186.63 in today's money. Since this is above the new full pension level there will be no increases for further NI contributions; however there will be inflation increases. The first £148ish will be increased each year by an amount, currently triple-lock, the surplus, approx £38, will be increased by CPI.

SeekTruth

jamesd wrote: »

Here's how it works for various date ranges:

From 1978/79-1996/97: there was a guaranteed minimum pension for those who contracted out. This GMP will be calculated and used as the contracted out deduction for these years.
From 1997/98-2001/02: no Additional State Pension was added so there is no contracted out deduction for time contracted out during these five years.
From 2002/03-flat rate: a similar calculation to the 1978/79-1996/97 calculation is used to get a contracted out deduction...

A personal view: I find the document to which jamesd links very helpful. However, the particular section that he quotes I find most unhelpful.

The document is talking about the transition calculations; namely, the current scheme valuation and the single-tier valuation. The current scheme valuation involves a Contracted Out Deduction (COD) that applies to contracted out service between April 1979 to April 1997. The term COD has been in use for some years for this purpose, presumably since the late 70s. The single-tier valuation involves a Rebate Derived Amount (RDA) that, like COD, is intended to reflect the benefit the contributor received by paying reduced NI contributions during Contracted Out service. However, unlike COD, the RDA applies to the whole period from April 1979 to April 2016.

The quoted section of document seems to be using COD when it means RDA, but not being consistent about this.

bilbo51

Thanks to all for the very useful discussion here - I'm finally beginning to get clarity on this ASP/COD/GMP thing.

JB9302

Just an update for anyone who is awaiting a reply for a pension forecast , I spoke to them today re my written request (received by them 6/10/14) and they say they are currently progressing requests dated 2/10/14 so a week or so longer for mine .

qcuk

Mine was posted 25/09/14 and to date no reply!

qcuk

Mine was posted 25/09/14 and to date no reply!


Still no reply @ 07/11/14

JB9302

qcuk wrote: »

Mine was posted 25/09/14 and to date no reply!


Still no reply @ 07/11/14

Might be worth ringing them to confirm that they have received your request , mine not back yet .