State Pension Post 2016 'Contracted Out'

tony4147

Does anyone know if I will get a full state pension after 2016?

At present I have 33 years NI contributions but I was contracted-out for 20 years, my contracted out part is now worth approx 40K

SeekTruth

tony4147 wrote: »

Does anyone know if I will get a full state pension after 2016?

At present I have 33 years NI contributions but I was contracted-out for 20 years, my contracted out part is now worth approx 40K

Impossible to say.

Assuming you reach State Pension Age (SPA) after 5 April 2016 then you will go through the transition process. Your Foundation Amount (starting point in the new system) will be the higher of 2 figures, one based on the current system, one based on the new system.

The figure based on the current system will be full basic (as you have over 30 years of NI contributions) of £113.10/wk (in 2014/15 money) plus any Additional Pension (AP) that you have accumulated along the way. You may have gained AP in any periods that you were not contracted out, you could also have gained AP even if contracted out since 2002 (as long as your pay wasn't too high).

The figure based on the new system will have a deduction for your period of contracting out. I would guess that 20 years of contracting out will mean that this figure will be lower than the figure based on the current system.

If my guess is correct then your Foundation Amount will be the same as your entitlement under the current system, ie £113.10 plus AP.

To be certain you'll have to apply for a State Pension Forecast.

You don't say when you reach SPA. Each year of NI contribution after April 2016 up to SPA will gain you an extra £4ish/wk on your Foundation Amount (but cannot take you above the 'full' new state pension amount (currently using £148ish/wk as indicative figure).

tony4147

I'm 51 now and plan to retire 65-67

SeekTruth

tony4147 wrote: »

I'm 51 now and plan to retire 65-67

Sounds as though you plan to work, and accumulate NI contributions, for more than 10 years after April 2016. This is more than enough to increase your pension from its Foundation Amount (which will be £113.10 or more) to the full new state pension.

tony4147

So if I carry on working then I will probably get much near to the full amount of state pension and keep all of the contracted out element as a private pension.

jamesd

You get 1/35th of the flat rate added to your foundation amount for each year worked after the new system comes in. Whether that's from working or paying voluntary contributions. With around 17 years until you reach state pension age you have the capability to increase your state pension entitlement by about half of the flat rate level. You won't get more than the flat rate but you should reach that without trouble.

Best to wait until foundation amount values are available after the new system comes in, then check what your foundation amount is. That'll tell you how many years it'll take to get to the full flat rate, just divide the shortfall by 1/35th of the flat rate and round up to get the number of years.

Yes, you'll probably end up with both the full flat rate and the contracted out pension pot. You keep the contracted out pot regardless.

tony4147

Just received a state pension forecast, I have 33 years NI contributions, and under todays scheme I will receive a state pension of approx £133 pw.

I'm 51 and was contracted out for 20 years, so under the new scheme I will have 33-20 = 13 years. If I work until 67 y/o I will add another 16 years giving me a total of 29 years NI contributions under the new scheme.

For a full state pension of £148 pw (new scheme) I believe that I need 35 years NI countributions, therefore I will be 6 years short of a full state pension.
So £148/35 = £4.22, £4.28 x 6 = £25.32, therefore my state pension will be approx £148-£25.32 = £122.68.

Now my contracted out pension is at present £40K (and hopefully will grow over the next 16 years without any additional contributions), and I looking at FT.com £100K with 3% escalation would get me an annuity of approx £4K/yr, therefore £40K will get me approx £1600 which = £31 pw, so I'm I right in that in my case I will have done very, very slightly better being contracted out?
Also is it possible for me to purchase the 6 years NI contributions to make it up to a full pension?

JezR

Once the new rules are in place and the foundation value calculated, your past contribution record then becomes irrelevant.

With 20 years contracted out, it is likely that the calculation of your foundation value will be the greater under the current rules, ie the £133 you have from your projection.

So the amount you would have to make up for the full flat rate would be £148-£133=£15, which you would easily do with just a few more years of NI. No need for voluntary contributions at all.

You are correct that people who were contracted out are in general 'winners' under the changes, provided they have sufficient working years to make contributions to move up from the old basic pension to the new flat rate.

kangoora

Is it now possible for me to get a state pension forecast which is accurate?

I got one in June this year which said I would get £143 under the existing rules based on contributions to April 2014, however, if I'd been contracted out between 1978 and 1997? then it would be reduced. As I was contracted out for all of that period then the forecast was as much use as a chocolate teapot.

I'm currently 52, looking at finishing at 58 in April 2020 and I'll have full 35 years NICs paid by that date.

Contact details for where to apply for an accurate forecast based on my full contribution records (taking into account my contracted out years) would be very useful. Also, anyone have a rough idea what it's likely to be based on the above info?

tony4147

kangoora wrote: »

Is it now possible for me to get a state pension forecast which is accurate?

I got one in June this year which said I would get £143 under the existing rules based on contributions to April 2014, however, if I'd been contracted out between 1978 and 1997? then it would be reduced. As I was contracted out for all of that period then the forecast was as much use as a chocolate teapot.

I'm currently 52, looking at finishing at 58 in April 2020 and I'll have full 35 years NICs paid by that date.

Contact details for where to apply for an accurate forecast based on my full contribution records (taking into account my contracted out years) would be very useful. Also, anyone have a rough idea what it's likely to be based on the above info?

I was informed by the Pension Service that I won't be able to get an accurate forecast until late 2015 or it might have been late 2016, I know it says something in the booklet (at home) that came with the statement.

greenglide

kangoora wrote: »

however, if I'd been contracted out between 1978 and 1997? then it would be reduced. As I was contracted out for all of that period then the forecast was as much use as a chocolate teapot.

But pension forecasts have said that for a long time.

Between 1978 and 1997 people who were contracted out could still a certain of additional pension due to the calculation of the COD and the GMP but this stopped from 1998 onwards where the COD and the GMP would always be equal. The result of these calculations would have not been known until you reached SPa and that may still be the case.

The difference should not be large.