Contracted Out and State Pension help?

kevkj

HELP>>>>>

I have worked since 1980 for the same company where i started at 16 years of age .I am now 51.

I contracted out in 1987 and stayed out until 2012 when contracting out stopped.

I contacted the Pensions for a state pension forecast recently and was told mine was £113 ..

I was then informed rules will change in 2016 and that my pension would be hit for the 25 years i was contracted out due to a default deduction that is being introduced.
My friend informs me that i will lose all my state pension for all these years contracted out and according to him i have a maximum of possibly 9 years full NI payment,he expects me to have a state pension of just £48 when the 2016 rules kick in. .

I have read things that seem to justify his view ,but it says i may still be offered the better of the two figures of £113 or £48.

I plan to retire at 56 so will only have 3 years to pay NI after 2016.
Gutted to say the least.
I thought the government was heralding £148 for everyone.

Is this Correct? help.

No doubt the option if available £113 will be taken away from me between now and my 67th birthday and i will be left with £48 state pansion after working for 40 years.:mad:.

JB9302

Have a read of this thread https://forums.moneysavingexpert.com/discussion/5094849

kevkj

JB9
Thanks for the pointer i understand a bit more.
though i am still worried about them changing the rules again and taking the old scheme away completely,thus my £113

I dont understand the below .

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.

Could anyone offer a rough forecast for the changes after 2016 taking my first post into consideration.

JezR

As a result of a long period of contracting out, your foundation amount on your contribution record is likely to be based on the current system. This will be the £113 you have in your projection (full basic pension, 30+ years already contributed) plus any second state pension.

You should have some already for the period you say you weren't contracted out (1980-87), which ought to have appeared on your projection.

You will also accrue further pension of 1/35th of the flat rate for each year you work after 2016 plus you could pay additional voluntary contributions if necessary to top this up to the full rate rate amount.

kevkj

Thanks Jez ,picking it up now.What about my payments 2012-2014 will i picking additional credits up for this ?

Also my forecast is £113 + £13 payable additional pension.

As i say im happy enough with this as i have £50,000 contracted out fund.

Just worry the £113 foundation option may be taken away.

JezR

Governments can change the law, but I doubt that taking away people's accrued rights would be a popular measure.

Yes you will continue to accrue second state pension in the current scheme until the new one takes over, so you may not be so far off the flat rate at your chosen retirement date even without voluntary contributions (which probably will be worth making, but we don't know the rates yet, or even what the flat pension amount might be in 2016).

jamesd

You'll probably end up entitled to the full flat rate state pension since you'll gain 1/35th of the flat rate amount per year worked after it starts until either you reach that level or stop working. You'd need to work about (£155 - £113) / (1/35 * 155) = 9.5 more years to get a full flat rate of say £155 assuming £113 as your foundation amount.

kevkj

Unfortunately i plan to retire at 56 so thats 2019, so there is no way i will pay that back to get the full rate as its only another 3 year payments.Whereas in the current state pension i assume im fully paid up after 34 years of working.

jamesd

You'll be able to make voluntary contributions to get to the full flat rate level. Those are fairly cheap - less than a year's worth of the state pension increase to buy each year.

In the current system if you're not contracted out you continue to accrue additional earnings-related state pension for as long as you continue to work. It's just the basic state pension portion which accrues even when contracted out that has the 30 year maximum.

JezR

kevkj wrote: »

Unfortunately i plan to retire at 56 so thats 2019, so there is no way i will pay that back to get the full rate as its only another 3 year payments.Whereas in the current state pension i assume im fully paid up after 34 years of working.

You can make voluntary contributions for additional years any time up to your state retirement age.

zagfles

jamesd wrote: »

You'll be able to make voluntary contributions to get to the full flat rate level. Those are fairly cheap - less than a year's worth of the state pension increase to buy each year.

Have they said how much it'll cost post 2016?