Contracted Out and State Pension help?

kevkj

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.

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.

jamesd

any idea what these voluntary contributions currently are ?

jamesd

£2.75 a week for class 2 NI plus class 4 NI of 9% of profits between £7956.01 and £41865 and 2% above that. For the state pension purpose you'd presumably not have high enough profits to trigger the 9% rate so it'd just be £2.75 a week.

kidmugsy

kevkj wrote: »

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.
...

Either he was winding you up or he's a blithering idiot. You must be the judge of that.

mgdavid

kevkj wrote: »

No i was worrying about it as had not heard about it previously ,so asked the question.
Sigh indeed.
thanks for your input MG david.

In post #16 you wrote as if you believed it already:
'Disgusting a dolite will get £155 after never working yet i get £48 plus whatever i get between 2016 and my retirement.GULP'.
There is apparently a huge amount of misinformation and scaremongering about pensions changes. The press and trade unions seem both guilty of this - don't take any notice of them.

jamesd

kevkj wrote: »

Disgusting a dolite will get £155 after never working yet i get £48 plus whatever i get between 2016 and my retirement.GULP

Wrong about the end of the transition period but you're right about the intent of the new system being to pay more state pension to those who spend life on the dole, with that funded by reducing the pensions of those with a full working life to the flat rate level if they work a lot under the new system. Those retiring soon will be well protected by the transition rules, it's more of an issue for those in their 40s and younger.

The idea is to raise the state pension level above the level for the means tested Minimum Income Guarantee. The MIG is funded out of general taxation, state pensions out of NI. So in effect it's a stealth tax increase by moving something out of the general taxation budget and funding it with cuts in state pensions for long term workers in the NI system.

WillowCat

jamesd wrote: »

Those retiring soon will be well protected by the transition rules, it's more of an issue for those in their 40s and younger.

This is something I'm trying to get my head around. I'm 47, have 25 years contributions (missed 4 years due to retraining at university recently, and 1 year due to unemployment). Most of my 25 years were contracted out, but there is a strong possibility that I will lose my entire pension fund in a divorce settlement.

I'm now a carer so get NI credits but I'm worried that my state pension will be very small due to the contracting out, but I won't have a private pension to make up the difference. I'd love to know what I could expect from the state so I can try to justify to a judge why I should keep at least some of my pension, but it seems no forecasts are yet available for my age group.

atush

jamesd wrote: »

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.

I thought they said their foundation amt was 113 plus 13 s2p so 126 altogether? So less years to get to flat rate?

atush

WillowCat wrote: »

This is something I'm trying to get my head around. I'm 47, have 25 years contributions (missed 4 years due to retraining at university recently, and 1 year due to unemployment). Most of my 25 years were contracted out, but there is a strong possibility that I will lose my entire pension fund in a divorce settlement.

I'm now a carer so get NI credits but I'm worried that my state pension will be very small due to the contracting out, but I won't have a private pension to make up the difference. I'd love to know what I could expect from the state so I can try to justify to a judge why I should keep at least some of my pension, but it seems no forecasts are yet available for my age group.

It is hardly likely you will lose ALL of your pension contributions, more like half. Unless you trade them for something else (perhaps unwisely like say half of your home). If you have a DB pension it is likely to be worth more than you will be offered.

So get yourself a statement and a forecast to date. You will get to the 35 years as you are still getting NI credits, and the above will tell you how much s2p will be added on top of your basic state pension.

mgdavid

Willowcat, are you sure you don't get NI creedit as a mature student? And you do get NI credit if you sign on as unemployed - did you, or just remove yourself from the job market?

jamesd

atush wrote: »

I thought they said their foundation amt was 113 plus 13 s2p so 126 altogether? So less years to get to flat rate?

That was forecast rather than foundation and with all of the years contracted out I'm not sure that it will all be received.

The potential issue is that the same rule used for calculating defined benefit minimum income payments might be used for enough contracted out years to take the foundation amount below even the basic state pension portion. Previously I'd been assuming that the BSP part was safe but having read more I'm no longer sure of that so I'm not even sure that just eliminating the additional state pension part in the approximation was good enough.

Roll on the time when we have actual foundation amounts to work with.