"Flat rate" state pensions - deception exposed

wotsthat

I'm in the born 1960 - 1969 group so can't get a forecast until next April.

I won't be building a spreadsheet based on this guidance to give myself a head start

molerat

tony4147 wrote: »

Not exactly easy to understand.
"The calculation is based on National Insurance qualifying years. The number of qualifying years a person has at the end of 2015/16"
So what happens if you have worked for lets say 35 years but were contracted out for 10 years, therefore you have 25 years full NI contributions and are still going to be working another 12 years and paying full NI contributions.
This would give you a full 37 years, 2 over the 35 required, will that person get a FULL state pension? and keep their contracted out pot on top?
Or is the additional 12 years that they work after 2015/16 lost?

At the end of this tax year you will be given a starting amount. If this is at or higher than the max new pension then that is all you get, it can not be increased. If it is less than the new max you can add to bring it up to the new figure.

SnowMan

wotsthat wrote: »

I'm in the born 1960 - 1969 group so can't get a forecast until next April.

I won't be building a spreadsheet based on this guidance to give myself a head start

:rotfl:

That's the voice of reason speaking.

There really is no need to get involved with the complexities here.

Either you are age 55 and over and can get a state pension statement that reflects the new scheme now.

Or if under 55 you wait until April and get a statement of your starting amount then.

All the complexity disappears in the calculation of the contracted-out deduction to give a known starting amount of state pension at 2016.

That said I have worked out my starting amount in a spreadsheet :obut its's straightforward for me as it is clear that the current scheme calculation will give the higher amount.

There seem to be a group of people who think they have been diddled out of state pension because they won't get the full £151.25pw. Unfortunately they can only work out this isn't the case and haven't been diddled by understanding how the current scheme works and at least some of the complexity. They can argue that it hasn't been properly explained to them, if they must, but they can't really argue that they have been diddled out of anything.

There's a small group who can argue they have been materially diddled out of some increases to their state pension after SPA, I would agree that is a necessary part of keeping it simple, but the argument can be made. It covers this in the document but could be a bit clearer that the affect of it not being (realistically) possible to do the calculation is that these increases are lost.

The effect on the recipient of this additional State Pension/Contracted- out Deduction calculation can be virtually the same as if increases had been paid on their pre-1988 GMP. With the closure of the additional State Pension in 2016 it will no longer be possible to continue the calculation

SnowMan

tony4147 wrote: »

Not exactly easy to understand.
"The calculation is based on National Insurance qualifying years. The number of qualifying years a person has at the end of 2015/16"
So what happens if you have worked for lets say 35 years but were contracted out for 10 years, therefore you have 25 years full NI contributions and are still going to be working another 12 years and paying full NI contributions.
This would give you a full 37 years, 2 over the 35 required, will that person get a FULL state pension? and keep their contracted out pot on top?
Or is the additional 12 years that they work after 2015/16 lost?

We are moving from a pre 2016 system that gives you a full basic state pension (£115.95pw) if you have 30 qualifying years, plus some additional state pension if you have been contracted-in, to a post 2016 system that gives you a single tier state pension of £151.25pw if you have 35 qualifying years.

So it is should be logical that someone who straddles the old and new system (and who has been contracted-out throughout historically) would need more than 35 qualifying years to get to the full single tier pension of £151.25pw, because to get to the full amount of £151.25pw you need to 'buy back' the difference between £151.25pw and £115.95pw for pre 2016 years.

The generous feature of the new system is that they effectively allow you to make up the difference between £115.95 and £151.25pw for pre 2016 years through additional post 2016 qualifying years above 35. So you can in many circumstances get the full single tier pension of £151.25pw and have your contracted-out pot on top

p00hsticks

tony4147 wrote: »

So what happens if you have worked for lets say 35 years but were contracted out for 10 years, therefore you have 25 years full NI contributions and are still going to be working another 12 years and paying full NI contributions.
This would give you a full 37 years, 2 over the 35 required, will that person get a FULL state pension? and keep their contracted out pot on top?
Or is the additional 12 years that they work after 2015/16 lost?

I'm in more or less that position (although with more years contracted out) - I've not read the latest documentation (and probably don't I need to) but my current simple understanding is as follows - i'm sure someone will jump in and correct me if I'm wrong

Everyone currently working will have a pension 'starting amount' calculated as at 6/4/16. This will be the higher of the two amounts they are entitled to under the old and new rules as at this date.

If you've already got at least 30 years NI contribution years under your belt, then under the current rules you'd be entitled to at least the full basic state pension amount of £115.95, even if you've been contracted out the whole time.

If you've been contracted in the amount will be higher, even possibly more that the new single tier rate of around £155 (and if it is, then that higher amount will be honoured and paid on reaching State Pension Age).

Once the new rules come in on 6/4/16, then there is no longer any distinction between 'contracted in' and 'contracted out' and the requirement for a full pension changes to 35 years.

Fro every qualifying NI year people work after that date, basically 1/35th of the new single tier rate is added to your starting amount, up to the maximum (which you can't then go beyond).

wotsthat

SnowMan wrote: »

There seem to be a group of people who think they have been diddled out of state pension because they won't get the full £151.25pw. Unfortunately they can only work out this isn't the case and haven't been diddled by understanding how the current scheme works and at least some of the complexity. They can argue that it hasn't been properly explained to them, if they must, but they can't really argue that they have been diddled out of anything.

I think I'm going to be more than OK. 31 qualifying years already, a working life contracted out into a DC pension and, depending on the reduction, plenty of years to get to the full amount.

However, as I was born between 1961 and 1969 I'm going to have to wait until next year to find out.

purdyoaten

p00hsticks wrote: »

I'm in more or less that position (although with more years contracted out) - I've not read the latest documentation (and probably don't I need to) but my current simple understanding is as follows - i'm sure someone will jump in and correct me if I'm wrong

Everyone currently working will have a pension 'starting amount' calculated as at 6/4/16. This will be the higher of the two amounts they are entitled to under the old and new rules as at this date.

If you've already got at least 30 years NI contribution years under your belt, then under the current rules you'd be entitled to at least the full basic state pension amount of £115.95, even if you've been contracted out the whole time.

If you've been contracted in the amount will be higher, even possibly more that the new single tier rate of around £155 (and if it is, then that higher amount will be honoured and paid on reaching State Pension Age).

Once the new rules come in on 6/4/16, then there is no longer any distinction between 'contracted in' and 'contracted out' and the requirement for a full pension changes to 35 years.

Fro every qualifying NI year people work after that date, basically 1/35th of the new single tier rate is added to your starting amount, up to the maximum (which you can't then go beyond).

That is as clear an explanation as I have seen that is in English (and I worked in taxation for thirty years!)

molerat

It seems that many contracted out people are the ones whining when in fact those contracted in could be the losers. Under the old rules they could get up to £276.10 per week, now if they have reached the £155.20 point they will not be able to accrue any more and will need to ensure they make other provision.

I have a full house of contributions but was contracted out so do not have much AP. I will now be able to buy some of this 30% annuity. MrsM will do even better. She does not have a full record and the new system gives her an extra £16 pw plus as a non tax payer some 30% annuity will be an even bigger bargain.

xylophone

but the argument can be made.

Come on Snowman, that's a bit disingenuous! You know perfectly well that not only can it be made, it has been made and the Government spokesman has wriggled like a worm on a hook....:rotfl:

xylophone

And as for

"The effect on the recipient of this additional State Pension/Contracted- out Deduction calculation can be virtually the same as if increases had been paid on their pre-1988 GMP. "

words fail me!