State Pension in 5 years time and NI

boxedin

Hello I wonder if you can help
I am 61 with 34 years NI contributions. I left work about 4 years ago and haven't worked since, living off a small pension and my savings

I was contracted out of SERPS for about 30 years of that time into company final salary schemes.

I have just been trying to work out my entitlement to state pension and have been given a figure of £113 on the pension service website. The New state pension figure being banded about is around £150 so
does anyone know why there is a shortfall as I am only 1 year short of the 35 years NI contributions required for a full pension ?

Secondly, I have read somewhere that the 35 years qualification is where you have not contracted out of SERPs and if you have contracted out then your pension is reduced by the number of years you were contracted out. This would in effect make my state pension peanuts as I have been in final salary schemes for over 25 years. Does anyone know if this is the case ?

Any information/advise appreciated, I will of course go down the Pension Service Advice route but just wondered/hoped that I had got it wrong

Thanks

greenglide

You need a pension forecast from DWP - fill in form BT19 or ring the future pensions centre and ask them.

It sounds as if you will be entitled to a little over £113 because of the time spent contracted out. This is what you would have got from the current scheme so you haven't lost anything.

You will two or three years from 6/4/2016 when the new system starts. If you pay self employed or voluntary contributions for these years you will increase your pension by around £4.30 or so for each year.

mgdavid

as you have over 25 years in final salary schemes, I'm wondering why the odd few quid of state pension seems so important?

jamesd

The current state pension system has two main parts, the fixed part and the earnings-related part. A person who was contracted out doesn't get the earnings-related part for those years from the state but does get the fixed part. So at present you have at least the full basic state pension entitlement because you have 30 years paying in and 30 years is what it takes under current rules to get that. The earnings-related part ends up being paid by your employer, usually more generously than the state system would have paid, so you haven't really lost that either.

Once the flat rate system starts you will be able to use self-employed or voluntary buying of NI and each year that you do this until you reach state pension age will increase your state pension by 1/35th of the flat rate level until either you stop or you reach the full flat rate. This is usually a good idea if you're in normal good health.

atush

become a self employed house sitter or dog walker and pay class 2 for one year?

GunJack

ok, so I currently (just) have 30 years NI, with another 20 years to work before SP age at 67. I've always been contracted out of serps. So what (f any) extra benefit will I get for the next 20 year's-worth of NI contributions under the new system?

atush

none until apirl 2016.

Then you'll get a small suppliment to your pension at abt 4.20 or so per year after you get up to 35 YEARS until you get up to full single tier. Each year you work after 2016/35 years will count, this will bring those who have been contracted out a chance to get up to the new full single tier.

But I think contracting out was stopped a few years back, are you sure you have zero S2P? If you have any at all, even 1 quid a week, you wont lose this.

GunJack

thanks for replying... so you mean I now need 35yrs of NI for max basic SP? That was not clear on the gov pension site, neither is the reduction due to being contracted out (20yrs civ service preserved, plus straight into private sector in a final-salary scheme), so no serps ever

p00hsticks

GunJack wrote: »

thanks for replying... so you mean I now need 35yrs of NI for max basic SP? That was not clear on the gov pension site, neither is the reduction due to being contracted out (20yrs civ service preserved, plus straight into private sector in a final-salary scheme), so no serps ever

NOW (under the current rules) to get the maximum basic pension (c £113) you need 30 years NI. This is regardless of whether you were contracted in or out, but you'd get a top up over and above that amount if you weren't contracted out at any point (SERPS/S2P).

Under the new rules, anyone retiring after April 5th 2016 will need 35 years NI to potentially be eligible for the maximum signle tier rate (c £150), but will have an amount deducted for those years where you were contacted out (and therefore paid less NI).

But at the point of transition, they'll work out what you're currently entitled to under both sets of rules, and the better of the two figures will be your 'foundation amount' to which subsequent years will be added

GunJack

p00hsticks wrote: »

NOW (under the current rules) to get the maximum basic pension (c £113) you need 30 years NI. This is regardless of whether you were contracted in or out, but you'd get a top up over and above that amount if you weren't contracted out at any point (SERPS/S2P).

Under the new rules, anyone retiring after April 5th 2016 will need 35 years NI to potentially be eligible for the maximum signle tier rate (c £150), but will have an amount deducted for those years where you were contacted out (and therefore paid less NI).

But at the point of transition, they'll work out what you're currently entitled to under both sets of rules, and the better of the two figures will be your 'foundation amount' to which subsequent years will be added

..and this is the part that's clear as mud...

so, if i work for 35 years (all contracted out) will be eligible for 113, 148, or something else as my state pension?

xylophone

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

and https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/391615/state-pension-changes-4.pdf