2016 state pension changes query

kevkj

Hi
I have recently received a state pension forecast telling me i have a pension of £113 + 16.00 additional payments so a total of £129 under the old system. This i am told will be my foundation figure.

I am 51 years of age and have worked for the same company for 34 years of which i was contracted out for the majority of years.

Under the new rules i have read today that i will have a pension of around £60 on the new system.

The highest out of the two figures will be my pension.
so all fine so far.UNTIL i read an article today in the Mail stating that the transition period will be up to 2021 then the option of taking the older scheme foundation higher choice will not be available and all will go on to the new scheme.

I plan to retire at 56 and will have then worked for 39 years for i am told £60 plus £4.something a year top up for the next 5 years of contributions until i retire so according to that my retirement figure will be £80 in total.

Can anyone shred any light on this transition period. If we cannot take the better of the two afterwards it seems extremely harsh.

greenglide

You really should not read the Daily Mail.

The transition lasts forever, just its impact becomes less.

kevkj

Greenglide thankyou for your reply but i have googled high and low for confirmation that the foundation fee will be ongoing ,but it seems to not be anywhere.yest i keep seeing transition period referred to,seems very poor inrformation given out by those at the top,

Linton

kevkj wrote: »

Greenglide thankyou for your reply but i have googled high and low for confirmation that the foundation fee will be ongoing ,but it seems to not be anywhere.yest i keep seeing transition period referred to,seems very poor inrformation given out by those at the top,

Surely the transition is a one off event at which you proceed under the new rules from april 2016 with a base of either what the old system had accrued at that time or what you would have accrued under the new system had it been in place with a deduction for contracting-out..

greenglide

These are "transitional measures" but the result is to give you a "Starting Amount" in 2016 based on the higher of the old rules and new rules amount.

From that point on any further qualifying years add to the Starting Amount until the amount is equal to the nSP full rate. Additional years (Post 2016 years) cannot take you above the nSP maximum amount.

If your Starting Amount is greater than the nSP maximum amount you get this as the "Protected Payment" and this is uprated by CPI up till SPa and onwards.

The Starting Amount at 6/4/2016 is also revalued each year - presumably by triple lock up to the nSP maximum amount and CPI thereafter but I havent seen any evidence of this.

The transitional protection is in the legislation - the Act is here along with summaries - https://www.gov.uk/government/collections/pensions-bill
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

http://www.parliament.uk/business/publications/research/briefing-papers/SN06525/the-new-single-tier-state-pension

xylophone

If this is the article, http://www.thisismoney.co.uk/money/pensions/article-2942928/Over-55s-apply-new-state-pension-forecasts-DWP.html

it does not say that the "foundation amount" calculation will change in 2021.....

The OP needs to read https://www.gov.uk/new-state-pension/how-its-calculated

"Valuing your National Insurance contributions and credits made before 6 April 2016

Your National Insurance record before 6 April 2016 is used to calculate your ‘starting amount’. This is part of your new State Pension.

Your starting amount will be the higher of either:

the amount you would get under the current State Pension rules (which includes basic State Pension and Additional State Pension)

the amount you would get if the new State Pension had been in place at the start of your working life"

jamesd

Assuming you continue working you will have a foundation amount that is likely to be about the same as the current basic state pension. Each year worked after that in the flat rate system will increase your pension by 1/35th of the flat rate amount until you reach the maximum. It is likely that you will end up with both the maximum flat rate and also the private pension from the contracted out money.

kevkj

James not in my case i polan to retire in 5 years so will not have chance to build up the new pension thats why its so important the government dont take away the old foundation figure.
I do not want anything i havent earned just the entitlement to what i have accrued ie £113= £16 additional+ any payments between 2016 and 2020 when i retire at 56.
Im happy with that just do not want the rules changing again and everyone put on the new system.I know a lot of people say that wont happen.Unfortunately they are guessing also.

greenglide

Unfortunately the article in the Mail is seriously flawed (nothing new there!).

They are talking about the 2021 date in a context that it is totally wrong. By 2021 the majority of people (but by no means all) who are part of the transitional arrangements and get the "Protected Payment" because they are getting more that the nSP maximum will have retired but not all of them.

The Starting Amount will always be the Starting Amount (uprated by inflation) until the last person who paid any contributions into the old scheme has retired. This is how the system works.

So after 6/4/2016 (when the Starting Amounts will be cast in stone) you will be able to know what your Starting Amount is, happy in the knowledge that it will increase with inflation for as long as it takes for you to reach SPa.

Unfortunately they are guessing also.

We are not guessing. We are ignoring the rubbish that the mail is spouting (again) and using information from the pensions act 2014 and the documents produced by the Government / DWP.

The Mail (like many others) regurgitates rubbish that fits its political spin - including the "fact" that no-one has to purchase an annuity for April this year when this requirement was removed ten years ago.

Sterlingtimes

greenglide wrote: »

Unfortunately the article in the Mail is seriously flawed (nothing new there!).

Thank you, greenglide. I read through the legislation and agree that the position that you present is entirely correct.

The Daily Mail's reporting in this context is irresponsible. It appears to be setting out to frighten the reader and the on-line version encourages readers' comments that similarly lack authority. Incredibly, readers then vote upon the comments and the most inaccurate comments receive the highest number of votes.

coyrls

Sterlingtimes wrote: »

Thank you, greenglide. I read through the legislation and agree that the position that you present is entirely correct.

The Daily Mail's reporting in this context is irresponsible. It appears to be setting out to frighten the reader and the on-line version encourages readers' comments that similarly lack authority. Incredibly, readers then vote upon the comments and the most inaccurate comments receive the highest number of votes.

I find this whole “crowd sourced” view of the truth a bizarre concept. It’s one thing to have an opinion on a celebrity’s haircut and to vote on whether it is an improvement on their previous style but to apply that concept to a matter of fact rather than an opinion is frankly stupid. Perhaps if enough Daily Mail readers vote for it, the world will be flat.