2016 state pension changes query

greenglide

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Just look around you, the world is flat!

jamesd

kevkj wrote: »

James not in my case i polan to retire in 5 years so will not have chance to build up the new pension

What happens is that you get a foundation amount value for what you have accumulated up to 6/4/2016. that will be the higher of the old and new rules and that foundation amount will not change in the future. For years worked after that you get an additional 1/35th of the flat rate added until you reach the full flat rate. If the flat rate ends up being £155 a week that means each year increases the state pension by £4.42 a week. The cheap way to get extra years after stopping normal work is to use the self-employed contribution route, where each week costs just £2.75. £2.75 once to get £4.42 a week from state pension age for the rest of your life is a great deal.

kevkj wrote: »

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.

If you don't use the self-employed contribution route I expect that in today's money you'd end up with something like £113 + 5 x £4.42 = £135.10. And five more years of either self-employed or bought after the flat rate comes in would take you to the full flat rate. Roughly, since the exact flat rate and your final foundation amount aren't known yet.

kevkj wrote: »

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.

Everyone who hasn't reached state pension age by 6/4/2016 is going on the new system. But our foundation amount will still be the higher of the old or new rules calculations, it's just years after that date which change.

One of the things worth knowing about this place is that I and the other regulars here have usually read the actual rules, white papers and other official publications. Overall we tend to do a better job than a typical journalist about being right.

kevkj

Thanks you have put my mind at rest .
James im actually better off than you think as my forecast i received recently was £113 and £16.00 additional state pension giving me a total forecast of £129 total.

So if i work for 4 more years after 2016 thats 4 x £4.42 =17.68

So a total of £136.48 at 56 years of age that will do me .

Thanks again.

jamesd

Right, but because you were contracted out I think that there will be some reduction in the additional state pension part. To be cautious I assumed that all of it would go.

You probably won't be able to get a correct foundation amount value until early in 2017 because it'll take a while for the 2015/16 NI to be credited and included in the calculation. Once you can get that final foundation amount number you'll be in a position to work out how many more years you might want to buy somehow to get to the full flat rate. I just assume you'll want to get those years because it's such a good deal. Well, it is at current self-employed NI rates, that could change.

mgdavid

kevkj wrote: »

So a total of £136.48 at 56 years of age that will do me .
Thanks again.

which will be indexed until you start receiving it at SPA in another 10 years or so.
As you were contracted out I guess you have a good DB pension to live on from 56 onwards?

BoxerfanUK

jamesd wrote: »

The cheap way to get extra years after stopping normal work is to use the self-employed contribution route, where each week costs just £2.75. £2.75 once to get £4.42 a week from state pension age for the rest of your life is a great deal.

Jamesd. I take it you would need to start up a bona fide business earning over £5885.01 per year in order to pay the lower £2.75 flat rate of self employed NI to get additional qualifying years.... No!!

greenglide

There is no rule about how much you must earn to pay the self employed contributions.

The rates may change when the new State Pension starts in 6/4/2016 as there be less difference between self employed and the full rate employed contributions.

BoxerfanUK

Hi Greenglide,


The link below states that you pay no voluntary NI contributions if self employed and earning up to £5885 pa but £2.75 pw if earnings are over this amount. So, if earning under 5885 and paying zero NI doesn't that mean that it does not count as a qualifying year for NI..... or have I got that wrong? It also mentions a small earnings exemption though, so do I take it that if you had this you would pay zero NI but that it WOULD then count as a qualifying year?

https://www.gov.uk/self-employed-national-insurance-rates

JezR

You can opt to pay no NI if you earn less than £5,885, but you can choose to pay the Class 2 flat rate, and get what this entitles you to.

BoxerfanUK

Ah I see, thanks very much JezR