State Pension Question

tigerspill

Folks,

I am trying to get my head around the changes in State Pension and how they affect me.

I have 31 years NI contributions. I was contracted out for 21 years.
I believe that under the existing scheme I would be on the maximum basic state pension of £113.10 in today's money.

I am 49 so have a long way to go to collecting.

I believe that under the new rules, my basic SP would be much lower because of the contracted out years, but that they take the higher of old and new which would be the £113.10 - my new "Starting Amount".
Is this correct so far?

From April 2016 onwards if I continue working and paying NI, my SP will increase from the £113.10 (plus what ever index increase there is next year) by £4.24? So if I work for two years after 2016, my SP would be £113.10 plus 2x£4.24 - £121.58.
OR, do my additional NI contributions after 2016 go to paying for my lack of payments due to being contracted out and therefore stuck at £113.10 for many years.

The web page says -
If your starting amount is more than the full new State Pension
The difference between your starting amount and the full new State Pension is called your ‘protected payment’.
Your protected payment is paid on top of your new State Pension and increases each year in line with inflation.
Any qualifying years you have after 5 April 2016 won’t add more to your State Pension.
Does this mean my SP is capped at £113.10 plus indexing forever?


At April 2016, I will have paid NI contributions for 32 years. This is two years over what is needed for the old maximum SP - do these two years just get "lost"? or do they continue to be added on towards the new maximum of 35 years. So to get the max SP, do I need to contribute for five years after April 2016 - i.e. in my case I actually have 37 years contributions?

Does this make sense?
I am totally confused.

Cyberman60

You need 35 years under the new scheme. I retired when the rule was 30 years and have consequently been stuffed unless I start work again or can make some voluntary contributions !! :eek:

MacMickster

tigerspill wrote: »

The web page says -
If your starting amount is more than the full new State Pension
The difference between your starting amount and the full new State Pension is called your ‘protected payment’.
Your protected payment is paid on top of your new State Pension and increases each year in line with inflation.
Any qualifying years you have after 5 April 2016 won’t add more to your State Pension.
Does this mean my SP is capped at £113.10 plus indexing forever?

Your Starting Amount will be less than the full new state pension, so the section that you quoted doesn't apply to you.

Whatever the full amount of the new state pension will be (probably around £155pw), divide this by 35. You will then increase your pension by this amount from your starting amount for each year that you work from 2016, until you reach the full amount of the new state pension. At your age you should reach the full amount if you work and pay NI contributions for at least 10 years between April 2016 and your state pension age.

Y

molerat

You currently have a figure of 30 years (full) basic state pension plus any additional state pension, the "old" pension statements have this additional pension as a net figure with co deductions already taken.

Your "new" pension figure is 31/35ths of the new pension less a co deduction.

The starting amount will be the higher of the 2 and if lower than the "new" pension can be added to at the rate of £4.24? per year contributed up to the new max figure (£148)

If your starting figure were to be more than the £148 then you will get sf-£148 protected and increased by inflation then added to the new maximum (£148) figure which will be upgraded by the triple lock each year.

xylophone

https://www.gov.uk/new-state-pension/how-its-calculated

If your starting amount is less than the full new State Pension


You may be able to get more State Pension by adding more qualifying years on your National Insurance record after 5 April 2016 (until you reach the full new State Pension amount or reach State Pension age - whichever is first).

Each qualifying year on your National Insurance record after 5 April 2016 will add about £4.24 a week (which is £148.40 divided by 35) to your new State Pension.

The reference to

"Any qualifying years you have after 5 April 2016 won’t add more to your State Pension."

comes under

If your starting amount is more than the full new State Pension

tigerspill

xylophone wrote: »

https://www.gov.uk/new-state-pension/how-its-calculated

If your starting amount is less than the full new State Pension


You may be able to get more State Pension by adding more qualifying years on your National Insurance record after 5 April 2016 (until you reach the full new State Pension amount or reach State Pension age - whichever is first).

Each qualifying year on your National Insurance record after 5 April 2016 will add about £4.24 a week (which is £148.40 divided by 35) to your new State Pension.

The reference to

"Any qualifying years you have after 5 April 2016 won’t add more to your State Pension."

comes under

If your starting amount is more than the full new State Pension

So my new maximum state pension is going to be
£113.10 plus 5x£4.24 = £134.30 - if I work five years from April 2016 - and I have done at least 30 years by April 2016 irrespective of being contracted in or out?

It is really the impacts of being contracted out I am trying to understand. It sounds like this doesn't matter as regards the basic SP. I haven't currently got any "additional" SP

xylophone

Do you only intend to work until you are 55?

jamesd

If not working you'll also be able to buy more years later so what will happen is that you end up with the full contracted out money plus the full flat rate. Your foundation amount will be the basic sate pension level because that'll be the higher of the old and new rules calculations. Then more years worked or bought after the flat rate comes in will get you to the maximum flat rate eventually.

Give your age you're probably a loser under the flat rate system, ending up with less than you would get under the current one. But because you contracted out you will be less of a loser than those who didn't contract out and might even turn out to get more and not be a loser at all., particularly if you retire very early. The more years you work and the higher the pay, the greater the chance of being worse off than in the current system.

tigerspill

xylophone wrote: »

Do you only intend to work until you are 55?

Hopefully

drumtochty

You are 49.
You were 16 in 1982.
By that time SERPS had started.
You claim to have 31 NI credits and 21 years contracted out.

Depending on your earnings and the fact that you have a year to work until April 2016 you will have 32 years NI contributions.

Therefore to calculate your new system state pension at todays rate of £148.40 a week you will get £136 per week gross as you are missing 3 years less 21 x anywhere between (21*£1.79 a week and 21 * £3.75) depending on your earnings when you were contracted out. That deduction if you earned less than £12k a year (at todays rate) will be £37.60 a week and if you were on about £40 k salary (at todays rate) your deduction will be nearer £78.75 a week.
Therefore you will get between £57 a week and £98 a week from the new system pension.

On the old system pension you will get the £113.10 but what I do not understand is you have 31 credits less 21 years contracted out. Therefore are you saying you did not work during these other 10 years.

Otherwise why have you not got say 10 years plus next year so 11 x £2 a week for your second state pension or SERPS.

In that case say an extra £22 a week in the old system.
So a total of £135 a week in the old system. It could be higher.

If that is the case, your foundation amount will be the £135 then a further four new system afther April 2016 will then hit the £148.40 per week max new system state pension..

Therefore do you have an up to date pension statement to confirm no second state pension or SERPS.

jamesd

drumtochty wrote: »

what I do not understand is you have 31 credits less 21 years contracted out. Therefore are you saying you did not work during these other 10 years.

21 years working contracted out and accruing basic state pension plus no additional state pension. 10 years working not contracted out and accruing both basic state pension and additional state pension would be one way. Total of 31 years for BSP so maximum BSP entitlement. The ASP probably low enough to vanish in deductions even under the current rules calculation, though some might remain, depending on just when the contracted in and out years were. Low income under SERPS might explain no ASP, say just at the lower earnings limit.

Instead of years worked there could be some years on benefits and juvenile credits, both of which had generally produced BSP entitlement but no ASP entitlement.

Doesn't really matter much since we know from the original post that a state pension statement has been obtained and can assume that it has given the correct number of years.