New state pension

Triumph13

greenglide wrote: »

At present is appears to be a plan to allow people to sell the annuity income stream to a third part financial institution in exchange for a, presumably taxable, lump sum.

The simplest way to handle the tax would be for the 'lump sum' to be something akin to a transfer value that they can have put into the private pension or SIPP of their choice. It can then be taxed as extracted in the same way as an existing DC pot.

Pobby

jem16 wrote: »

True - but I only checked the posting history because the OP said this;



Made me think that the OP was already in receipt of a state pension and was hoping for a higher rate from the new state pension without realising that many will never actually get that amount and would be better off (or at least no worse off) under current rules.

Hi again. Yes i should have been a little clearer. I am in receipt of the SP plus serps bringing me up to £152 per week. Add to that a small pension of around £75 per week.

Sorry about that.

bogotard

Hi, long time lurker - wonder if you could help settle an argument.


My auntie was bemoaning the new state pension at the weekend as she and husband have both reached retirement age in recent years (actually they are deferring state pension at the moment which seems better value, but that's a different point).


She thinks it is unfair that if only she got to retirement age this summer instead of a few years ago, she would now be on the new flat rate pension of £150ish instead of their own rates of £110 ish. Thats a big chunk of money to get for 'free' for the next few decades and be missing out on for unlucky timing. I think they both served their time to qualify for full pension at new rates (ie. 35 year plus rather than just 30).


But I don't think her point is valid, because they only reason they are not already on a lot more than £110 is because they contracted out and had more money going into the employer scheme or more money in their own pocket etc. I don't have all the details but one of them has something like a fiver of extra pension on top of the basic £110 while the other has none.


So I said it makes sense that they are stuck at £110 with a good employer DB income on the side, and not £150 because people are only getting £150 by adding together their basic state pension and their extra state pension and if they contracted out they would have the £150 slashed to something lower.


She is unconvinced and thinks the whole point of the new pension is that if you didn't get put a lot of extra 'state second pension' away over time is that you will get it anyway as long as you served your full 35 years.


So to settle an argument, is there a difference between 'not having much / any state second pension top up because you contracted out' which is preserved under the new system so you still don't get it, which I think would be my Auntie's situation, and then on the other hand 'not having much / any state pension top up because you never earned much over your life (low paid job)' in which case you will get the full £150 which is the new fair amount of money for everyone to get as a minimum in absence of specific individual circumstances.


Not sure if the question makes sense but she thinks people are getting an extra £40 that she doesn't qualify for and she has been done out of a pension by being unlucky with age.


I said she wouldn't get it anyway under new system because of the contracting out, and the people who are winners and losers are the ones who pay a lot of NI or don't pay a lot of NI depending on their salary rates going forward and all get harmonised to one level. That harmonisation doesn't extend to people who didn't pay a lot of NI full stop because they contracted out into a teacher scheme or a government scheme or a blue chip company DB scheme, so her and husbands ex colleagues are not going to be magically better off than they who retired in last couple of years.


Sorry to hijack thread but the title seems relvant.

greenglide

You are largely right. If they were both working for many years but were contracted out (Teacher, Civil Servant etc) then as part of the transitional arrangements they would have got the same as they are now.

And if they had an SPa date after the new State Pension comes in they would only get half the rate for deferral and the increments earned for it arent inheritable.

You can't easily compare the two schemes.

Dunnit

I know a Civil Servant of 30+ years and he has a forecast for next year of £114.75. Your aunt and uncle would have received similar amounts so they have not lost out.

bogotard

Thanks that does make sense to me, it's what I thought. It's not that teachers and civil servants retiring next year are getting a huge boost compared to those retiring last year.


I tried to explain that if you had taken an employer DB pension you wouldn't have a 'side pot' driven by NI money because you never paid it in, and so they are not comparing like with like when looking at their £110 now vs someone else's £150-odd later if that someone else did have a side pot. But they are getting hung up on the fact that they heard you get the higher of your basic start amount and this new flat level, so think they could have retired later and got given this new flat level, which is higher than what they are actually getting


I don't know if there's an easier way to explain why they don't lose out or a web link that shows a definitive chunk that would get taken away from them off the new standard amount, if they had always contracted out. I know going forward people aren't contracting out anyway and someone mid career would just get a start amount now and then accrue under new scheme going forward. But they think they have the worse end of the stick compared to others. At least my auntie does, my uncle seemed more like he might see my point but didn't want to tell my auntie she is wrong!

jem16

bogotard wrote: »

I don't know if there's an easier way to explain why they don't lose out or a web link that shows a definitive chunk that would get taken away from them off the new standard amount, if they had always contracted out.

This paper might help - there's also some case studies on it.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

Pennywise

I know two IFAs and they've both independently said that their regulators will expect a proper evaluation and proof that the pensioners can support themselves if they cash in a pension. Apparently, the regulators and networks are scared stiff of another mis-selling scandal, so IFAs simply won't act for anyone who wants to splash the cash without any plan B for the rest of their retirement. Of course, the execution-only firms won't have to worry (or will they?). I think, in reality, there will be safeguards to stop people spending becoming reliant on state funding instead.

ronaldo53

A NI question (it has become so complicated,wonder why)

Having just received NI pensions forecast and work/NI contributions history, which incidentally it has missed out my first 6 years of employment (4 of which I was an apprentice) I have written back with further information,

My current history states I have paid 32 years NI contributions(which up to recently was enough to qualify) I took early retirement at 50 years old and then became a ltd company (working as a contractor) my accountant advised me that it was unnecessary to continue to pay NI contributions.

I am now 61 ,I receive a pension from my former company Bae.I dont know whether that scheme was contracted in or out? Could anybody please clarify/ simplify if I will receive a full state pension? Cheers

xylophone

According to the BAE systems Pension Scheme booklet, the Scheme was contracted out.

As you are 61, you can get the new state pension forecast which should show your position with regard to state pension.

https://forums.moneysavingexpert.com/discussion/5171092