Pension changes 2016

SJG1

DaveMcG wrote: »

The entire purpose of the new arrangement is to reduce the burden of pension credit by increasing the pension of the groups most likely to require pension credit. The cost of this is to be borne by those least likely to require pension credit - ie those in salary related schemes and above average earners.

Private sector salary related schemes will face increased costs when contracting out is abolished and may cut members benefits or shut down the scheme.

Like the OP I'm in a railway scheme. I have been trying to find out what effect the new rules will have on our scheme with little success. One thing I'm pretty sure of our employers won't like paying an extra 3.4% into our pensions.

hyubh

DaveMcG wrote: »

Private sector salary related schemes will face increased costs when contracting out is abolished and may cut members benefits or shut down the scheme.

The 'scheme' doesn't face higher costs, the employer does, and public vs. private sector doesn't come into that. The difference is that private sector DB schemes are being allowed to adjust future accrual downwards to offset the higher NICs now due from the employer. That's hardly a reason in itself to 'shut down the scheme' - indeed, it's a reason not to even with the end of contracting out.

Matters are actually much more problematic in public sector-land where the LGPS was recently revised completely independently of the new state pension plans. Over there it's belated discussions about the possibility of recycling the additional NICs back into the pension funds to allow reducing employer LGPS rates correspondingly, though that could get complicated given third and private sector employers participate in the scheme as well as local councils and state schools.

xylophone

Like the OP I'm in a railway scheme. I have been trying to find out what effect the new rules will have on our scheme with little success. One thing I'm pretty sure of our employers won't like paying an extra 3.4% into our pensions.

http://www.parliament.uk/business/publications/research/briefing-papers/SN06725/pensions-the-statutory-override-and-protected-persons


http://www.rmt.org.uk/about/pensions/pensions-news/network-rail-pension-scheme--proposals260115/

might be worth a look.

roy_c

Triumph13 wrote: »

Whilst it would be nice if we knew where you got that £67.84 figure from, it is actually completely irrelevant.
What you will get is your foundation amount calculated at April 2016 (and increased annually as usual). Your foundation amount is the HIGHER of the new rules calculation and the old rules calculation. I don't know if that £67.84 is supposed to be the new rules calculation, but your old rules calc is going to be the full £113 a week plus any SSP/ Serps for the years when you weren't contracted out.

I calculated under the new scheme, say the new pension is £148 / 35 years contributions = £4.22 x the number of years paid in full NI contributions ie 16

Am I doing this wrong?

Cheers
Roy

roy_c

Also in my pension newsletter it states
''the time you have been a member of the company pension fund you will not qualify for credits towards the higher flat rate pension,''

Triumph13

roy_c wrote: »

Am I doing this wrong?

Cheers
Roy

You are indeed. The transitional rules around the changeover are horribly complicated in terms of working out 'contracted out deductions' etc, but in the end they boil down to this:

• If you've spent much time contracted out then your calculation on the new scheme at April 2016 will be lower than under the old
• If you haven't been contracted out then you calculation at that point will be higher under the new method

To stop people losing out they work out both calculations then lock in the higher one. Whilst your contracted out contributions to date don't 'count' towards getting the higher single tier pension (as you were getting the rebate and your DB scheme), they do still count just as they always did to the OLD method.
What you will get is your entitlement under the old method, exactly as it always was, up to April 2016, then the opportunity to top it up to the full new method post 2016 at a rate of £4.20 odd a year. You are in the category of people who are the biggest winners from the change.

roy_c

Triumph13 wrote: »

You are indeed. The transitional rules around the changeover are horribly complicated in terms of working out 'contracted out deductions' etc, but in the end they boil down to this:

• If you've spent much time contracted out then your calculation on the new scheme at April 2016 will be lower than under the old
• If you haven't been contracted out then you calculation at that point will be higher under the new method

To stop people losing out they work out both calculations then lock in the higher one. Whilst your contracted out contributions to date don't 'count' towards getting the higher single tier pension (as you were getting the rebate and your DB scheme), they do still count just as they always did to the OLD method.
What you will get is your entitlement under the old method, exactly as it always was, up to April 2016, then the opportunity to top it up to the full new method post 2016 at a rate of £4.20 odd a year. You are in the category of people who are the biggest winners from the change.

Thanks for that, although I don't really understand that, it looks good to me.

I will be leaving in April or shortly after it 2016 will I need to top up my contributions or just leave as is?

xylophone

Have you obtained a new state pension statement?

https://www.gov.uk/state-pension-statement

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

roy_c

I'm waiting on that, applied about five weeks ago. But I hear they have a disclaimer in them.

webbit

atush wrote: »

sorry, but no, wrong again. I am guessing you didn't get a maths o level?

With 30 years you will not get a full new sp.

You will need a min of 35 years after april 2016, and you need to have been (or be in future) contracted in.

You only need (if retiring today ) 30 years to get a full basic sp, and you get more on top if you have been paying serps/s2p etc alongside.

atush you are a first class !!!!!!! , why slag people off now !!!! Off


My company got a 3.4% rebate and they plan to reduce benefits, and stop early retirement increase payments and bring retirement inline with state pension, w fought hard to preserve all our rights and yes we are lucky to be in this type of scheme, but to what cost