State pension blooper

schojac_2

Preparing to retire and approached pensions to obtain prediction of my expected state pension.

Shock horror - £30.00 less than the expected £150. I have 46 years contributions but 7 of those years I had contracted out with a company pension. That's okay I thought I still have the required 35 years to qualify. No you haven't pensions stated; the seven years that I was contracted out are deducted from the 35 qualifying irrespective of the 46 years contributions. Basically I have 28 years out of the 46 to calculate my pension.

Feeling really cheated:(

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schojac wrote: »

Preparing to retire and approached pensions to obtain prediction of my expected state pension.

Shock horror - £30.00 less than the expected £150. I have 46 years contributions but 7 of those years I had contracted out with a company pension. That's okay I thought I still have the required 35 years to qualify. No you haven't pensions stated; the seven years that I was contracted out are deducted from the 35 qualifying irrespective of the 46 years contributions. Basically I have 28 years out of the 46 to calculate my pension.

Feeling really cheated:(

Whats your SP using the system used at present?

McKneff

Full state pension is not £150, it is about £108 and you will still get the full state pension. The rest is made up of SP2, Serps......


I think it is you who is not understanding it.

kidmugsy

schojac wrote: »

I have 46 years contributions but 7 of those years I had contracted out with a company pension. That's okay I thought I still have the required 35 years to qualify. No you haven't pensions stated; the seven years that I was contracted out are deducted from the 35 qualifying irrespective of the 46 years contributions. Basically I have 28 years out of the 46 to calculate my pension.

Feeling really cheated:(

Whereas you ought to be feeling really silly because you've misunderstood. Contracting out does not mean you lost years of pension entitlement: you contracted out only from the SERPS/S2P bit. Your reward is to get more from your company pension. You can't really have been expecting both to get more from the company scheme, and still get rewarded by the taxpayer for the NI contributions you avoided, did you?

agarnett

McKneff wrote:

I think it is you who is not understanding it.

schojac and several million others, I'd say. We all understood what came out of Cameron's mouth when the flat rate pension was announced, but the reality is completely different and only understood by the few.

Thanks to raised awareness on sites like MSE, there is a growing group who have discovered strong pointers to reality, but none of us could sit down and tot up our state pensions entitlements with any degree of understanding of how one bit of our contracted out pensions affects other bits and overall how it has actually affected the state pension.

SERPS personal pension policies were introduced as a promotion by government and then totally neglected by successive governments as a concept, so that there will be a significant group of people who reached age 55 and cashed in those policies. This without anyone, including the experts, having the slightest idea how they would come to affect the basic state pension, or any inkling that they therefore needed to be safeguarded from any cashing in.

They were all measured by experts as simple personal pensions like any other when it came to cashing them in or stuffing them into a SIPP for drawdown - it was a simple choice - one more pension pot to pay a pension if you let it run, or part cash and drawdown perhaps if you didn't. No-one ever dreamed that it would directly affect state pension entitlements of the future. It is beginning to look very much like the age old reduced married women's NI problem that left so many women without a proper pension. Of course if those women did not pay a full NI contribution, they had the money in their pocket. Did we blame them for a poor choice? No - they were encouraged to go that route without any serious warning that they needed to save up for a retirement in poverty with a reduced pension. I believe an aunt has one. She seems to be receiving just £65 per week. She is ok at the moment whilst her husband is alive because he receives a state pension of around £100pw more (£165). But she is likely to survive him - then what?

Same with contracting out. SERPS personal pensions were simply another "pocket" not so much where full NI contributions did not leave the individual, but were rebated. And now look - another much larger tranche of second class pensioners has been created of both sexes this time.

Contracted out implications of occupational schemes from 1978 are also woefully badly understood and with many of the old DB schemes having deliberately avoided issuing pension benefit statements to deferred members over the last 10 years, the communication on how they affect state pension is virtually non-existent.

It is an appalling mess, and I wonder if you McKneff, and you kidmugsy, realise how appalling it actually is.

McKneff

I probably don't but Im seeing it more and more.


Mine was pretty simple to be honest, I only paid 20 years of full stamp so was only entitled to 50% SP so got my state pension on my OHs NI.
I did understand about the Serps and the contracted out points.


I was one of the ones trapped into the Married Womens Stamp era.
it was certainly never explained what the implication were and that it affected the amount of state pension. When you are 17, married and you get asked do you want to pay £1 or £3, seemed like a no brainer at the time.

schojac_2

I accept that I have totally misunderstood and when I took out the company pension was unaware of the consequences - it was 35 years ago and I was much younger.

I'm just disappointed in my own ignorance and now at this late stage will be unable to do much about it. However, my saving grace is that the pension pot and the possible annuity from it will pay a little more than I would have got from state pension.

My concern is how many other people, who like me do not fully understand the pension system, and have many more years contracted out, will fall into the same misguided thinking.

Many thanks for all the enlightenment; feeling rather sheepish.

xylophone

Preparing to retire and approached pensions to obtain prediction of my expected state pension.

I assume you become eligible to draw your state pension after 6 4 16- see https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

Even under the current scheme, there is a Contracted Out Deduction applied to Additional State Pension earned between 1978 and 1997.

See https://forums.moneysavingexpert.com/discussion/comment/60319901#Comment_60319901 post 18.

molerat

When did you start to "expect" £150 ? You will get exactly what you would have got before the new system was introduced, in fact you may get slightly more as the whole "foundation amount" (up to the max nsp) will be increased by the triple lock instead of the various components being uprated by differing figures.

xylophone

it is about £108

No - currently full Basic State pension is £115.95.