State pension blooper

seven-day-weekend

green_man wrote: »

These calculations certainly confuse me and do not seem to be correct.

Surely in the OPs case they should get the full basic pension (£116 ish). then for the Sp2 element they have missed 7 years out of 35 so I would expect the serps element to be reduced by 1/5. But a £30 reduction is 1/5 of the whole pension not just the Serps element. ?

That's how I read it too. They WILL get the full State Pension. plus what they have qualified for in SERPs and S2P , plus what they have in their opted out Pension.


What's the problem? How does the OP think they have missed out?

hugheskevi

Surely in the OPs case they should get the full basic pension (£116 ish). then for the Sp2 element they have missed 7 years out of 35 so I would expect the serps element to be reduced by 1/5. But a £30 reduction is 1/5 of the whole pension not just the Serps element. ?

Additional Pension is not based on 35 years, instead it builds up each financial year of working life.

The OP said "I have 46 years contributions but 7 of those years I had contracted out with a company pension." The qualification criteria for Additional Pension is different to basic state pension, and it is simple to have a qualifying year for basic state pension without earning any Additional Pension, even if contracted-in (for example, Home Responsibilities Protection (children) or starter credits (for those aged 16-18)...the rules have changed several times so were different for most of OPs career).

Additional Pension accrual is related to earnings, so it isn't a simple pro-rata relationship.

The way non-accrual/deductions for being contracted out applies have changed over time. Contracted-out deductions can increase at a different rate to the accrued pension, even resulting in a negative entitlement. Although a negative entitlement is not deducted from basic state pension, if someone with a negative entitlement started contracted-in employment the pension they accrue would first be used to reduce the negative entitlement. Once in payment, due to the different rate of increases it is possible for an individual to start retirement not entitled to any Additional Pension, but then over time become entitled due to the different up-rating.

The whole system is a mess, so it is very hard to understand what is going on without a comprehensive history of earnings.

green_man

The whole system is a mess, so it is very hard to understand what is going on without a comprehensive history of earnings.

You are right there. The OP seems to be getting little more than the basic state pension, despite having payed 39 years of Serps. That surely cannot be right.

hugheskevi

The OP seems to be getting little more than the basic state pension, despite having payed 39 years of Serps.

The OP said they had 46 years contributions. It is not clear that all, or indeed any, of those years involved earnings above the lowest threshold to qualify for SERPS. I wouldn't rely on an inference that 'contributions' means 'earnings' when it could easily mean 'qualifying years.'

A lifetime spent with long periods out of the labour market bringing up children, part-time working, unemployment, low earnings, disability, being contracted-out, etc, could all lead to little or no SERPS but a large number of qualifying years for basic state pension.

Due to the way the system has changed, two people of the same age with the same number of years raising children, with low earnings, etc, but doing the things in different years could end up with very different amounts of Additional Pension. For example, someone earning at the Lower Earning Limit between 1997-2002 would have a fraction of the amount of Additional Pension than if they would have earned by working at the Lower Earning Limit between 2002 and 2007.

If the OP does have 39 years of contracted-in earnings which are well above the Lower Earnings Limit, then no, the amount cannot be right. But I would be examining those assumptions before making any conclusions.

Archergirl

I contracted out of SERPS for a number of years, the money went to CIS.
When I was 60 CIS wrote to me to say I could now claim my pension, they pay me about £90 a month from age 60 instead of having to wait till I am 63 as I do for my state pension.
Rightly or wrongly, I am happy.

mumps

seven-day-weekend wrote: »

That's how I read it too. They WILL get the full State Pension. plus what they have qualified for in SERPs and S2P , plus what they have in their opted out Pension.


What's the problem? How does the OP think they have missed out?

I think, I'm not sure but this is how I read it, that she retires after the new pension comes in so she gets the larger pension when you compare her entitlement of the new pension to the old. As she has paid NI, without being contracted out, for the required 35 years she thought she would get the full new pension but the 7 years she was contracted out will be deducted from the 35 years not the 40 something years she paid including the 7 years opted out. I hope that makes sense.

As I said before if she has paid 35 plus years without being contracted out I think it is easy to see why she would think that she qualified.