Serps

jamesd

pedrothewheel wrote: »

I wonder if anyone can help me with this, I too contracted into Serps at a early age although I really didn't quite know what I was doing, I was then automatically contracted out about 10 years ago.

Isn't that the wrong way around? That is, everyone started contracted in to SERPS and stays that way unless they contract out. Then around ten years ago many companies started contracting people back in.

pedrothewheel wrote: »

I panicked a bit last year and I was advised to contact the National Insurance Office to find out if there was anyway of repaying the shortfall to be entitled to a full pension

A full state pension under current rules is about £250 a week. This is because the state pension under current rules has three parts:

1. the Basic state Pension. This is not affected buy contracting in or out. Each year worked or receiving Child Benefit counts as one year. There is currently no minimum number of years and you get the full Basic State Pension after 30 years.

2. the Additional State Pension. This is earnings-related and increases only for years when contracted in. It is reduced by years contracted out as well, with fairly complicated rules.

3. Graduated Retirement Benefit, an earnings-related payment that could be a couple of Pounds a week for those who started working before SERPS started.

pedrothewheel wrote: »

their answer was that i needed 30 years and that I had 29 qualifying years up until April 2014 so I'm guessing now its 30, But i don't know how I have...

Yes, you'll have an entitlement ot the full Basic State Pension, some Additional State Pension, maybe some Graduated Retirement Benefit and also keep whatever you got from contracting out.

pedrothewheel wrote: »

It also said the pension is changing in 2016 and that you only need 10 qualifying years, so am I right in thinking that I will get a full pension?

No. Ten qualifying years does not get you the full flat rate capped amount. It's just the new minimum number of years before you get anything at all.

What will happen is that from 6 April 2016 two calculations will be done to work out your Foundation Amount:

1. Current/old rules.

2. New rules. For those who contracted out these are less favourable than 1, so it'll almost always be 1 that is used.

Since you have 30 years your Foundation Amount is going to be at least the full Basic State Pension level. You will probably also get a bit more due to the years contracted in but it's hard to work out just how much because it depends on how you were contracted out and the specific years.

Starting from 6 April 2016 each year worked or years after that purchased will increase the Foundation Amount by 1/35th of the flat rate until you reach its cap level, likely to be around £155.

pedrothewheel wrote: »

I done the same thing for my husband who didn't contract out, but has a shortfall off 2 years but I'm assuming this year and next year makes up the shortfall therefore we shouldn't pay anything..

Just ask for your Foundation Amount calculations once those are available. They are now for people who are 55 or older. Once you know that you can decide what to do about working or buying post-2016 years.

jamesd

pedrothewheel wrote: »

Just read my husbands letter again and it says he has 22 qualifying years and a shortfall in 2 years, this was at April 2014

Please say more about the shortfall wording. Exactly what the letter says would be good. The reason is that the current rules full basic state pension level takes 30 years so he'd be 8 years short of that, not just 2.

pedrothewheel wrote: »

am I right in thinking if he pays the shortfall he will have the 22, plus the 2 shortfall years and 2 for 14-15, 15-16 equalling 26 to transfer in to the new scheme therefore needing to work another 9 nine years to get full pension at 35 years, and if he doesn't pay the shortfall he will need to work another 11 years?

Was he ever contracted out? If not, he will have some earnings-related Additional State Pension so he'd start out closer to the flat rate cap. He might even be above it already, if he is, he'd keep the extra.

For years after 2016 each year worked increases the state pension by 1/35th of the flat rate until its cap level is reached.

Say he really had no Additional State Pension at all somehow. He'd have at least 26/30ths of the current Basic State Pension level as his foundation amount. That's 26 / 30 x £115.95 = £100.49. Say the flat rate payment/cap level is set at £155 a week. He'd be short of that by £54.51. The number of years to work to get to the full flat rate is 54.51 / (155/35) = 12.3 years. But it'd probably really take less because he probably does have some Additional state Pension entitlement. But if not contracted out a lot he'll also have some Additional State Pension from the contracted in years. That would increase his Foundation Amount and reduce the number of years.

If he didn't contract out, the new rules version of the Foundation Amount calculation might be better for him. The new rules calculation would be 26 / 35 * 155 = £115.14 a week. He'd be short of the full flat rate by £39.82 and it would take 29.82 / (155/35) = 9 years.

Without knowing the exact contracting out details it's impossible to know which of the old or new rules calculation would be best for him. We can be sure that at the worst it'd take 12.3 years but it'll probably be less.

You each also get whatever your contracted out years got you, either pension pots of your own or higher work pension entitlements.

xylophone

Have you read https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/424121/dwp040b-apr-2015.pdf