Contracted out years joke

hyubh

HappyHarry wrote: »

Fair point. Well made.

I shall take that at face value - thanks

DaveMcG

HappyHarry wrote: »

It's all down to people living longer. The alternative is culling, which would probably be even less popular.

This particular change isn't to do with people living longer. It's objective is to ensure that low earners and unemployed get enough in retirement to avoid the requirement for pension credit. It is funded by abolishing contracting out and reducing the amount that higher earners would have received in top ups from the state.

FatherAbraham

greenglide wrote: »

For several years now you have only been able to contract out if you were in a DB pension scheme. These people will now pay full rate NI (losing the contracted out rebate) and the employer will also pay full rate NI as they lose their rebate as well which is higher. The pension schemes will be allowed to increase the employees pension contributions without the agreement of the employees (a "permissive override") to recover the extra NI that they will be paying "through no fault of their own".

Except for employees of the state, who will be protected from having to increase their pension contributions in the way you describe, because the cretins who run the state negotiated that there would be no adverse changes to public-sector pension schemes for another twenty-five years.

It's funny, I was just reading an article about a ten-year clawback on bankers' bonuses being proposed, and I wondered whether there should also be a ten-year clawback on the huge pension benefits accumulated by senior civil servants and other state employees, if their work subsequently proves to be similarly damaging to the state.

Warmest regards,
FA

MPD

The clawback can already happen. If an official is found guilty of a serious enough crime, generally misconduct in a public office, then occasionally the pension is confiscated.

It is extremely rare but probably a bit more common than clawback from bankers.

SJG1

greenglide wrote: »

For several years now you have only been able to contract out if you were in a DB pension scheme. These people will now pay full rate NI (losing the contracted out rebate) and the employer will also pay full rate NI as they lose their rebate as well which is higher. The pension schemes will be allowed to increase the employees pension contributions without the agreement of the employees (a "permissive override") to recover the extra NI that they will be paying "through no fault of their own".

There hasnt been much debate about this so far?

Well if other DB schemes are like the railway scheme no-one has a clue what is going to happen yet. I have been told talks are on going so its just a matter of wait and see.

It does look like the railway companies will be able to claw there extra NI payments back from the pension funds unless staff are protected under TUPE (ex BR). Whether that will result in lower pensions or higher contibutions yet to be seen.

Thrugelmir

FatherAbraham wrote: »

Except for employees of the state, who will be protected from having to increase their pension contributions in the way you describe, because the cretins who run the state negotiated that there would be no adverse changes to public-sector pension schemes for another twenty-five years.

Contribution levels have increased in many schemes in the past 3 years. RA is moving in line with NRA. Higher NI from next year.

The screw is being silently turned.

bigfreddiel

I think it's a very fair system that is trying to encapsulate an extremely complex system that has grown over the last 60 years with a much simpler system. In my case under the old rules I get £147/wk and under the new rules I get £56/week So I will get the higher amount which seems fair enough to me.

I would guess my situation covers a large number of people.

Cheers fj

FatherAbraham

Thrugelmir wrote: »

Contribution levels have increased in many schemes in the past 3 years. RA is moving in line with NRA. Higher NI from next year.

Yes, sure that's all happened, but it was consulted, negotiated and agreed. That's not the point.

This change is different. Employers have been given the power to rewrite scheme terms in order to recoup the extra costs they will incur from the scheme contributors -- but public sector employers won't be able to avail themselves of this exceptional statutory intervention, because the state has gotten itself into a stupid mess where it's both a provider of state pensions and of employer pensions, and it can't be seen to rewrite the rules to its own advantage, even thought it's permitting ever other employer to do that thing.

Warmest regards,
FA

jamesd

Hadden01 wrote: »

It's not possible to remove this effect - all contracted out years are included in the calculation no matter how many contracted in years you might accrue in the future

That is not so. From the moment the flat rate state pension starts on 6 April 2016 further years worked will cause an increase in accrued state pension, up to the flat rate cap level.

What the contracted out years will do is reduce the Additional State Pension amount accrued and included in the Foundation Amount for the flat rate system. Potentially all the way down to just (years paid in up to 30, whether contracted in or out) / 30 * (Basic State Pension).

This is part of why those who contracted out are generally winners under the flat rate system. Provided they are a few years from state pension age they can get the increased personal or work pension from the contracting out plus the full cap level of the flat rate state pension. While a person who didn't contract out would get only the flat rate cap level and nothing for the extra years worked (though they might have a higher foundation amount than the flat rate cap).

Even without the flat rate transition arrangements what you wrote wouldn't have been correct. This is because the earnings-related Additional State Pension entitlement increases for all years worked, it's not capped at 30 years. The calculated Contracted Out Deduction value from the contracted out years could exceed the accrued ASP initially but eventually the S2P from more years worked could cover the full deduction and more.

The flat rate system abolishes the earnings related portion for years worked after it starts, replacing it with just flat rate accrual for each year, capped at the flat rate level.

GunJack

jamesd wrote: »

This is part of why those who contracted out are generally winners under the flat rate system. Provided they are a few years from state pension age they can get the increased personal or work pension from the contracting out plus the full cap level of the flat rate state pension. .

Yes, I'll be one of those people - by next April I'll have 31 years in (3 year's credit for 16-18, plus 28 years of being in DB schemes so all contracted out). So my Foundation Amount will be equal to the full basic sp at that time (£116-ish) rather than the calculation under the new rules which would have reduced the foundation substantially because of all the contracted out years.

But, I'll still be 18 years away from SP age, so every year I do will add £4-odd pw up to the Single Tier max, so depending on how much p.a the STmax goes up to in that time I can keep adding SP value...

actually, my SP will probably not hit the STmax, as if it grows at 2.5%pa that'll be £233pw by I get there, I can only get up to £205pw...but certainly won't be losing out by having been contracted out all my working life to date