Contracted out years joke

GunJack

redux wrote: »

Can anyone explain in simple terms why it is that people who have been contracted out, thus paying lower NI contributions and having that money instead put in a separate pension scheme, and will eventually receive the benefits of that extra money having been in that separate scheme, keep coming on here and elsewhere and complaining that their reduced contributions to the state scheme are going to buy them fewer benefits from the state scheme?

Is there something confusing about the meaning of the word contract?

If their private or company scheme hasn't done as well as they might have hoped, or something the salesman said hasn't been fulfilled or was misunderstood, the pension company is the target of their potential complaint, not the state.

...and why do some people assume that everyone is a pensions expert? I'm certainly not thick, and I suppose have been sheltered by being in the CS and then a company DB scheme, but for something as important as people's pensions, the rules & regs don't-half make it complicated to try and follow...

GunJack

..oh, and I personally was only ever expecting to get the full basic SP with no serps or whatever because I've always been contracted out.....

lazer

The joke is that existing pensioners will be left with £115pw while new pensioners get £150pw.

My Mum's retirement date is Feb 2016 - so she will get £115pw whereas if it was 2 months later she would get £150pw! (And no entitlement to pension credit as Dad also gets a state pension of around £140)

GunJack

lazer wrote: »

The joke is that existing pensioners will be left with £115pw while new pensioners get £150pw.

My Mum's retirement date is Feb 2016 - so she will get £115pw whereas if it was 2 months later she would get £150pw! (And no entitlement to pension credit as Dad also gets a state pension of around £140)

for new retirees post-Apr 16, they may well not get £150, it still depends on NI record and serps/company pension/combination of both...so has your mum worked and paid into serps/company scheme? I'm not being funny, one thing I have picked up on is that without substantially more info, no-one can give you anything like an accurate answer

xylophone

so she will get £115pw

She has no SERPS/S2P? Has she obtained a statement?

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

lazer

xylophone wrote: »

She has no SERPS/S2P? Has she obtained a statement?

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

Yes she has a pension forecast, and she has some SERPS from years ago before she had children, so i think she actually gets £120 - so she does a little bit more than the basic.

She worked from 16 - 28 (1967 - 1980) then became mainly a SAHM, going back to work at 48.

Dad worked full time from 16 to 60 (Redundancy at 60. and then a few part time/temporary jobs from 60 - 65) and did pay SEPRS/S2P but because he was a low earner his entitlement is £140 - still lower than the new flat rate pension.

Neither of my parents despite my dad working for well over 40 years and my Mum for 25 years will get more than the Flat Rate Pension.

Both have/had small private pensions but Dad cashed his in under triviality rules as the amounts were so small, and Mum will probably cash hers in too as the lump sum is more useful than £1.35 a week!

Both have full NI contributions records and would be entitled to the full flat rate pension if only they were slightly younger.

Their combined income in retirement will be £260, so mum is going to continue to work to top this up.

xylophone

Does your mother have no S2P for 2002 - 2015?


A top up from a non earner's pension contribution?

http://www.telegraph.co.uk/finance/personalfinance/pensions/11528623/Pension-profit-use-new-rules-to-grab-instant-25pc-returns.html

Could your mother pay the maximum into her pension while she is earning? Remember that she can contribute up to her net earnings into a pension scheme and the provider will claim the tax relief.

http://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/tax-relief-and-contributions

p00hsticks

lazer wrote: »

My Mum's retirement date is Feb 2016

I suggest she double checks that date, as according to this table

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/310231/spa-timetable.pdf

it's not possible for women to reach state pension age in February 2016. If she was born between 6 February 1953 – 5 March 1953 it would be 6th January 2016, or 6th March 1953 to 5th April 1953 would be 6th March 2016.

Either way, she gets to retire by the age of 63, which is 3-4 years earlier than the majority of those who will be getting the new single tier pension. So she might lose out slightly on the weekly amount, but she's getting it earlier than many.

Swings and roundabouts....

lazer

xylophone wrote: »

Does your mother have no S2P for 2002 - 2015?


A top up from a non earner's pension contribution?

http://www.telegraph.co.uk/finance/personalfinance/pensions/11528623/Pension-profit-use-new-rules-to-grab-instant-25pc-returns.html

Could your mother pay the maximum into her pension while she is earning? Remember that she can contribute up to her net earnings into a pension scheme and the provider will claim the tax relief.

http://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/tax-relief-and-contributions

We are considering using the lump sum from the occupational pension to buy the extra amounts but as the lump some is only about £10k it wouldn't actually buy that much -£11 a week, will definitely think about it though.

p00hsticks wrote: »

I suggest she double checks that date, as according to this table

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/310231/spa-timetable.pdf

it's not possible for women to reach state pension age in February 2016. If she was born between 6 February 1953 – 5 March 1953 it would be 6th January 2016, or 6th March 1953 to 5th April 1953 would be 6th March 2016.

Either way, she gets to retire by the age of 63, which is 3-4 years earlier than the majority of those who will be getting the new single tier pension. So she might lose out slightly on the weekly amount, but she's getting it earlier than many.

Swings and roundabouts....

She was born in Feb, so retiring age is Jan, I just assumed it was her birthday but she knew otherwise.

jamesd

A 10k occupational pension lump sum means that at least one of them was contracted out for many years and this is something that would be reducing that person's state pension, because the occupational pension would be paying it. That is, if it's a defined benefit one, like average or final salary.

If the occupational pension is not final or average salary it's worth saying more about just what it is. A lot of people just throw money away by buying an annuity when there are way better options available.

Do be sure that they know that pension contributions are a way for them to get free money from the government. Pay in £2880 net, tax relief even if no tax paid increases that to £3600 in the pension. They can then take out 25% of the 3600 tax free, £900, and pay income tax when taking out the remaining £2700. Assuming income tax is due on all of the £2700 because the full personal allowance has been used that'd be £2160 after tax. So pay in £2880, get out £3060, a gain of £180, or 6.25% of the amount paid in, over just a few weeks. The £2880 bit is for a person with no earned income. The Virgin Stakeholder pension is a good one to use for this because it has no charges.

Someone with a job can pay in the whole amount of their pay in the first year. If they take out any of the 75% they are limited to £10,000 a year or pay, whichever is lower, in later years. So it might pay to delay taking out the 75% part. You can't do this 25% only with the Virgin one.

A person who reaches state pension age before 6 April 2016 can get their state pension payment increased by 10.4% for each year they defer claiming it, or defer it after claiming. Can only defer after claiming once. For a person in normal good health it's a great deal. Funding this is a good use for lump sum money.