State Pension Boost help

john78

Hi wondering if anyone can give me some advice in relation to my dad's state pension. He is 65 in November so before the state pension allowance is increased. Today he gave me a scrap from a newspaper saying that those who reach pension age prior to April 2016 can pay some contributions to increase their state pension amount.


Can anyone point me in the right direction?


He is likely just clutching at straws as feels hard done to that the pension will increase just after he is due to receive it. Same happened with my mums state pension, she had paid a high amount of national insurance each month but at the time you needed to have worked 39 years to get the full state pension, think the year after she got hers they reduced it to 30.

PennyForThem_2

Has he asked for a pension statement? This will give him an expected weekly amount that he should receive.


Also top up info is here:
https://www.gov.uk/statepensiontopup


If he does not need to actually take his state pension then he can defer which for those eligible before April is 10% ish interest per year


https://www.gov.uk/deferring-state-pension/what-you-may-get

john78

Hi and thanks for your reply.


No he hasn't requested a pension statement yet but with over 40 years paying contributions we assumed he would get the full amount which I think at his date of retirement is £115.


I had seen the link for buying additional state pension it works out to buy another £25 a week in pension he would need to pay a lump sum of £22250 and even that wont get him to the 2016 rate of £155.


I had hoped there was something else available as I thought the new scheme was initially meant to be introduced in 2015 rather than 2016.


Will ask for a pension forecast but guess like my mum he will just miss out.

Vortigern

john78 wrote: »

No he hasn't requested a pension statement yet but with over 40 years paying contributions we assumed he would get the full amount which I think at his date of retirement is £115

£115 is the basic state pension at the moment. He may be entitled to Additional State Pension or State Second Pension, depending on whether he has paid into a company pension scheme.

He needs to get that statement.

greenglide

There are two options.

He can defer his pension which will get them over 10% extra on his weekly pension for each year he defers or pro rata if shorter period. An extremely generous deal.

Alternatively he can pay the class 3a contributions where a lump sum is converted into a weekly amount. This is not as generous and is equivalent to deferring at 5% or so.

Has he been in contracted out employment for part or all of his working life? Anyone who is spent period not contracted out will have accrued Additional Pension from SERPS / S2P which can take the pension paid significantly and can be more than the new State Pension that starts next year.

p00hsticks

john78 wrote: »

Will ask for a pension forecast but guess like my mum he will just miss out.

If it makes him feel any better, he won't be "missing out" on anything.

If, as you say he's got 40 years NI contributions but his predicted pension under current rules is only £115, then this indicates that he's been contracted out into a private pension scheme for the whole of his working life. Under the rules of the new scheme, considerable deductions from the £155 headline figure are taken for those in this position (to allow for the fact that they will have paid NI at a lower rate than those 'contracted in').

For those retiring shortly after the new scheme comes in, there is a transition period where the government calculates what you would get under both the old and new rules, and gives you the higher of the two amounts.

For those like your dad, with a history of being contracted out for the whole of their working lives, the amount under the old rules will be higher than that under the new.

As others have suggested, an alternative is that he's not been contracted out the whole time and could be entitled to some SERPS or S2P on top of the £115 basic amount - and him getting a pension forecast will show this up.

john78

Thank you for the replies. My Dad has been a self employed hackney taxi driver for the last 40 years. He doesn't have an occupational pension. He did pay into a private pension scheme all his days but it was taken out in the 70's or early 80's and at the time he was shown figures that indicated he would be very comfortable in retirement. In reality his private pension is worth a pittance and not even in the same ball park as the illustrations had indicated. His private pension company has been bought over several times since he took it out but as far as I can see it was taken out in a time where there was no regulations in place to help people who don't understand these things and the selling agent seems to have been able to get away with promising the earth. His experience with his private pension goes a long way in explaining his attitude that he was and has been completely shafted with his financial affairs.


I guess I will apply for a calculation and see what figures they come up with.

jem16

john78 wrote: »

Thank you for the replies. My Dad has been a self employed hackney taxi driver for the last 40 years. He doesn't have an occupational pension.

Self employed people would probably be one of those who benefit from the new rules unfortunately.

He did pay into a private pension scheme all his days but it was taken out in the 70's or early 80's and at the time he was shown figures that indicated he would be very comfortable in retirement. In reality his private pension is worth a pittance and not even in the same ball park as the illustrations had indicated.

Did your Dad increase his contributions each year in line with inflation or did he stick at the same amount as he started with? How much was he paying each month?

I guess I will apply for a calculation and see what figures they come up with.

Unfortunately with 40 years self employment it's likely to be only the basic state pension amount of around £115pw.

john78

Not sure how much he was paying Jem, I will need to ask him but I would guess he has likely always paid the same amount

Alter_ego

Pension credit may help out

Mojisola

Alter_ego wrote: »

Pension credit may help out

It will. If his weekly income is less than £151.20, it will get topped up with PC.

https://www.gov.uk/pension-credit/what-youll-get