pension service writes "you could become entiled to a higher pension..

Deals_2

than you would be under the current rules. Then it says "the government proposals for a package of reform for the future of the UK pensions system. one of the gov.'s proposals is to increase basic pension from 2012 in line with earnings growth which is normally higher than prices" .

does anyone know exactly how and if this would work? or understand this a bit better than i do? i always thought our state pension in the future (as we are contributing towards our pensions) would be a bit riskier in the future!

Thanks in advance!

EdInvestor

Currently the state pension rises in line with inflation as expressed by the retail price index. Earnings usually rise at a higher rate.The plan is to return to linking the state pension to earnings from 2012, or the end of the next parliament at the latest. The state pension always used to be linked to earnings but was switched to an inflation link when Mrs Thatcher was in power.

The future of the state pension varies for different social groups.Women stand to do much better, with major changes coming in in 2010 to bring them up almost to the same level as men.At the moment they lag far behind. At the same time men will be able to claim a state pension on the basis of their wives' NI, as woman can now on their husbands'.

SERPS/S2P entitlements will be changed to benefit the lower paid and carers, so better off people won't benefit, but most of the better paid people are contracted out of S2P into final salary company or public sector pensions anyway.Contracting out will be abolished for money purchase pensions.A new national pension will be introduced which employers will be required to contribute to - workers can opt out. Everyone will benefit from the restoration of the state pension earnings link.


Quite a revolution really, not that many people seem to have noticed :rolleyes:

Deals_2

people dont really understand it all. i often read up on pension stuff but i must say still to this day i have difficulty understanding the jargon. i think they should make things easier to understand. i wonder whether i am the only one?
What did Margaret Thatcher change the system at the time ...only for us to come back to it. yes sounds good particularly for the lower paid ones such as us. do we know by how much though? any figures? it also says we dont need to contributre as many years so how will it be made up. thanks again.

EdInvestor wrote: »

Currently the state pension rises in line with inflation as expressed by the retail price index. Earnings usually rise at a higher rate.The plan is to return to linking the state pension to earnings from 2012, or the end of the next parliament at the latest. The state pension always used to be linked to earnings but was switched to an inflation link when Mrs Thatcher was in power.

The future of the state pension varies for different social groups.Women stand to do much better, with major changes coming in in 2010 to bring them up almost to the same level as men.At the moment they lag far behind. At the same time men will be able to claim a state pension on the basis of their wives' NI, as woman can now on their husbands'.

SERPS/S2P entitlements will be changed to benefit the lower paid and carers, so better off people won't benefit, but most of the better paid people are contracted out of S2P into final salary company or public sector pensions anyway.Contracting out will be abolished for money purchase pensions.A new national pension will be introduced which employers will be required to contribute to - workers can opt out. Everyone will benefit from the restoration of the state pension earnings link.


Quite a revolution really, not that many people seem to have noticed :rolleyes:

Andy_L

Deals wrote: »

What did Margaret Thatcher change the system at the time ...

In order to save money

EdInvestor

Deals wrote: »

Do we know by how much though? any figures?

Not yet but IIRC earnings typically rise by quite a bit more than inflation - maybe a third more? So instead of an annual increase of say 2%, you might get 3%.It mounts up over time.

it also says we dont need to contributre as many years so how will it be made up.

Actually your NI contributions now are not going to pay for your pension later - they are used to pay the pensions of those who are already retired.It's the younger generations that will be paying your pension. This is one advanatge of having more immigrants - the more new workers to help pay pensions, the less likely taxes would have to go up.

Belair

So, if my understanding of that extract is correct, if I am earning a good salary, I stand to get a bigger state pension if I delay my retirement till after 2012? I am female and will be 60 in late 2012 and contributing to a final salary scheme.

noh

Belair wrote: »

So, if my understanding of that extract is correct, if I am earning a good salary, I stand to get a bigger state pension if I delay my retirement till after 2012? I am female and will be 60 in late 2012 and contributing to a final salary scheme.

If the info you have given above is correct and you were born in 1952 you are not due your state pension until 2015. see:-http://www.thepensionservice.gov.uk/resourcecentre/statepensioncalc.asp

Nigel

Belair

Thanks, I understand that. Sorry, I didn't make myself clear.
If I retire early, using my company final salary pension, will delaying till after 2012 be more beneficial to me? I am thinking of the earnings related state pension. Or should I wait till 2015? I want to be comfortable, but at the same time, young and fit enough to enjoy life to the max.

noh

Are you contracted out of S2P at present?
Delaying your retirement from work will give you a larger pension simply because you will have made more contributions otherwise can't see any advantages. I would say just retire when you feel the time is right;)

Nigel

Belair

Yes, I'm contracted out of S2P. Fortunately I have a couple of AVC's waiting for me. 2012 here I come! :T :j


Thanks Nigel

EdInvestor

AVCs are not related to contracting out of S2P. You will have to take the money from the AVCs at the same time as you draw your company pension.

You can't take your basic state pension until 2015 and if you have been contracted out you won't get an earnings related state pension, it is included in your company pension.

What is the retirement date for your company pension?