Second State Pension Issues

MichaelJohn

I am coming up to retirement in the next few years and decided to get a pension forecast. Whilst the basic state pension component is correct the second state pension part in my view is totally incorrect. It covers a period when I was not contracted out and I estimate that it should be over £20/week. The figure I have been given in well under £1/week. When I asked them to check they came back with a figure a few pence higher! When I approached both the Ombudsman and the PAS both came back saying they do not deal with state pensions. Obviously I can approach DWP again but who can I take it to if the answer is still unsatisfactory? Thank you...

JezR

Have you ever been contracted out though - especially between 1978 and and 1997?

dunstonh

If you have periods of self employment, unemployment (where not signed on) or where a member of an occupational pension that was contracted out (most final salary schemes for example) or you contracted out using a personal pension then you would have less additional pension entitlement.

xylophone

You are now aged around 60 and so started work in the early seventies.
Your state pension statement foundation amount will be calculated on NI paid from then to now.

In particular, the period 1978 -1997 covers the Guaranteed Minimum Pension arrangements.

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447195/new-state-pension--effect-of-being-contracted-out.pdf

MichaelJohn

I started work in 1968 at 16. I was first enrolled into a pension scheme on my 21st birthday and was contracted out by default (i.e. knew nothing about it).. This has been the case bar the period between 1985 and 1995 (i.e. 10 tax years). The SP II covers that period. As I was working and earning a reasonable salary through that period 70p/week makes no sense - as I say I have calculated it at over £20.

minty777

Mistakes do happen,in my case by £20 a week.

greenglide

I read that posting as meaning that you were contracted out throughout your working life except 1985 - 1995.

This would severely limit the AP you could have accrued because of the size of the Contracted Out Deduction you would have accrued.

How have you arrived at your estimate of the AP?

Have you had details of you National Insurance contributions from HMRC? That will tell you how much NI has even credited to your account each year. Apply at https://www.gov.uk/check-national-insurance-record

If you are really determined you should be able to ask HMRC under the data protection act for a copy of data held for you by the NPS system - previously NIRS2 and NIRS before that but this will be huge!

xylophone

You may have some graduated pension for the years before 1974 - between 1974 and 1978 there was no additional state pension but you may well have contributed to your occupational scheme.

From 1978 to 1985 you were contracted out and so would have earned a GMP - see https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

1985-1995 you were contracted in but contracted out again thereafter.

Your Foundation Amount will have been calculated after the contracted out deduction and the deduction of the rebate derived amount - see link in the previous post.

This could account for the small amount of AP.

MichaelJohn

'xylophone' - your summary is correct. The thing that makes no sense to me was that I was given a figure for what my SP II would have been if I had not been contracted out for the whole period 1978 - date. The ten years (1985 - 95, inclusive) represents ~27% of this and yet the SP II figure I have been given is < 1% of the whole. If this is actually correct I feel a) I have been robbed and b) contracting in was pointless (or is it penniless)!

xylophone

If you were eligible for state pension before 6.4.16, you would still have had a Contracted Out Deduction.

See https://forums.moneysavingexpert.com/discussion/comment/60319901#Comment_60319901 post 18.

hyubh

MichaelJohn wrote: »

The thing that makes no sense to me was that I was given a figure for what my SP II would have been if I had not been contracted out for the whole period 1978 - date. The ten years (1985 - 95, inclusive) represents ~27% of this and yet the SP II figure I have been given is < 1% of the whole. If this is actually correct I feel a) I have been robbed and b) contracting in was pointless (or is it penniless)!

Roughly speaking, and ignoring revaluation and other complications, the idea is that your GMP and AP combined won't be higher than that enjoyed by a person who earned the same as you during their working life yet who were contracted in throughout. Since the amount of AP such a person earned wouldn't have been limitless (only 20 reckonable years in DB terms), you can't therefore just 'make up' contracted out periods with additional contracted in ones.