New State Pension Enhancement?

monkeyspanner

I am looking for clarification regarding required NI contribution history to get full state pension.
I am due to get the new state pension from retirement at 65 in January 2017. I currently have 32 qualifying NI years and I am no longer working. I was paying voluntary NI contributions but stopped when the requirement for full pension dropped from 44 to 30 years was first proposed. I realise that the NI requirement for full pension is increasing from 30 to 35 years on 6 April 2016 but have been unable to clarify how this will affect my position. I also expect the new state pension amount I may receive will be reduced as I was contracted out whilst in a company scheme from I believe 1988 to 1995.

My questions are:
1. Is it 30 years prior to 6 April 2015 plus 5 years after 6 April 2016?
2. Will all my existing 32 years count towards the 35 years requirement?
3. Will it be worth my making up the additional 3 (or 5) years?

jem16

monkeyspanner wrote: »

1. Is it 30 years prior to 6 April 2015 plus 5 years after 6 April 2016?

Yes but there are transitional arrangements in place. Your entitlement will be worked out on both the current rules and the new rules. You will get the higher of the two calculations.

2. Will all my existing 32 years count towards the 35 years requirement?

Yes.

3. Will it be worth my making up the additional 3 (or 5) years?

Not at the moment as you have the maximum under current rules. You will need to wait until after April 2016 to see if you can make further contributions and whether or not it will be worth it.

As you are over 55 you can get a statement now which will give you your foundation amount. I would suggest that you apply for this.

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

p00hsticks

monkeyspanner wrote: »

My questions are:
1. Is it 30 years prior to 6 April 2015 plus 5 years after 6 April 2016?
2. Will all my existing 32 years count towards the 35 years requirement?
3. Will it be worth my making up the additional 3 (or 5) years?

I'm not an expert, but in a similar sort of situation, and my current understanding is that there aren't simple answers - it will depend on your particular records

As you're over 55, you need to start by getting a pension statement
https://www.gov.uk/state-pension-statement

To obtain the value on this statement, the Pension Service will use your NI record to calculate your pension entitlement under both the current and new rules. Whichever is the higher becomes your "starting amount" as at 6th April 2016.

Depending on what this figure is will determine exactly how future contributions after that date are dealt with.

If your starting amount is equal to or greater than the new "single tier" amount (of at least £151.25), then you will get your starting amount, but additional contributions after 6/4/16 will not increase the amount further.

If your starting amount is less than the new single tier amount, then each additional full years NI contributions after 6/4/16 will add 1/35th of the single tier amount (so around £4.30) to your starting amount, up to a maximum of the single tier amount.

As you already have 30 years contributions, under the current rules you'd be entitled to at least the current basic pension amount of £115.95, and possibly more if you have any SERPS or S2P, and if you've been contracted out the chances are that this will be a higher amount than under the new rules.

bigfreddiel

p00hsticks wrote: »

I'm not an expert, but.....,.

As you already have 30 years contributions, under the current rules you'd be entitled to at least the current basic pension amount of £115.95, and possibly more if you have any SERPS or S2P, and if you've been contracted out the chances are that this will be a higher amount than under the new rules.

You probably missed this bit:

" I also expect the new state pension amount I may receive will be reduced as I was contracted out whilst in a company scheme from I believe 1988 to 1995."

Also being contracted out means your new state pension will be reduced, there is no chance of it being higher under the new rules.

The actual reduction will be revealed in the autumn statement this November. Any figures the gov has produced so far are only vague estimates.

Cheers fj

molerat

The new SP will be reduced by the CO deduction but the transitional arrangements will protect the foundation amount at the currently earned amount, in any case not less than the current basic SP amount for 30+ years contributions and certainly more than that under the new calculations.

molerat

monkeyspanner wrote: »

1. Is it 30 years prior to 6 April 2015 plus 5 years after 6 April 2016?
2. Will all my existing 32 years count towards the 35 years requirement?

You will be given a foundation amount from April 2016. Once this amount is produced the number of years becomes irrelevant and it will rise annually with the triple lock. [STRIKE] You will be able to add to this starting amount at the rate of, at current figures, £4.32 per year contributed / purchased post 2016 until you reach the maximum of £151.20.[/STRIKE] Your problem is that you will not be able to make any more contributions as you retire in the 2016-17 tax year unless some provision is made available similar to the current class 3a contributions.

monkeyspanner wrote: »

3. Will it be worth my making up the additional 3 (or 5) years?

[STRIKE]Not until after 2016,[/STRIKE] any purchased contributions will add nothing to the figure.

dampsquib

Not that it's going to earn monkeyspanner a bigger pension (due to the contracted-out deduction) but one thing he may have overlooked is that he may well have 35 years of NI credits when he hits 65 in Feb 2017.

Men born before 06/10/53 receive Auto Pension Credits. It's a system which is being phased out, but my understanding is that, as monkeyspanner was born in February 1952, he will receive 3 years of NI Auto-Credits for the tax years in which he was 62, 63, & 64. Men over 60 used to be able to benefit from 5 years of Auto-Credits.
It seem monkeyspanner will not be able to benefit from any useful post-April 2016 NI credits though.

I may be in a slightly more fortunate position, as I was born a little after 5th April 1952, so 2016/17 will be one of the years for which I receive an Auto-Credit.
In July, after hearing Steve Webb (ex-Coalition Pensions Minister) on R4's Money Box programme outline how paying NI after April 2016 could allow you to improve on your April 2016 'starting rate' figure, I was all set to buy one more NI credit year by making voluntary contributions, in order to get an extra £4.32pw added to my State Pension. I'm another case with contracted-out years, so in my pension forecast statement, my old-system figure dictates the amount I am to receive.
My plan to buy an extra year was short-lived, as I then remembered that I wouldn't be able to, as I will receive an Auto-Credit for the 2016/17 year.

I'm left wondering, if working and paying NI after April 2016, or paying voluntary NI contributions from 2016, can both make a real difference to your State Pension, where your April 2016 Starting Rate falls below the full single tier amount, will my Auto-Credit for one year also get me an extra £4.32 pw?

Will Auto-Credits have the same impact as real Class 1 and Class 3 contributions?
Anyone know?

greenglide

Will Auto-Credits have the same impact as real Class 1 and Class 3 contributions?
Anyone know?

Auto credits make a year between female state pension age and 65 a qualifying for a male. If you already have 30 years (old rules) or 35 years (nSP) there is nothing to be gained.

Auto credits only give additional years, they do not increase Additional Pension earned by SERPS / S2P.

molerat

But once April 2016 arrives the number of years is only relevant to those starting out as you will be given a £ figure and anything earned or credited for whatever reason will be added to that figure if below the maximum (unless they decide that anyone getting the new system rates is awarded years)

greenglide

A qualifying year is a qualifying year whether it is before or after 5/4/2016. After that date they only increase the nSP amount by 1/35 up to the nSP maximum. Presumably if the number of years reaches 35 the nSP maximum must have been reached already as the Rebate Derived Amount is only used for the old rules amount?

monkeyspanner

Thanks for all the replies. I can't pretend I fully understand all the detail provided but I get the drift I think.
My conclusions so far are:
- Due to my contracted out period the new style pension amount would be less than the old style pension so the old style basic pension guarantee will apply.
- Buying contributions or having auto credits will not increase the new style pension above the old style basic amount.
- Adding contributions for the period after April 2016 but prior to my retirement age will not be possible as there is not a full contribution year.
- I also understand that deferred pension enhancement after April 2016 will be much less beneficial and a quick claculation would suggest it is not worth doing as the payback period is too long.