New state pension question

[Deleted User]

I haven't paid NI since I retired in 2011. I was told then that I had 33 qualifying years for state pension which entitled me to the maximum basic state pension.

I have recently applied for a statement of SP. This again shows 33 qualifying years and SP of £119.87 per week.

I reach SP in 2023 at age 66.

I don't understand what my position will be under the New State Pension which comes from into effect in April 2016. Is my record of 33 years good enough to qualify me for the full New State Pension in 2023? Should I be thinking of making voluntary contributions?

Thanks for any help.

molerat

You need to get a statement under the new rules to see where you stand. https://www.gov.uk/state-pension-statement

You currently will get at least the amount stated under the old rules but the new rules may give you more (or be calculated at less depending on your contracted out status but you will receive the higher figure). I believe new statements now only give the higher figure to avoid confusion.

You are able to purchase any missing years between 2006 and 2016, so 2 in your case to make up to the new required 35 and you will be able to pick the cheapest 2. You have up until 2019 to do that.

After 2016 you may be able to buy extra to top up to the full amount but the details have not been announced yet.

SnowMan

Deleted_User wrote: »

I have recently applied for a statement of SP. This again shows 33 qualifying years and SP of £119.87 per week.

State pension statements (for those over age 55) sent out since about February 2015 have been based on what you have accrued taking into account the changes that come in from April 2016. So if your statement is after then (it should say on the statement that it allows for the new state pension scheme) then £119.87pw is what you have accrued so far allowing for the changes.

The amount you have earned up to April 2016 (the starting amount) is based on the better of the current scheme calculation and the new scheme calculation.

However it is impossible to tell from the information provided whether your calculation on your statement of £119.87pw is based on the old (current) rules or the new rules.

It could be that your £119.87pw is based on the old (current) scheme. As you have the 30 required years for the old scheme then this might be basic state pension of £115.95pw plus £3.92pw of additional state pension.

Or it could be that your state pension estimate is based on the new state scheme (which works off 35 qualifying years). The calculation might be

33/35 x 151.25 less a deduction for contracting out of £22.74pw
= 142.61 less 22.74
= 119.87

The contracting-out deduction (if applicable) is if you contracted out of additional state pension through a person pension or employer's scheme, and reflects that you would have a separate private/employer pension from those contracted-out contributions.

If it isn't clear from your statement (and most current statements are unclear) you need to go back to the Pension Service, Hattie, and ask them whether your calculation is based on the old scheme or the new scheme and if it is based on the old scheme, ask them what the calculation is on the new basis or vice versa.

As molerat says you can increase your starting amount by 1/35th of the single tier pension amount, about £4.32pw for each qualifying year you have after 6th April 2016 (either earned, credited or purchased through voluntary contributions). You either have 6 or 7 potential qualifying years after 6th April 2016, so you might be able to add up to about £30.24pw (= 7 x 4.32) to your starting amount making your total state pension about £150.11pw (119.87+ 30.24).

Without knowing whether your statement figure is based on the old or the new rules it is impossible to say whether there is any point to paying voluntary contributions for qualifying years up to April 2016. You already have enough years (more than 30) for the old scheme calculation but you don't have enough years (less than 35) for the new scheme calculation. But as we don't know if your amount of £119.87pw is based on the old or new rules and how close the other basis is to applying then there is not enough information to know if you can increase your starting amount of state pension earned up to April 2016. As molerat says there is no rush to do anything, you have at least until 2019.

[Deleted User]

Thanks for very helpful info.

I applied for a SP estimate/statement in summer 2011, just after I retired. This was divided into basic pension and additional pension. It disclosed 33 qualifying years, and also made clear that this entitled me to the FULL basic state pension.

The statement I have received now was applied for 2/3 weeks ago and received yesterday, so definitely post Feb 2015, is not at all clear. It does confirm that I have 33 qualifying years (based on records up to 2014/15) and gives figure of weekly pension of £119.87 but not divided into basic and additional (as was the 2011 one). There are some complicated notes, which I haven't studied yet but will.

I retired early in 2011 with an assurance that I had a full NI record to qualify for full SP, so I'm feeling somewhat confused. I'm not claiming I'm hard done by, just confused about where I stand. I was in a contracted out scheme for most of my working life, so I'm not expecting the full £151 (or whatever it has risen to by 2023). I'm just confused about my NI record. I realise that it's very complicated and thst its up to me to ask questions and understand. I don't feel, though, that the Pension Service is providing a very helpful information service to people like me.

SnowMan

Deleted_User wrote: »

I don't feel, though, that the Pension Service is providing a very helpful information service to people like me.

I agree with you about the Pension Service not providing enough information.

I strongly suspect from your latest information that the amount on your statement is based on the old (current) scheme, and the new scheme calculation is lower, so its full basic state pension (£115.95pw) plus a small amount of additional state pension (£3.92pw).

So put simply you can expect a state pension of about £119.87pw in today's terms, but there will be the opportunity to increase this as earlier mentioned up to around £150pw through voluntary contributions after April 2016 (at rates not yet announced). However there will be no point in paying voluntary contributions for missing years up to April 2016.

I would definitely go back to the Pension Service and ask them 'what is my pension amount based on the new scheme basis. I think the amount you've shown of £119.87pw is on the current basis, but I need to know what the amount is on the new basis, it isn't enough for me to know it is lower'. Don't let them fob you off with 'you can work it out from the statement' or 'we can't tell you that' or 'it's not relevant'.

If you post back how you get on, then we can be much clearer in helping you.

[Deleted User]

Thank you, SnowMan. This discussion is very helpful to me, if not in providing an answer it does confirm what my questions to be. I will pursue things further and report back on this thread asap.

p00hsticks

SnowMan wrote: »

I would definitely go back to the Pension Service and ask them 'what is my pension amount based on the new scheme basis. I think the amount you've shown of £119.87pw is on the current basis, but I need to know what the amount is on the new basis, it isn't enough for me to know it is lower'. Don't let them fob you off with 'you can work it out from the statement' or 'we can't tell you that' or 'it's not relevant'.

Snowman, can you please explain simply why it's important for Hattie625 to know the calculated figure under the new rules if the amount calculated under the old is higher ? I was under the impression that the lower of the two figures (and whether that was the one under the old or new rules) wasn't significant.

SnowMan

p00hsticks wrote: »

Snowman, can you please explain simply why it's important for Hattie625 to know the calculated figure under the new rules if the amount calculated under the old is higher ? I was under the impression that the lower of the two figures (and whether that was the one under the old or new rules) wasn't significant.

Good question. That's probably best explained with an example based on Hattie's situation. Let's look at 2 different scenarios where her old scheme calculation £119.87pw is the higher.


SCENARIO 1 :
Old scheme basis: £119.87pw
New scheme basis: £119.86pw (33/35 x 151.25 - 22.75)

Then it would be possible to purchase a pre 2016 missing year which would change the calculation with the extra year to

Old scheme basis: £119.87pw (unchanged as already 30 years)
New scheme basis: £124.18pw (34/35 x 151.25 - 22.75)

Higher amount now £124.18pw


SCENARIO 2
Old scheme basis: £119.87pw
New scheme basis: £109.86pw (33/35 x 151.25 - 32.75)

Then purchasing a pre 2016 missing year would change the calculation with the extra year to

Old scheme basis: £119.87pw
New scheme basis: £114.18pw (34/35 x 151.25 - 32.75)

Higher amount still £119.87pw


So in scenario 1 purchasing an extra year actually brings the new scheme calculation above the old scheme calculation and so there is value in buying the extra year (and a further year to take qualifying years up to 35), but in scenario 2 buying an extra year is valueless.

So for someone with between 30 and 34 qualifying years it is important to know if the new scheme basis bites, and also if it is close to biting, because purchasing an extra pre April 2016 year can have some value if the new scheme calculation is close, but not if it doesn't bite and isn't close.


It is important to say, talking more generally than Hattie's scenario, that purchasing a pre April 2016 qualifying year even when it does increase the starting amount at April 2016, may still be valueless, because it may be that through working or credits after April 2016 the person will get up to the full single tier pension of about £151.25pw in any case without buying a year.

p00hsticks

Thanks for that explanation - so it's only important for those with less than 35 NI years. Not something I need to worry about then....

xylophone

Thank you, SnowMan. This discussion is very helpful to me, if not in providing an answer it does confirm what my questions to be. I will pursue things further and report back on this thread asap.

Were you sent this (revised June 2015) booklet with your statement?

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/452011/dwp040b-jun-2015.pdf

roxy28

xylophone wrote: »

Were you sent this (revised June 2015) booklet with your statement?

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/452011/dwp040b-jun-2015.pdf

Dad has just got his pension statement 3 days ago, the booklet is not laid out the same as your link, but thats because the version is dwp042 08/15 a little more up to date it seems, but not much difference.