New state pension question

SnowMan

xylophone wrote: »

Had the new system been in operation on that date, you would have received (33/35 x £151.25) - £44.65 = £97.96?

Not equal to £97.96pw but no more than £97.96pw.

The issue is that the DWP have difficulty calculating the rebate derived amount because it isn't a figure their creeky computers calculate at the moment.

However the rebate derived amount equals

the contracted-out deduction for the period to 1997 (COD)

plus

the contracted-out deduction after 1997

However the (pre 97) COD is something the DWP do have on their system (because it is the deduction also used as a component in calculating additional state pension under the old calculation).

Hence it is easier for them to show just the pre 97 COD bit on the statements which is what the £44.65pw is in Hattie's case.

As in Hattie's case it isn't always necessary to know the rebate derived amount, it is enough to know it is at least £44.65pw and hence the new calculation is not equal to £97.96pw but no more than £97.96pw.

Where it does matter what the exact rebate derived amount is, it probably gets sent to a different person at the DWP who uses an abacus and beads to work out the figures accurately.

SnowMan

Deleted_User wrote: »

SnowMan, thank you so much for that brilliantly set out explanation, which I think I understand. The bottom line seems to be that there is no point in me buying pre-April 2016 additional years. I will, however, pursue my enquiries with DWP just to be absolutely sure. I know that I have until 2019 to buy up pre 2016 years, should it be worthwhile (which it looks like it isn't).

I think I am correct in saying that we don't yet know how much it will cost to buy additional years post 2016. I have an excellent occupational pension, so I would have to be sure that it would make economic sense to increase my SP from £119 pw to (up to) £151 pw, as the extra would be subject to basic rate tax (and not really required for a reasonable standard of living). I suppose until we know the costs involved, it's too early to make any decisions.

Yes that's spot on.

The rates for buying missing years have historically been very generous. A basic rate taxpayer only has to live in the region of 5 years after State Pension Age to be better off by paying voluntary contributions to top up their record. So there is a good chance that will remain the case for qualifying years after 2016 albeit the rates haven't yet been set.

greenglide

The issue is that the DWP have difficulty calculating the rebate derived amount because it isn't a figure their creeky computers calculate at the moment.

HMRC can calculate it now. I wasnt aware that DWP systems ever calculated COD, GMP etc as it is HMRC that has all the contributions data.

First awards of nSP will be in December, not long! Four months and four days (plus time for invitations to claim to go out and punters to make the claim) before 6th April 2016.

xylophone

The issue is that the DWP have difficulty calculating the rebate derived amount because it isn't a figure their creeky computers calculate at the moment.

Are you sure of this?

Assume you mean "creaky" - or perhaps not.... maybe "up the creek"..:)

SnowMan

greenglide wrote: »

HMRC can calculate it now. I wasnt aware that DWP systems ever calculated COD, GMP etc as it is HMRC that has all the contributions data.

First awards of nSP will be in December, not long! Four months and four days (plus time for invitations to claim to go out and punters to make the claim) before 6th April 2016.

I think you are right that the HMRC do the actual calculations because they have the contribution records, it used to be the National Insurance Contributions Office (NICO) but then merged into HMRC, although I'm no expert on how they work. You ask for you statement from the Pensions Service which is part of the DWP, but you are right that HMRC have all the contribution amounts so there is some liaising between government departments going on and HMRC must do the sums.

Good point that they need to get themselves sorted by December, I hadn't considered that.

xylophone

Are you sure of this?

I have just seen Greenglide's post - presumably (although it doesn't really make any difference to Hattie), she can be confident that the £44.65 is the RDR?

SnowMan

xylophone wrote: »

I have just seen Greenglide's post - presumably (although it doesn't really make any difference to Hattie), she can be confident that the £44.65 is the RDR?

It would be interesting to know if they are now showing the rebate derived amount (that is including post 97 contracting-out deduction) routinely on all statements for over 55s (coming under single tier) even when the new scheme basis doesn't bite.

Do you know the answer to that greenglide, is that what you were saying in your previous post?

gadgetmind

Is there any point in those in their early 50s asking for these calculations and details now or is it better to just wait until April next year?

woolly_wombat

SnowMan wrote: »

SUMMARY
In summary it looks like your starting amount at April 2016 will be approximately £119.87pw (old scheme basis is higher). You cannot increase this by paying voluntary contributions for years up to 5th April 2016.

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).

I find myself in a similar position to Hattie in that I stopped working in 2014 with less than the new 'flat rate' state pension due to many years contracted out.

I am due to receive my state pension in 2024 aged 66.

Where I differ from Hattie is that I already have 38 years NI contributions, so more than the future 35 minimum.

Will I still be able to purchase additional state pension through voluntary contributions post 6th April 2016?

greenglide

Surely all the forecasts sent out to inform people of what their nSP Starting Amount "must" include the Rebate Derived Amount as far as can be estimated (based on 2013 - 14 or 2014 - 15 years contributions) otherwise they would all be wrong.

Initially they did these clerically and I dont know whether the IT has been put in place yet to do them automatically.

HMRC had a major software implementation a few weeks ago ready for them calculating these things for nSP claims as did DWP but that doesnt mean they can produce these things for "everyone" - these are the stuff to actually award and pay people, the forecasts are very different.