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New state pension question

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  • greenglide
    greenglide Posts: 3,301 Forumite
    Part of the Furniture Combo Breaker Hung up my suit!
    I was unsure whether I would be able to purchase additional state pension through voluntary contributions post 6th April 2016, given that I already have more than 35 years.
    Anyone who has not reached the nSP standard amount and is under SPa will be able to pay contributions after 5/4/2016 until they reach SPa or they hit the nSP maximum amount. Any further contributions would be "wasted".

    The number of qualifying years does not matter in this case - it is a special case where people can will be able to have over 35 years (be 5/4/2016) but not qualify for the maximum amount.
  • greenglide wrote: »
    Anyone who has not reached the nSP standard amount and is under SPa will be able to pay contributions after 5/4/2016 until they reach SPa or they hit the nSP maximum amount. Any further contributions would be "wasted".

    The number of qualifying years does not matter in this case - it is a special case where people can will be able to have over 35 years (be 5/4/2016) but not qualify for the maximum amount.

    Thanks for that greenglide.

    It will be interesting to see how much it costs.
  • SnowMan
    SnowMan Posts: 3,753 Forumite
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    edited 10 November 2015 at 3:17PM
    greenglide wrote: »
    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.
    Thanks that's really interesting information.

    My guess was that they worked out how much the rebate derived derived amount (RDA) would have to be for the old scheme calculation to be the higher, and provided they could show that it was at least that, for example through the contracted-out deduction pre 97 (COD pre 97) being more than that, they either didn't worry about calculating the full RDA (to include post 97 COD), or they calculated it for completeness but didn't show the RDA on the statement itself.

    In the early days after February 2015, they showed both the new and old amounts on statements so would have to had calculated both, but they suddenly stopped doing that and just showed the single higher figure so that doesn't always require a full RDA calculation.

    Clearly where the new scheme calculation is higher then a full calculation is required.

    I have a lot of sympathy for the DWP/HMRC in wording state pension statements being sent out for over 55s now because it's quite difficult until the 2015/2016 contributions are incorporated into figures.

    After 2015/2016 contributions are included I would like to think it will be easier, and I would like to see a breakdown of the starting amount calcualtion, and wording on the statements along the lines of (and it will differ for those with starting amounts above £151.25pw, or for people who can't reach £151.25pw), and it should mention pre 2016 voluntary contributions ideally also
    Your starting amount is £136.95pw.

    The amount above is your estimated starting State Pension entitlement at April 2016 and will increase after 2016 by 1/35th of the full single-tier state pension amount, £4.32 a week, for each Qualifying Year added to your record between April 2016 and when you reach your State Pension Age, until it reaches the full single-tier state pension of £151.25 a week.

    If following the 6th April 2016, 4 more Qualifying Years are added before you reach your State Pension Age, of the 6 tax years possible, you would get the full single-tier state pension of £151.25 per week, but would not be able to increase this above £151.25 per week through additional (post April 2016) Qualifying Years.

    Your State Pension will be revalued (i.e. pre SPA) and uprated (i.e. post SPA) in line with earnings inflation. Currently it is also subject to the triple lock of the higher of earnings inflation, price inflation (CPI), and 2.5% per annum.
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  • coyrls
    coyrls Posts: 2,518 Forumite
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    edited 10 November 2015 at 3:14PM
    SnowMan wrote: »
    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?

    I have a statement dated 26/5/2015 where my pension is higher under the old rules (i.e. the new scheme basis doesn't bite). No value is given to any contracted out deduction. The statement says:
    When working out your estimate, we made a deduction because you have been contracted out of the additional State Pension at some time.
    There is no information at all on what my pension calculation would be under the new rules.
  • SnowMan
    SnowMan Posts: 3,753 Forumite
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    edited 10 November 2015 at 4:21PM
    coyrls wrote: »
    I have a statement dated 26/5/2015 where my pension is higher under the old rules (i.e. the new scheme basis doesn't bite). No value is given to any contracted out deduction. The statement says:

    There is no information at all on what my pension calculation would be under the new rules.

    I don't think that is very good. Even where the new scheme calculation is lower then you at least want to know what the amount is, and as earlier mentioned there can be scenarios where paying voluntary contributions for pre April 2016 years can switch things so that the new basis is higher.

    If your old scheme amount is over £151.25pw then it doesn't really matter as the new scheme calculation always has to be no higher than £151.25pw.

    (edit: you are aware that statements that allow for the new calculation also are only available to those over age 55?)
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  • greenglide
    greenglide Posts: 3,301 Forumite
    Part of the Furniture Combo Breaker Hung up my suit!
    There is no information at all on what my pension calculation would be under the new rules.
    The original clerically produced forecasts for nSP DID show the full breakdown in a concise, clear and straightforward - I had one. It gave both figures and said I would get the old rules on as it was higher.

    The current ones show absolutely nothing apart from you will get xxxxx. There was nothing wrong with the original one - it showed what you had asked for.

    How anyone could be confused but old rules, new rules, you get xxx because it is higher beats me. It is not as though it shows what you might have got but you cant have it - that would be different.

    DWP and government in general do tend to use wording for Sun readers and it leads to some atrocious wording. The pensions client group tend to still be people who can read, write and spell.
  • SnowMan
    SnowMan Posts: 3,753 Forumite
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    greenglide wrote: »
    The original clerically produced forecasts for nSP DID show the full breakdown in a concise, clear and straightforward - I had one. It gave both figures and said I would get the old rules on as it was higher.

    Yes the earlier ones were fine. We've had a number of clients come into the CAB who are completely bamboozled by the later statement which has next to no information on it.
    I came, I saw, I melted
  • greenglide
    greenglide Posts: 3,301 Forumite
    Part of the Furniture Combo Breaker Hung up my suit!
    I hadnt thought about the situation where extra qualifying years are boughtfor years before 6/4/2016, these impact the Starting Amount and could cause a flip from old rules to new rules or vice-versa (I assume). I assume some people could have a choice of buying pre 6/4/2016 or post 6/4/2016 years - the value (depending on the price of each year and the benefit) may be different?
  • SnowMan
    SnowMan Posts: 3,753 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Photogenic
    greenglide wrote: »
    I hadnt thought about the situation where extra qualifying years are boughtfor years before 6/4/2016, these impact the Starting Amount and could cause a flip from old rules to new rules or vice-versa (I assume). I assume some people could have a choice of buying pre 6/4/2016 or post 6/4/2016 years - the value (depending on the price of each year and the benefit) may be different?

    I can't think of any scenario where buying an extra pre April 2016 year can ever flip it from new to old but it can flip it from old to new.

    That is because 1/35 of 151.25 = 4.32pw is more than 1/30th of 115.95 = 3.87pw, and in any scenario where the new scheme initially bites, where you can increase your entitlement under the old scheme by an extra year (qualifying years less than 30) you can increase your new amount also by a bit more.
    I came, I saw, I melted
  • molerat
    molerat Posts: 35,013 Forumite
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    edited 10 November 2015 at 4:03PM
    SnowMan wrote: »
    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.
    We have set aside £4820.40 to buy MrsM an extra 7 pre 2016 years and calculated the payback, at 2015 rates and a non tax payer, as 3yrs 3 weeks - bargain ! The 2006 - 2016 rates are set in stone. We will wait and see what the 35th year she needs will cost, hopefully £14.10 as this year.
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