New State Pension starting amount and full record of qualifying years- trial service

Sipowicz

It can't be that greenglide, I've been contracted out all my working life. I'm calculated under existing rules, I'm under the nSP maximum.

bigfreddiel

Hmmmm...... Curious innit! fj

greenglide

I was thinking about circumstances where there would be nothing additional to provide.

It could, of course, be a simple bug in the program or maybe for some reason HMRC are unable to calculate the data for some people.

Who knows.....

bigfreddiel

There was an article in the press a few weeks ago that HMRC and DWP had a project starting to reconcile NI contributions, and would not complete till 2018!

No doubt they have ordered the data by age descending, so the reconcile oldies like me first!

But there again it is two government departments involved so who knows?

Cheers fj

molerat

Sipowicz wrote: »

It can't be that greenglide, I've been contracted out all my working life. I'm calculated under existing rules, I'm under the nSP maximum.

Same here, £137 under old rules.

gee9fam

I have a received a State Pension Forecast that states the following:

Estimate of £142.30 payable in 2025 based on 37 years qualifying years up to 2014/15. (4 missed years whilst at Uni).

COPE estimate £17.32.

I’m a little confused as the contracted out period relates to an old Equitable life pension (thankfully not the With Profits Fund) that was moved to an Aviva stakeholder pension in 2002.

The current figures for the Aviva stakeholder are as follows:
Non protected rights fund - c£60k
Final Bonus - c£25K
Protected Rights Fund - c£18k
Final Bonus - c£7k
Total c£110k

A couple of questions:

1. I have not contributed to Aviva since it was moved in 2002 so does this still mean I am still contracted out despite making no contributions?
2. Would there be any benefit in moving the Aviva to a SIPP with respect to being contracted out and the small print regarding a Market Value Reduction?
3. Under Important Information it states that if the COPE amount increases the State Pension could be lower than that estimated. How would this happen?
4. If I continue to work for next 5 years at low salary (other income through divs, investments and contributions direct to SIPP so not subject to NI) will this increase State Pension?

Appreciate any comments.

coastline

State Pension Statement arrived by post today and as expected the contracted out situation leaves me with the original state pension of £115.97.(before 2016 increase)
Contracted out pension equivalent (COPE) is estimated at £59.17 a week as I was in a final salary pension scheme for around 25 years.
Stopped paying NI at 33 years when the qualifying rate was 30 years so I'm guessing I'll have some gaps to fill.?
Just a case of when and how to pay class 3 NI contributions to make up the difference as it looks like I'll have until April 2019 to benefit ?

https://www.gov.uk/voluntary-national-insurance-contributions/rates

SnowMan

coastline wrote: »

State Pension Statement arrived by post today and as expected the contracted out situation leaves me with the original state pension of £115.97.(before 2016 increase)
Contracted out pension equivalent (COPE) is estimated at £59.17 a week as I was in a final salary pension scheme for around 25 years.
Stopped paying NI at 33 years when the qualifying rate was 30 years so I'm guessing I'll have some gaps to fill.?
Just a case of when and how to pay class 3 NI contributions to make up the difference as it looks like I'll have until April 2019 to benefit ?

https://www.gov.uk/voluntary-national-insurance-contributions/rates

I'm assuming that you have 33 Qualifying Years to 6th April 2015, and 2015/2016 isn't going to be a Qualifying Year and your starting amount in 2016/2017 terms is £119.30pw (full basic state pension) or £115.95pw in 2015/2016 terms? And you have some potential post April 2016 Qualifying Years but won't get those through working (or credits)?

Post back if that is wrong.

But on that basis your Starting Amount is calculated as the higher of

OLD BASIS
= 30/30 x 119.30 + additional state pension
= 119.30 + 0
= £119.30pw

NEW BASIS
= 33/35 x 155.65 - 59.17 (COPE)
= 146.76 - 59.17
= £87.59pw

So your starting amount is based on the higher old rules calculation of £119.30pw.

As you already have the maximum required under the old rules calculation (30 years) then paying voluntary contributions to buy pre April 2016 years won't increase your starting amount.

The new basis calculation above would increase (by the purchase of pre April 2016 years) but would still be less than the old basis calculation (for example based on 35 years that new calculation becomes 155.65 - 59.17 = 92.08)

So in summary there is no benefit to paying voluntary contributions for missing pre April 2016 Qualifying Years, as your starting amount at April 2016 will still remain at £119.30pw.

However you can pay voluntary contributions for post April 2016 Qualifying Years to increase your starting amount up towards £155.65pw. You will earn 1/35th of the new state pension for each post April 2016 Qualifying Year, about £4.45pw (=155.65 x 1/35). So you will need 9 post April 2016 Qualifying Years to get you up to £155.65pw, after which you can't earn any additional state pension (as 7 x 4.45 + 119.30 = 159.35 which is just greater than 155.65)

It will depend on how near you are to SPA whether you have enough potential post April 2016 years to get to £155.65pw.

All these figures are in 2016/2017 terms, so the starting amount and £4.45 increments will all increase up to SPA, currently in line with the triple lock (higher of earnings inflation, CPI price inflation and 2.5%). So 9 post April 2016 years will get you to the full single tier pension amount.

The deadline for buying the 2016/2017 year will in due course be 5th April 2019. The cost it appears is £14.10pw or £733.20 for the full year.

The deadline for buying the 2017/2018 year (at the 2017/2018 class 3 rate) should in due course be 5th April 2020

And so on


Unless you have significantly reduced life expectancy then the current cost of £733.20 for purchasing post April 2016 years represents a very cheap way to buy extra state pension.

SnowMan

gee9fam wrote: »

I have a received a State Pension Forecast that states the following:

Estimate of £142.30 payable in 2025 based on 37 years qualifying years up to 2014/15. (4 missed years whilst at Uni).

COPE estimate £17.32.

On the surface it looks like your starting amount has been based on the old rules so the calculation of the starting amount might have been

the greater of

OLD RULES CALCULATION
= 30/30 x 119.30 + additional pension
= 119.30 + 23.00
= 142.30

NEW RULES CALCULATION
= 35/35 x 155.65 - 17.32 = £138.33pw

So starting amount is the higher old rules figure of £142.30pw

I have not contributed to Aviva since it was moved in 2002 so does this still mean I am still contracted out despite making no contributions?

Contracting out through a defined contribution pension ceased from 5th April 2012. So even if you had a contracted-out election in place with Aviva at 5th April 2012 (which is not clear here) then you will have been contracted-in subsequently

Would there be any benefit in moving the Aviva to a SIPP with respect to being contracted out and the small print regarding a Market Value Reduction?

Contracting-out ceases in its entirety from 6th April 2016. Defined contribution contracting-out as mentioned ceased after 5th April 2012.

Whether transferring the existing Aviva fund to a SIPP is a good idea, will depend on the size of the MVA, when the MVA ceases to apply, and a comparison of charges and investment options etc.

Under Important Information it states that if the COPE amount increases the State Pension could be lower than that estimated. How would this happen?

The COPE is probably in 2015/2016 terms (allowing for contracting-out to 5th April 2015), and it should be the COPE in 2016/2017 terms which will be used in the starting amount calculation. So referencing the calculation above you can see that the revaluation into 2016/2017 may slightly reduce your new rules calculation of the starting amount.

But if the old rules calculation is the higher as it appears to be, then it may not affect your starting amount

If I continue to work for next 5 years at low salary (other income through divs, investments and contributions direct to SIPP so not subject to NI) will this increase State Pension?

You will need 3 post April 2016 Qualifying Years to get you up to £155.65pw (as 4.45 x 3 + 142.30 = 155.65 - you might actually be a few pennies short).

If you are employed then a Qualifying Year is a year where you have earned more than £5,824 in a single employment (2016/2017) . Someone earning just over this amount may still have missing weeks because fluctuations in earnings may mean their earnings fall below the weekly/monthly equivalents.

SnowMan

For those struggling to get identified for the online system, the paper statements (that allow for the new state pension) can now be ordered by anyone over age 50 (was previously 55).

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

If you’re 50 or over, you can contact the Future Pension Centre to get a statement by phone or post......................

Your statement will be calculated according to new State Pension rules.