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

SnowMan

Penfold2 wrote: »

Thank you for your response Snowman.

I'll clarify those numbers for you. The £149.40 is the projection for 2017 based on him continuing to receive the credits. His his current entitlement is actually for £143.18 PW.

I doubt this makes much difference to your sums though?

In that case his starting amount must have been calculated as:

OLD RULES
= 30/30 x 119.30 (basic sttae pension) + 23.88 (additional pension)
= 143.18pw

NEW RULES
= 35/35 x 155.65 - 47.97
= 107.68pw

So the starting amount is based on the old rules calculation of £143.18pw

Because your dad already has more than both the 30 and 35 qualifying years that count in the calculation above he can't increase his starting amount calculation at April 2016 by buying pre April 2016 years.

So buying 2012/2013 and 2013/2014 years would be wasted money.

However he will earn an additional 1/35th of the full new state pension i.e £4.45pw from the credit for 2016/2017 for being over pension credit age. So he can expect a state pension of about £147.63pw (= 143.18 + 4.45) in 2016/2017 terms.

Penfold2

Thank you once again Snowman, I really appreciate you explaining this to me. We've been massively confused.

I shall relay the news to my parents.

TheGardener

I have just tried the calculator. The good news was I would be entitled to the full state pension of £155.65 and I have 36 years contributions. However, it then said I would only get £138.70 and had 13 yrs more to pay to get the full amount? I have been contracted out (public sector) for most but not all of my working life. Can anyone help with what effect is the COPE going to have and what would happen if I don't do a full 13 more years?

zagfles

TheGardener wrote: »

I have just tried the calculator. The good news was I would be entitled to the full state pension of £155.65 and I have 36 years contributions. However, it then said I would only get £138.70 and had 13 yrs more to pay to get the full amount? I have been contracted out (public sector) for most but not all of my working life. Can anyone help with what effect is the COPE going to have and what would happen if I don't do a full 13 more years?

See above, you get 1/35th of the full state pension for every qualifying year from this year on. If you've got £138.70 already then you only need another 4 years. Maybe less when your 2015/16 record gets added.

TheGardener

thanks zagfles...so if I pay another 4 ish years - will that mean once I get to the 'full' amount, there is nothing to be gained from continuing to contribute? or will additional years over the 4 mean I build but a larger sum?

SnowMan

TheGardener wrote: »

thanks zagfles...so if I pay another 4 ish years - will that mean once I get to the 'full' amount, there is nothing to be gained from continuing to contribute? or will additional years over the 4 mean I build but a larger sum?

If your starting amount is £138.70pw at April 2016, then you can add 1/35th of the full single tier pension, £4.45pw (=155.65/35) for each post April 2016 Qualifying Year until you get up to the full £155.65pw.

So if you get 4 more Qualifying Years post April 2016 that will take your state pension up to

£138.70 + £4.45 (year 1)+ £4.45 (year 2) + £4.45 (year 3)+ £3.65 (year 4) = £155.65pw

You won't be able to earn any more than £155.65pw so you won't get any extra accrual for any additional years, and that is why the 4th year above is slightly less than £4.45pw.

The £155.65pw is in 2016/2017 terms, so you will get annual increases on this currently in line with the triple lock (higher of earnings inflation, price inflation and 2.5% each year)

You will continue to pay national insurance up to State Pension Age, so for example if you are employed and earning more than about £8,060pa in a single job you will continue to pay class 1 national insurance, or if you are self-employed class 2 and/or class 4 national insurance if you are earning more than £5,965pa.

coastline

SnowMan wrote: »

Based on you already having more than 30 Qualifying Years, then unfortunately paying the £689 will be wasted money as you can't increase your starting amount at April 2016, by purchasing this pre April 2016 year for the reasons mentioned in my previous post.

Starting amount before purchase (see earlier post) £119.30

Starting amount after purchase of 2011/2012 year
Higher of

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

NEW BASIS
= 34/35 x 155.65 - 59.17 (COPE)
= 146.78 - 59.17
= £92.03pw

Starting amount (after purchase) still £119.30pw

Extra pension by buying 2011/2012: £119.30 - £119.30 = nil

I rang the Pension Service today to see how I could set up direct debit payments for further voluntary NI contributions.
A new statement will be sent out shortly despite my original being only days old on 30-03-2016.
In the next week or so I can ring back and set up the best way forward.
As I explained in my previous post I was hoping to fill in some gaps at the reduced rate of £689 and I've been told this is possible even using direct debit.
The adviser mentioned some details have just been cleared up in recent days as I was under the impression my foundation amount was set using the old rules.So as I understand it I have 33 qualifying years on the old rate of £119.30 but I can still pay the reduced rate of £689 for some extra NI to help me towards £155.

woolly_wombat

coastline wrote: »

I rang the Pension Service today to see how I could set up direct debit payments for further voluntary NI contributions.
A new statement will be sent out shortly despite my original being only days old on 30-03-2016.
In the next week or so I can ring back and set up the best way forward.
As I explained in my previous post I was hoping to fill in some gaps at the reduced rate of £689 and I've been told this is possible even using direct debit.
The adviser mentioned some details have just been cleared up in recent days as I was under the impression my foundation amount was set using the old rules.So as I understand it I have 33 qualifying years on the old rate of £119.30 but I can still pay the reduced rate of £689 for some extra NI to help me towards £155.

Whoa coastline.

According to your previous post, £689 is the cost of extra NI for "2011/12 or before" and Snowman has already said (my emboldening):

SnowMan wrote: »

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.

coastline

woolly_wombat wrote: »

Whoa coastline.

According to your previous post, £689 is the cost of extra NI for "2011/12 or before" and Snowman has already said (my emboldening):

I went through that point twice with the adviser as I have gaps in NI in recent years although I have enough to qualify for old pension of 30 years NI but not the new one due to being contracted out.
I explained I was thinking I would pay £733 a year in NI from post 6th April 2016 to gain any future benefit.
The adviser said I could pay £689 for some of the gaps and £733 after that..
I'll soon find out in a few weeks I suppose ?

molerat

I fear you will find it difficult / impossible to find out the truth about how pre 2016 contributions will affect you from official sources.