Pension Help Please

SpiderMam

Hi, I'm 51 years old and have worked continually since 1984. I contracted out of SERPS from 1987 to 2001 and assume I was contracted back in after this date. I'm now confused as to my eligibility to a state pension at retirement age. I receive a statement each year from CIS which mentions a pension amount of £701 per year, but obviously this is nowhere near a living wage. Could you please help? Thanks

xylophone

Contracting out of SERPS did not deny you a basic state pension.

You will be aware that people of your age group will fall into the new state pension regime.

https://www.gov.uk/new-state-pension/overview

Request a state pension statement after 6 April.

SpiderMam

Thanks xylophone. So does this mean I'll get both? Thanks and sorry for appearing a bit thick here.

xylophone

So does this mean I'll get both?

Do you mean both your private pension and your state pension?

If so, yes, you will receive your private pension (this is probably available to you from age 55) and your state pension at your state pension age. See https://www.gov.uk/state-pension-age

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447195/new-state-pension--effect-of-being-contracted-out.pdf

SpiderMam

Thanks ever so much, much appreciated

jamesd

Yes, you'll get both. Just get a state pension statement to know what you've accumulated so far and check it once every year or two to see changes over time.

Under the current/old rules you would get basic state pension accrued for each year plus an earnings-related amount of additional state pension if not contracted out.

From 6 April 2016 you will be allocated a foundation amount under the flat rate system that is the higher of your entitlements under the current or flat rate systems. That'll usually be the current rules value for someone who has contracted out.

From then on each year worked that counts or which is purchased will increase the state pension by 1/35th of the flat rate amount. There is no longer any earnings-related component after this. The increases stop when the flat rate cap/level is reached.

Those who contracted out normally benefit from this because those who didn't contract out stop getting more state pension after 35 years worked but those who contracted out just keep on increasing until they reach the flat rate level. And in addition they get to keep their contracted out money.

Don't take the CIS number too seriously. Normal pension statement calculations do daft things like assuming you'll buy an inflation-linked annuity and very few people do that. At the moment the best deal at normal retirement ages - the one that gets most inflation-linked income for the money - is deferring the state pension. You'd probably end up with something like twice the CIS number by doing this.

SpiderMam

Thanks you're all so kind