New (2016) State Pension - BEWARE!!!

Grumpy_Old_Duffer

Like many people I was under the impression that if I had 35 qualifying years I would get the 'new' State Pension rate of £155.65.

Like many, we were encouraged to Opt-Out back in the 70's/80's, and I was in an Opted-Out Pension scheme for 8 years, before being made redundant and 'luckily' transferring my Pension to a Section 32.

Just received my State Pension statement and it shows I have 48 qualifying years .. yippeee I thought, more than enough, even taking into account the 8 years of Opt-Out, so to my reckoning that's now 40 qualifying years (5 years in pocket!!) :j.:j:j

WRONG!!!!

Based on the figures on my Pension statement they ignore the 13 years of NI 'over payment', and deduct the 8 - Opt-Out years from the 35 qualifying years needed for the new 2016 Pension scheme, not from the 48 'qualifying' years I actually have :mad::mad::mad:

Who, I wonder, benefits from the 'excess' years of NI Pension payments?

It's the same old story ... those that scrimp & save for a better retirement, get penalised the most :o:o

What a great life my generation's had; 15% Mortgage rates in the 70's, now SFA on our Savings :(:(

Moral of this story: "If the Chancellor announces in a Budget something that sounds to good to be true, it probably is!!"

tempus_fugit

If you were contracted out in previous years you would have benefited from a further pension paid from the contracted out payments. For example, I was contracted out between 1980 and 1995, and the payments went into my company pension, which I will receive when I am 65 (actually a year earlier than the state pension, so all the better). It would not be fair for those of us what benefited from cheaper payments into the state pension to get the same as those who didn't.

le_loup

Grumpy_Old_Duffer wrote: »

It's the same old story ... those that scrimp & save for a better retirement, get penalised the most

Don't be silly.
You get an enhanced payment from your company pension.
By all means be a grumpy old duffer but think before posing!

Grumpy_Old_Duffer

Missing the point ..... if I had only paid 35 years NI then fair enough ... but 48 years!!!

GunJack

So, your starting amount would be based on your contributions under the outgoing system, so full £119-odd basic SP (from Apr 16), plus some amount from SERPS/S2P, on top of which you'll get your company pension payments from the contracted-out period.... surely your total pension will be over £155?

plus, everyone pays NI when under pension age if earning...regardless of how many years you have...

GunJack

p.s. maybe you've read your statement incorrectly? or just misunderstood the differences between old & new SP, and the transition period between the two?

GunJack

also, NI isn't just for pension, it's also toward benefits should you need them

zagfles

Grumpy_Old_Duffer wrote: »

Missing the point ..... if I had only paid 35 years NI then fair enough ... but 48 years!!!

Yes that's the way it works. The thing to remember is that the new flat rate state pension replaces both the basic state pension and SERPS/S2P. If you contracted out of SERPS/S2P then your flat rate pension is reduced as you get some of it from the contracted out pension.

You end up with 13 "wasted" years of NI contributions, but that would be exactly the same as someone who never contracted out. They'd get at least £155 direct from the state with 13 wasted years. You get (probably) at least £155 total from the combination of the state pension and your contracted out pension, again with 13 wasted years.

dunstonh

What a great life my generation's had; 15% Mortgage rates in the 70's, now SFA on our Savings

Your generation will probably go down as one of the wealthiest and the ones that had to contribute the least for what they have.

RickyB2000

I guess the unfairness is someone who is say 50 or 55 in theory can make up their state pension to full amount again by making further NI contributions. However, someone who already has an excess of NI years and who no longer has the chance to make it up again can't.

However, I do agree that they will have 15 more years of higher defined benefit pension which is likely to be far better than the 20 somethings who may get the full state pension but will have very poor contribution schemes in comparison.

saver861

Unfortunately this is more of a problem on how the new pension was 'sold' to the public. Only 13% get the full new pension in its first year. Everyone thought they would get the full £155 when it was announced.

Gradually people have become aware of the real values and the effect of contracting out etc. However, there is still a high proportion of people who are unaware they will not get the full £155.

The Gov messed this one up badly in their quest to put out the 'good news' side of the new pension.