New State Pension Guide 31 March 2016 at 1:09PM in Pensions, annuities & retirement planning 684 replies 117.2K views

MSE_Helen_S

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Thanks folks,

SnowMan

In the table the maximum weekly pension under the old system should be something slightly above about £280 per week and not £119.30 per week. The £119.30 per week is the maximum basic state pension and not the maximum state pension. To exclude additional state pension is not comparing like with like.

The losers who will end up with less than £155.65
......................
This is mainly due to the numbers of people who ........ and, critically, those who have been what's known as 'contracted out' of the old state pension in the past

Please stop perpetuating this myth that those who have been contracted-out are losers, in general they are winners

The Parliamentary report on the mis-communication of the changes says

People with periods of contracting out typically gain from the new state pension. That many such people believe wrongly that they are disadvantaged is in part a failure of Government communication.

In this case the mis-communication is by MSE (not the first mis-communication by MSE on this).

The article fails to cover how the transitional period works. It needs to explain that everyone has a starting amount at April 2016.

If this is more than the £155.65pw full single tier pension, then no further accrual is possible after April 2016 (although amounts are still uprated with the triple lock and CPI on the protected amount)

And if the starting amount is below £155.65pw, then 1/35th of the single tier amount (about £4.45pw) can be added for each post April 2016 qualifying year until the full single tier pension is reached. An example to show how many post April 2016 years were needed to reach £155.65pw would be a good idea.

A couple of diagrams showing these 2 scenarios would be good.

There is also a typo of £155.95pw as the full single tier amount at one point.

greenglide

Presumably MSE count as part of "the press" and "the press" have shown a total lack of understanding or nSP (and pensions in general) or a deliberate move to stir up confusion?

GunJack

I thought it was "Single Tier", not "Flat Rate"?

Also, male SP age is already at least 67 (well, mine is) so why do you insist on olny mentioning the increase to 66 by 2020?

EdGasket

Looks like the the 'flat rate for everyone' is a con. Anyone contracted out for most of their working life will get a deduction from the 'flat' rate of quite a substantial amount. The argument being 'oh well your private pension will make it up' BUT that wasn't the point of a private pension which was to provide extra income NOT make up the shortfall in BASIC state pension because they changed the rules.

Well it looks to me as though those contracted out will lose out because with annuity rates so low the private pension will not make up the shortfall in the basic state pension.

greenglide

The term "SPa" (State Pension age) refers to the age at which they reach State Pension age - for me it is 65 (May this year). The term SPa date is used to specify the exact date on which you achieve it.

Also there are uses such as "Female SPa" which is used for qualifying for bus passes, Winter Fuel Payment etc which is the date on which a female born on the same day would reach SPa.

It was all simpler in the 1990s!

greenglide

The argument being 'oh well your private pension will make it up' BUT that wasn't the point of a private pension which was to provide extra income NOT make up the shortfall in BASIC state pension because they changed the rules.

Sorry but the reason for contracting out was because the pension scheme member gave up entitlement to the additional pension (SERPS / S2P) in exchange for the employee and employer paying less NI.

Since such members didnt contribute to the second pension why should they benefit from the transitional measures to close down the SERPS / S2P schemes?

SnowMan

Separately, the new state pension rules will make it very difficult to pass on any additional or second state pension you may have built up to loved ones when you die. The old regime allowed this to take place without too many restrictions

Another bit that needs a complete rewrite.

The real change is the removal of virtually all inherited and derived rights under the new state pension except for married women who have been paying reduced (E) rate contributions (for example the ability to use some or all of a spouse or civil partner's contribution record on death, retirement or divorce to gain some entitlement or extra entitlement than that based on your own record only)

The writer of the MSE article does not understand that this affects both basic state pension and additional pension effectively. The only real relevance of additional pension is that some of the limited protections that apply during the transition are mainly in relation to additional pension.

EdGasket

greenglide wrote: »

Sorry but the reason for contracting out was because the pension scheme member gave up entitlement to the additional pension (SERPS / S2P) in exchange for the employee and employer paying less NI.

Since such members didnt contribute to the second pension why should they benefit from the transitional measures to close down the SERPS / S2P schemes?

Exactly, it was giving up the right to additional pension BUT not the Basic pension. Now they are using contracting out as an excuse to reduce the basic 'flat' pension from £155 to something much less.

SnowMan

EdGasket wrote: »

Exactly, it was giving up the right to additional pension BUT not the Basic pension. Now they are using contracting out as an excuse to reduce the basic 'flat' pension from £155 to something much less.

Someone with 30 qualifying years under the old system to date, and who had always contracted-out, would get the full basic state pension of £119.30pw as a starting amount under the new system, with the additional bonus of being able to accrue further state pension in relation to post April 2016 qualifying years.

So there is no reduction of the basic pension only the additional pension, and in some cases there is no reduction in the additional pension either because of this ability to 'buy' this back through post April 2016 qualifying years.

Consider Frosty who has 30 years all contracted-out to April 2016 (and so has earned no additional state pension) and his twin Olaf who has 30 contracted-in years during which he has earned about £36pw of additional state pension say. Assume both have 9 years before they reach SPA (all of which are qualifying years).

Both will have an eventual state pension of £155.65pw. However Frosty will have his private contracted-out benefits as well, and may have paid lower national insurance up to April 2016. Olaf will have no separate private contracted-out benefits and may have paid higher national insurance.

Frosty, the contracted-out snowman is the winner.

coyrls

GunJack wrote: »

Also, male SP age is already at least 67 (well, mine is) so why do you insist on olny mentioning the increase to 66 by 2020?

It's not all about you; my (male) SP age is 66 because I will be 66 in 2022.