State Pension: too many qualifying years?

TooMuchSloeGin

(Good grief... I am asking a simple question and the whole thing descends into an utterly unrelated discussion. Well, it must be post-Brexit Britain :-\ For the record, I sincerely apologise for the munificence of gov.uk towards people like me.)

Thanks @molerat for your answer. Assuming the three years are indeed this 16 to 18 educational bonus, and so taking my 20 years entitlement at face value, I still have trouble understanding the actual figures. Either I am too thick or this pension thing is too complex. Probably both. Here goes: if I have twenty years NICs, I should get roughly 20*£4.45 = £89. The gov.uk website tells me though that I'll currently get £101. That's £12 more per week, so not wholly insignificant. Where am I going wrong?

xylophone

Your starting amount is the better of your entitlement under old/new rules.

Your "old" will include any SERPS/S2P you have earned as well as the basic.

jamesd

Your calculation of 20 £ 4.45 is assuming that your whole working life has been under the flat rate system. It hasn't.

The older system that you have been working in until 6 April 2016 had two parts, a basic state pension that needed 30 years to get the full amount plus an earnings-related portion that continued to increase as you worked until you reached state pension age.

The starting level for the flat rate system is the higher of the old rules or new rules calculations and in your case the old rules is higher so that's what you have now, plus some for the 2015-16 tax year that won't be added until late this year. For 2016-17 onwards you'll get the flat rate increase of 4.45 per year, or rather an entitlement to 1/35th of the flat rate per year from 6 April 2016 on top of what you had built up under the old system until 6 April 2016.

TooMuchSloeGin

Thanks for that clarification. Slightly less than half of the 17 years I was contracted out of SERPS, the rest I was in. So I assume the £101 is some sort "composite" figure that no-one outside of the hallowed halls of the DWP can transparently explain?

IOW, I have just to trust those numbers (maybe check back every year...?) and can only hope and pray that the guys over there have got their calculation right? Seems rather murky if I may say so.

xylophone

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

TooMuchSloeGin

THX for the link. Well, I had a look... I think "murky" is about the right word :-) I think I will just have to accept that figure and hope it's right. Is there a way to ask the DWP for a more detailed calculation than that from the gov.uk state pension website?

To recap this whole thing: till 2014/5 (the last year shown as full) I have built up 20 years NICs which are currently worth around £101. If I top up the one gap year this will add £something to this £101, let's say £4. If I then continue to contribute for another 14 years, I should end up getting £101 + £4 + £4.45 * 14 = £167.30. And that'll be my (maximum) state pension however long I then continue to pay NICs.

Right?

bowlhead99

TooMuchSloeGin wrote: »

To recap this whole thing: till 2014/5 (the last year shown as full) I have built up 20 years NICs which are currently worth around £101. If I top up the one gap year this will add £something to this £101, let's say £4. If I then continue to contribute for another 14 years, I should end up getting £101 + £4 + £4.45 * 14 = £167.30. And that'll be my (maximum) state pension however long I then continue to pay NICs.

Right?

Not quite.

As you noticed earlier, your start point of £101 is more than you would have got for 20 years under the new system (the £4.45 a year system up to £155ish) because you had some earnings-related or "state second pension" included, from your time in the old system.

Basically if the amount already earned under the old one is bigger than what you'd have earned in the new system over the same time period, you can keep that earned entitlement, and vice versa - whatever's best for you. And then it's single tier all the way from now on.

So they draw a line in the sand for your starting entitlement and then going forward everything's on the new system (4.45 a year up to £155ish). Which means you can keep earning the 4 45 as year on top of the £101... BUT you can't go over £155ish on the new system, whether you pay in for another 13 or 14 or 15 or 20 years. You hit the cap.

As your remaining years are on the new system, which only lets you earn 4.45 a year until you hit 155, there is no way to hit 167 unless you're already there.

For me, I'm about 7 years away from hitting the cap and will at that point then be about 20 years from state pension age... But I can't just keep on growing the 155 to 160 or 200 or 250, because the single tier "£4.45 a year til you hit £155" doesn't let you keep going like that.

So if you really do plan to work another 14 years, paying NI each year and eventually hitting the cap with no ability to go beyond it - probably no point paying extra to buy back the missed year as you won't need it and it'll be dead money. I have a missed year and am not going to buy it.

greenglide

You are currently below the maximum nSP amount. Further contributions will get you £155.65 / 35 (£4.47) per year until you hit the £155.65 maximum.

The £155.65 will be index linked each year as will the amount you start with (the £101 figure).

Quite simple really;-)

[Deleted User]

TooMuchSloeGin wrote: »

Is there a way to ask the DWP for a more detailed calculation than that from the gov.uk state pension website?

Yes, just ring them up and ask. They'll send you a pension forecast along with an explanation booklet.

TooMuchSloeGin

OK folks, I think I get it now. Amazing what I learned about this wonderful system within roughly 24 hours :-)

Thanks to all who posted helpful bits... adios.