NEw State Pension Topping UP

xylophone

Your scheme will do what it does according to its rules.

See http://www.asapofficeservices.com/payroll-news/introducing-the-contracted-out-pension-equivalent-cope/

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/512799/your-state-pension-statement-explained-dwp042.pdf

p00hsticks

MikeFloutier wrote: »

I still feel it's unfair to have to pay more than 46 years of NIC

Will it help if you remember that a) for many of those 46 years whilst contracted out you were paying NI at a lower percentage rate than those who were contracted in and b) you are currently due to recive a state pension amount that is exactly what you would have always expected under the 'old rules'. The transitional rules around introduction of the new State Pension are now offering you a unexpected chance to further increase that weekly amount for a relatively small one-off payment if you wish but there is no obligation to do so.

MikeFloutier

Thanks for this Poosticks, I understand what you are saying BUT the facts remain that:

1. The maximum possible state pension ie before COD is around £155

2. My .gov pension estimate says I'm entitled to £122 but I can increase this to £134 by paying around £2k NIC (I'm not earning btw)

3. It follows that the difference between £155 & £134 must represent COD (where else could this deduction come from?) and so,

4. Where on earth does the further reduction to £122 come from AND why should I need to pay more than 46 years (bearing in mind I'm not earning)

Sorry to keep banging on about this but...

p00hsticks wrote: »

Will it help if you remember that a) for many of those 46 years whilst contracted out you were paying NI at a lower percentage rate than those who were contracted in and b) you are currently due to recive a state pension amount that is exactly what you would have always expected under the 'old rules'. The transitional rules around introduction of the new State Pension are now offering you a unexpected chance to further increase that weekly amount for a relatively small one-off payment if you wish but there is no obligation to do so.

jamesd

MikeFloutier wrote: »

This seems a little unreasonable bearing in mind I have 46 years of contributions. I appreciate it can't be the absolute max because of the contracting out BUT SURELY 46 years doesn't need topping up. How much do you need?

Not worth contacting DWP.

The issue arises because the old state pension system had a basic state pension portion that stopped accruing after thirty years and an earnings-related part that never stopped accruing but which could be opted out of. Then the flat rate system was introduced with fixed accrual per year and a higher level cap than the basic state pension in the old system. So for those opted out of the earnings-related portion there might be room between the basic state pension and flat rate cap levels to gain from more years starting with 2016-17. Depends just how much of their life was contracted out or getting credits rather than any earnings-related contributions.

There's no years cap in the flat rate system, it's just until you reach the cap. If someone was in the new system only, that would happen after 35 years, which is why you see that number mentioned.

The number of years needed to get to the cap depends on how much there was in earnings-related contributions.

The way the flat rate works means that those who can gain from more years after being contracted out are winners. They get both their contracted out pension and the chance to increase their state pension, while those not contracted out gain nothing from extra years because they already reached the cap.

jamesd

The difference between 122 and 155 is due to being contracted out. 134 is what you can get from more years now that we are using the new rules with an amount cap instead of a years cap. 155 is unreachable because you reach state pension age and don't have time to keep on accruing more years to get there. If you did have more years to state pension age you could get closer to or reach 155. As it is, the years available mean that growing from 122 to 134 is all you have time for.

It would be worth contacting DWP if they said that you could get an increase for buying years before 6 April 2016, mainly because that is unlikely to be true so you'd need to know just why it is possible in your specific case. For those with at least 30 years up to 6 April 2016 it would have to be the 30 to 34 years and chance to make the new rules calculation higher than the old rules calculation situation.

marlot

MikeFloutier wrote: »

... it seems that a few extra years of voluntary payments would be more than repaid after 3 years and thereafter be a benefit so...

DOn't forget that you'll pay tax on the added pension at your marginal rate.

MikeFloutier

Many thanks James, that makes sense. A COD of £21 against the COPE estimate £70 seemed a little low anyway.

MikeFloutier

Odd thing is that I just did a forecast for my wife.

It says she has 30 years contributions, will get the maximum pension of £155pw and doesn't suggest making any further contributions.

molerat

She may well have 30 years non contracted out with sufficient S2P to make up the basic to the same level as the new pension.

xylophone

Your wife's entitlement will have been calculated on the basis that she receives the higher of her entitlement under old and new rules.

Presumably she was never contracted out.

Under old rules, she will have been entitled to a BSP of £119.33 plus any additional pension (Grad/SERPS/S2P).

Under new rules 30/35 of £155.60.

It would appear that her calculation under the old rules gave her an entitlement equal to NSP - she cannot increase that amount.

She can contact DWP to check.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf (from a couple of years back but the principles are explained).

http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS19_State_Pension_fcs.pdf?epslanguage=en-GB?dtrk=true