State pension and contracting out

xylophone

I've got 42 years full NI contributions, surely that is way over what I need for the maximum pension?

It appears that you were in a Contracted Out Pension Scheme at some period of your life.

At 5.4.16 your "starting amount" was calculated under the old and new state pension arrangements.

Under the old, you would be entitled to the Basic State Pension ( because you had thirty years + of NI) plus any additional pension minus a deduction representing your contracted out period.

Under the new, a full NSP minus a deduction representing your contracted out period.

In your case the old calculation would have given the higher amount.

You can increase your Starting Amount to £147.07 by making NI contributions up to 2020.

See https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447195/new-state-pension--effect-of-being-contracted-out.pdf
for full explanation but for BSP read £119.30 and for NSP £155.65.

Silvertabby

Silvertabby, thank you.

£147.07 is the forecast for 2020.

I've got 42 years full NI contributions, surely that is way over what I need for the maximum pension?

No, DWP are a bit misleading when they say 'full NI contributions' because they don't mean that at all - just that you've paid NI of some sort for a full year.

As you must have been in a contracted out private or occupational pension scheme at some point, you paid reduced NI for that period. The reduction of 1.2% doesn't sound much, but it equates to £25 per month for someone on a salary of £25K per year. On top of that, your employer also paid less NI - roughly 3 times as much as your rebate. That's £100 per month less going into the State pension scheme for the period you were contracted out. Adjust these figures if you were on less or more than £25K at the time, but you get my drift...

Have you got a current estimate for your occupational/private pension? - don't forget that this will be paid in addition to your State pension.

xylophone - sounds like £147.07 is the OPs forecast as at SPA, assuming she pays NI until then, so this is likely to be her maximum amount?

p00hsticks

Lucy_Lastic wrote: »

Silvertabby, thank you.

£147.07 is the forecast for 2020.

I've got 42 years full NI contributions, surely that is way over what I need for the maximum pension?

No. because as Silvertabby says, many of those years would have seen you paying a lower rate of NI due to being contracted out (and presumably paying in to a company pension schene instead).

Under the 'old' pension rules you needed 30 NI years to get to the full basic pension of £119.30. (Any period contracted in would have seen you build up this amount a bit more in SERPS or S2p). This forms your 'starting amount' as at 6th April 2016.

Any years worked/creditted after 6/4/16 up to State Pension Age wil ladd to this amount at the rate of £4.45 a week (being 1/35th of the new weekly maximum £155.65)

Lucy_Lastic

Thanks all, I am a civil servant and have been in the same civil service pension scheme since starting work with them in 1977. 40 years continuous service coming up this November.

Employment prior to 1977 had no pension scheme.

Silvertabby

Thanks all, I am a civil servant and have been in the same civil service pension scheme since starting work with them in 1977. 40 years continuous service coming up this November.

Employment prior to 1977 had no pension scheme.

In that case you've been contracted out since 1978. You must be a low to moderate earner (or part time) to have accrued a State pension in excess of the old basic £119 per week, so it looks like you may have some SP2 top ups from 2002 to 2016. I worked part time from 2004 until I retired last year (at 60) having been contracted out from 1978, and my State pension estimate is £138 per week.

Lucy_Lastic

Silvertabby - yes, low-moderate earner @£20,000.

Can you explain SP2 top ups from 2002?

xylophone

xylophone - sounds like £147.07 is the OPs forecast as at SPA, assuming she pays NI until then, so this is likely to be her maximum amount?

I said

You can increase your Starting Amount to £147.07 by making NI contributions up to 2020.

xylophone

Silvertabby - yes, low-moderate earner @£20,000.

Can you explain SP2 top ups from 2002?

It would be a good idea to read the full explanation given in my link in 22 above.

2002 saw the introduction of S2P See

https://en.wikipedia.org/wiki/State_Second_Pension

xylophone

See also http://www.civilservicepensionscheme.org.uk/members/member-news/the-state-pension-and-your-civil-service-pension/