State Pension Forecast

xylophone

I checked mine tonight. the one thing I did not understand is the number of years NI contributions you have to make. Mine shows I have already made 38 years of NI contributions, but tells me I have to make another 8 years before I will get the full pension. That's 46 years of NI contributions.

You have been "contracted out" before 4.6.16?

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

ProDave

xylophone wrote: »

You have been "contracted out" before 4.6.16?

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

Yes, but as I understood it, I was opted out of SERPS, Second Earnings Related Pension, not opted out of the basic pension contributions. At least that's what all my pension documentation said.

I am now self employed and no longer opted out. It's not an issue, if I continue as self employed until I retire I will comfortably meet the number of years NI contributions needed. It just seems more complex than it has to be.

p00hsticks

ProDave wrote: »

Yes, but as I understood it, I was opted out of SERPS, Second Earnings Related Pension, not opted out of the basic pension contributions. At least that's what all my pension documentation said.

And that basic pension is what you get - at least to start with.
But you also now have the opportunity to increase it further, as the new maximum is considerably higher than the old 'basic' pension (although less than the old maximum).

Your 'starting amount' as at 6/5/16 was calculated as the higher of the two values under old and new rules -

old rules -
(NI years up to maximum of 30/30) x £119.30 + any SERPS/S2P

new rules
(NI years up to a maximum of 35/35) x £155.65 - COPE
where COPE is an adjustment for those previsouyl contracte out

[Note that the £119.30 and £155.65 amounts subsequently increased for 2017).

Having got a starting amount, everyone simply builds up their new state pension
by 1/35th of the new State Pension amount for each post-2016 NI year until the maximum is reached.

You are one of those who'll benefit by getting several bites of the cherry - the basic pension you were always entitled to under the old rules, the opportunity to increase it to the new higher maximum by working/buying/getting creditted with additional years and a private pension as well.

It's straightforward going forward, but necessarily complicated during the transition to try to be as fair as possible

molerat

You were contracted out of the second pension and will receive at least what you would have got under the old scheme where the contracted out deduction could not take you below the basic pension for the years contributed. The new increased pension had to make an adjustment for those that paid less in to ensure they did not receive the same as those that paid more and the COPE allows for that. To ensure you were not penalised by that adjustment you were allowed to keep the old scheme calculation if it was higher with the added bonus that you could add to it going forward, a win win situation. It is only complex for those that are transitioning between the two schemes but is really quite easy to understand.

ProDave

p00hsticks wrote: »

And that basic pension is what you get - at least to start with.
But you also now have the opportunity to increase it further, as the new maximum is considerably higher than the old 'basic' pension (although less than the old maximum).

Your 'starting amount' as at 6/5/16 was calculated as the higher of the two values under old and new rules -

old rules -
(NI years up to maximum of 30/30) x £119.30 + any SERPS/S2P

new rules
(NI years up to a maximum of 35/35) x £155.65 - COPE
where COPE is an adjustment for those previsouyl contracte out

[Note that the £119.30 and £155.65 amounts subsequently increased for 2017).

Having got a starting amount, everyone simply builds up their new state pension
by 1/35th of the new State Pension amount for each post-2016 NI year until the maximum is reached.

You are one of those who'll benefit by getting several bites of the cherry - the basic pension you were always entitled to under the old rules, the opportunity to increase it to the new higher maximum by working/buying/getting creditted with additional years and a private pension as well.

It's straightforward going forward, but necessarily complicated during the transition to try to be as fair as possible

Thanks for a very clear explanation, I am sure others will find it helpful as well.

I have already "earned" a pension of £129 and if I get those 8 more years of NI contributions in, I will get the maximum of £159

GunJack

ProDave wrote: »

Thanks for a very clear explanation, I am sure others will find it helpful as well.

I have already "earned" a pension of £129 and if I get those 8 more years of NI contributions in, I will get the maximum of £159

remember, after inflation increases, that 159 will be more like £186 in 8 year's time

Silvertabby

remember, after inflation increases, that 159 will be more like £186 in 8 year's time

.. but don't forget that £186 in 8 years time will buy the same amount of goods and services that £159 will buy today.

bigadaj

Silvertabby wrote: »

.. but don't forget that £186 in 8 years time will buy the same amount of goods and services that £159 will buy today.

Depends which goods and services....

Silvertabby

.. but don't forget that £186 in 8 years time will buy the same amount of goods and services that £159 will buy today.
Originally posted by Silvertabby ”

Depends which goods and services....

Ok, that's partly true. Our 13 year old bosch washing machine is making death rattles. As it fits snuggly under a worktop and between cupboards, the replacement can't be any bigger than the current machine. We dug out the original paperwork to check the dimensions - and found the receipt. £349. The price of the replacement bosch machine we are looking at? £349.

bigadaj

Silvertabby wrote: »

Ok, that's partly true. Our 13 year old bosch washing machine is making death rattles. As it fits snuggly under a worktop and between cupboards, the replacement can't be any bigger than the current machine. We dug out the original paperwork to check the dimensions - and found the receipt. £349. The price of the replacement bosch machine we are looking at? £349.

Yes, our last couple of fridges have been £10 cheaper each time.

However it's generally claimed that most people's personal inflation rate increases with age, and certainly pensioners have often had the highest rate over recent years, so whether t be Cpi, rpi or any other measure everyone's rate will be different and won't match the headline figure.