State Pension - over 44 contributions needed

crumpsall

I was born Oct 1955 and will reach State Pension age in 2021. I was contracted out and understand the basis of the COPE (Contracted Ouot Pension Equivalent) reduction to State pension. What I do not understand is why, having 40 year's worth of NIC contributions/ credits, HMRC are saying that I still need another 4 years of contributions in order to maximise my pension. All the publicity/ Govmt info suggests that for those retiring then need only 35 years contributions. Can anyone explain?

GunJack

Yes, it's 35 years if starting exclusively on the New State Pension, so from FY 16/17. For most of us, we'll have had NI contributions under the old system, and at the end of FY 15/16 a calculation was done under the old and new systems so that your starting amount in the New SP was the higher of the two amounts. For most people with a fair bit of NI pre-FY 16/17 it's beneficial, as you can pay more years NI to get closer to the New SP maximum, and so be better off than under the old system, especially if you were contracted-out (i.e. have company/private pension schemes) as well as State Pension. HTH.

Linton

35 years with no COPE gives you the standard pension. COPE reduces this as you paid reduced NI/ had the contributions paid into a private pension/ had part of the state pension included in a DB scheme.

However the post 2016 pension scheme allows you to recoup the COPE reduction with NI years beyond 35.

Extra NI years before 2016 dont count as that was prior to the new scheme coming into effect.

Dazed_and_confused

And the government has decided to somewhat surprisingly allow additional benefits to accrue using the higher figure from when your starting amount was calculated which essentially means your COPE figure is utterly irrelevant.

Starting amount at April 2015 (rounded figures just for example)

Old system = £120
New system = £70 (this is net of COPE)

So when you start getting new NI years from April 2015 onwards you would think these would be added to the £70 and if you have enough post April 2015 years this could eventually overtake the old style pension of £120 (but you could never get less than the £120 whatever happened).

But no, you start with £120 and each added year is added to this so you are in a real win win situation, years of reduced NI with company pension entitlement AND you can now, if enough years left to pension age, build up to the full new state pension of £160. Nice!

GunJack

Dazed_and_confused wrote: »

And the government has decided to somewhat surprisingly allow additional benefits to accrue using the higher figure from when your starting amount was calculated which essentially means your COPE figure is utterly irrelevant.

Starting amount at April 2015 (rounded figures just for example)

Old system = £120
New system = £70 (this is net of COPE)

So when you start getting new NI years from April 2015 onwards you would think these would be added to the £70 and if you have enough post April 2015 years this could eventually overtake the old style pension of £120 (but you could never get less than the £120 whatever happened).

But no, you start with £120 and each added year is added to this so you are in a real win win situation, years of reduced NI with company pension entitlement AND you can now, if enough years left to pension age, build up to the full new state pension of £160. Nice!

April 2016, FY 16-17, surely??

colsten

You should also keep in mind that NI contributions are for more than just state pensions. Around 20% of our NICs go directly to the NHS, the rest goes into the NI Fund. The NI Fund pays for state pensions as well as working age benefits - ESA, JSA, maternity leave.

NI contributions are also your insurance policy for benefits should you become unable to work. If you have not paid them in the preceding two years, your entitlement to the working benefits ceases.

If people did not continue to pay NI up to their state pension age, there would be less money in the NI Fund - meaning that either the state pension amount would have to be reduced or the state pension age would have to increase more than it already does, or both.

bigadaj

It might be the media spin but it isn't half depressing to have people whinging on here about NI contributions when teh change to the new system is of whole benefit to them.

The simple answer is to stop paying NI, if that's feasible as it's obviously primarily a form of taxation, and that person will still get what they would have been entitled to use the old system.

And, of course, despite having paid in for years there's no specific pot accrued, those contributions have paid previous pensioners as well as NHS etc, so you can't actually take your 'pot' in any case.

p00hsticks

bigadaj wrote: »

It might be the media spin but it isn't half depressing to have people whinging on here about NI contributions when teh change to the new system is of whole benefit to them.

I can't see the OP 'whinging' - simply asking for an explanation.

There have been many reports in the media about 35 years getting you a full new state pension, without adding the proviso that that is only true for those starting their working lives under the new rules and that transitional rules are in place for those who have already accumulated years under the old system.

It's no wonder that the subject comes up time and again here - in my experience some are complaining but most simply want to understand the rules.

bigadaj

p00hsticks wrote: »

I can't see the OP 'whinging' - simply asking for an explanation.

There have been many reports in the media about 35 years getting you a full new state pension, without adding the proviso that that is only true for those starting their working lives under the new rules and that transitional rules are in place for those who have already accumulated years under the old system.

It's no wonder that the subject comes up time and again here - in my experience some are complaining but most simply want to understand the rules.

Fair enough, I'd say somewhere between the two, as I said in my previous post complaints are generally derived from a daily mail or similar Mis interpretation and Mis reporting of the situation in its entirety.

The new system is a significant improvement, in clarity and understanding at least, it's the old system and the transitional arrangements that are complicated.

Bottom line is that no one is worse off, even if there may be gripes about not getting a full new state pension when people have benefitted from cope elsewhere.

Roger-Jolly

I have recently been working with my financial advisor to seek the best I can have from my pension situation.
I was due to retire recently, but opted to work on. If not to enhance my pension, then to receive an income for a bit longer.
I discovered recently that I will not receive the full New state pension as despite having 46 full contribution years, I have three part contribution years and these have penalized me.
Unfortunately they are farther back that the existing rule that you can only top up for the last ten years contributions, so the option is taken out of my hands despite the 46 years.
No-one will sway me in thinking that the government just rip us all off. My N.I. contribution for 2016/2017 of £2,533.40 was the better part of £900 more than the previous year.
So much for having a new system.

xylophone

I discovered recently that I will not receive the full New state pension as despite having 46 full contribution years, I have three part contribution years and these have penalized me.

What exactly does your new state pension forecast say?

https://www.gov.uk/check-state-pension