Can I really get the full State Pension, despite having been Contracted Out?

sacherlover

As a group of friends in their 50s, this week we all got together to look at State Pension Forecasts.

We have all received State Pension Forecasts recently. One of our group, with only 31 years of Full NI contributions is being forecasted almost the whole £159. Others within our group with more than 36 full years are being forecasted around £137.

Many of us with around 35 years have it noted on our Forecasts that we can get our State Pension to the full £159.55 by making another 5 years of contributions - for some of us that will have to be voluntary contributions from savings.

However an Accountant has said that her understanding is that, if you have been Contracted Out, you can NEVER get your State Pension to the full amount.

Would anyone out there be able to clarify this.

We can't be the only people who are struggling to get clarity on this and almost everyone in our age group will have been Contracted Out at some stage of their working life.

Thanks,

Jackie

Jerben

sacherlover wrote: »

Many of us with around 35 years have it noted on our Forecasts that we can get our State Pension to the full £159.55 by making another 5 years of contributions - for some of us that will have to be voluntary contributions from savings.

The above sounds about right. (Im in a similar position).


I would't be using that Accountant!

Dazed_and_confused

The accountant should probably stick to accounts work.

The basic answer is yes you can get the full "new" state pension amount however that is, as you already seem to realise, based on additional years contributions being made.

As a contracted out person with a few years to go before (state) retirement age you have had the best of both worlds.

Years of paying less national insurance coupled with opportunity to bump your state pension up to the new state pension amount.

You will have had a starting amount at April 2016 which would have most likely been the amount you were expecting anyway (approx £120).

Each qualifying year from 2016:17 onwards i.e. you pay sufficient national insurance, increase your starting amount by £4.55/week.

So after roughly 8 years (assuming a starting amount of around £120) you will have reached the new basic amount of £159.55.

The extra NI payable from April 2016 probably seemed a pain at first but seems pretty good value now. Certainly better for you to have this system than have ended up with the expected £120.

badmemory

I do hope you are not using the accountant, as if she is incorrect on such a basic point well words fail me (a very unusual state of affairs). I am sure someone will be along shortly to give links & explanations etc. To those with pension forecasts - please read them again. Important figures = starting amount & how many years under new state pension needed to make up full new state pension.

GDB2222

I have some sympathy with the accountant, actually. The new state pension scheme is surprisingly, and perhaps unfairly, generous.

My position is that I was contracted out for 10 years, with a COPE of around £20 pw. Following that, I was self-employed for over 30 years. I was surprised to find that I am entitled to the full £159 pw without paying additional contributions. This is a fair bit more than the forecast I received a few years ago under the old scheme.

xylophone

See post 14

https://forums.moneysavingexpert.com/discussion/comment/73386670#Comment_73386670

Kynthia

badmemory wrote: »

I do hope you are not using the accountant, as if she is incorrect on such a basic point well words fail me (a very unusual state of affairs). I am sure someone will be along shortly to give links & explanations etc. To those with pension forecasts - please read them again. Important figures = starting amount & how many years under new state pension needed to make up full new state pension.

Would you not use a car mechanic because their knowledge of central heating boilers was lacking? Accountants aren't financial advisors or pension experts. Nothing in the accountancy qualification covers the state pension. Unless they are advertising themselves for the purpose, you wouldn't see an account for pensions advice.

sheramber

Kynthia wrote: »

Would you not use a car mechanic because their knowledge of central heating boilers was lacking? Accountants aren't financial advisors or pension experts. Nothing in the accountancy qualification covers the state pension. Unless they are advertising themselves for the purpose, you wouldn't see an account for pensions advice.

If the accountant is giving advice on pensions when she isn't qualified then what else is she giving advice on that she isn't qualified in?

Silvertabby

I was contracted out for 38 years - from 1978 until I retired (at age 60) in 2016.

As I worked part time for the latter part of my working life, I have benefitted from the post 2002 SP2 top up - so my foundation amount is £140 rather than the £122 I had expected. By choosing to pay voluntary Class 3 NI in (pre SPA) retirement I, too, can bump my State pension up to the maximum £160 per week.

Each case is different.

Snakey

I was contracted out for about twelve years but under current rules only need to make six more years of contributions (taking me to my early fifties) to get the full State Pension. Shame the contracted-out amounts were invested so badly that - when I belatedly discovered them, about five years ago - they were worth about the same as they were when they went in, but still, it's free money.

sheramber wrote: »

If the accountant is giving advice on pensions when she isn't qualified then what else is she giving advice on that she isn't qualified in?

She probably got put on the spot by the sort of client who thinks that she must know all about everything involving any sort of "numbers" or "maths" because it's all the same thing really, and gave an answer off the top of her head. The client - having declined the offer of paying her to do any further work to confirm the position - has then mentally stripped out all of the caveats and passed it on as the gospel truth.

That's what normally happens, anyway, from my experience of having people tell me that such-and-such-a-professional says they can definitely do something, then I speak to the person concerned to find out more details and it turns out they really didn't say any such thing.

dunstonh

Can I really get the full State Pension, despite having been Contracted Out?

Yes. Its very common. The contracted out years get replaced with contracted in years. Your working life is more than the qualifying period. So, having some contracted out but the rest contracted in means getting full amount is not that difficult.

However an Accountant has said that her understanding is that, if you have been Contracted Out, you can NEVER get your State Pension to the full amount.

Not correct. This is why accountants no longer deal with financial advice. To be fair, most accountants know their area of knowledge and will defer to others in areas where they do not know. I work well with a number of accountants. However, I have cross swords with a couple who have given out information that is decades obsolete or just bad opinion based on bad understanding. No profession is perfect across the board.

The Self employed are also winners in this change as well. Old system meant they only got the basic state pension. Now they get the increased amount as well.