New State Pension Forecast

tamste

I have just checked my NI record and am a little confused.

I am due to receive the state pension in 2026 and although my NI record shows 39 full years of contributions (and 3 partial years) the State Pension Summary states that based on this data I will only receive £138.97 per week against the full £164.35 per week. It says that I will have to make another 6 years contributions to get the £164.35.

Reviewing the detail of the record, I have 35 continuous years of full contributions going back to 1983/4.

From 1976/7 to 1982/3 there are 3 years which are "not full" and 4 years where I was given credits (marked full) whilst I was studying for A levels and at Uni.

What I don't understand here is why with this record the Summary only has my state pension forecast of £138.97 rather than £164.35.

Can anyone shed light on this please.

Brynsam

Yes - it's to do with when the years are earned - you need more in the post-2016 period. See https://www.gov.uk/new-state-pension/how-its-calculated

Paul_Herring

What I don't understand here is why with this record the Summary only has my state pension forecast of £138.97 rather than £164.35.

You've likely been contracted out for some of those full years. At the bottom of https://www.tax.service.gov.uk/check-your-state-pension/account check for:



Clicking that link (https://www.tax.service.gov.uk/check-your-state-pension/account/cope):



Note that the amount stated is a notional amount that
- you should be getting as part of your personal pension where your refunded national insurance contributions went into
- it may be more or less than that amount and
- more than likely won't explicitly be stated on any paperwork you'd get from your personal pension provider

tamste

Thanks for the very swift reply.

Sorry, new to me this stuff, but I thought that if I had =>35 years of full contributions, I would receive the maximum:

Valuing your National Insurance contributions and credits made before 6 April 2016
Your National Insurance record before 6 April 2016 is used to calculate your ‘starting amount’. This is part of your new State Pension.

Your starting amount will be the higher of either:

the amount you would get under the old State Pension rules (which includes basic State Pension and Additional State Pension)

the amount you would get if the new State Pension had been in place at the start of your working life

Thus, if the new state pension had been in place at the start of my working life, surely I have qualified for the max already?

Paul_Herring

.. and since you need a minimum of 35 qualifying years, it seems that you don't have 35 qualifying years of non-contracted out contributions. Each subsequent year non-contracted out contributions will 'knock out' one of the contracted years.

Given the figures you gave, I'll guess that you currently have 30 years of non-contracted out contributions with the rest being contracted out. If you work for another 4 or 5 years, you'll knock the remaining ones out and end up with the full state pension.

Paul_Herring

Thus, if the new state pension had been in place at the start of my working life, surely I have qualified for the max already?

The new state pension started in 2016. If you have 39 years of contributions, I don't think that the new state pension was there at the start of your working life

xylophone

You once worked for NHS and would have been a member of the DB Pension Scheme which was contracted out of SERPS/S2P (Additional State Pension).

At 6 4 16 two calculations were done for you

Full BSP + (ASP - Deduction for contracting out) Old Rules Entitlement

Full NSP - Contracted Out Pension Equivalent. New Rules Entitlement.

Your Starting Amount was the higher of the two and in your case was lower than a full new state pension.

You will be able to increase your entitlement up to full NSP by contributions or credits up to State Pension Age.

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

tamste

Thanks all ... starting to make sense now.

I spent 24 years in the NHS up to 2007, so its probably this. Will check it out further and see if I can bring make up the deficit. Was hoping to stop working in 2020 so need a way to bring this in line if I am to avoid a shortfall in 2026

Paul_Herring

Technically there shouldn't be a deficit/shortfall - anything your state pension has been reduced by should be (more than) made up by the other pension fund that got the NI rebates paying you more than it otherwise would have.

In fact if you do manage to get your state pension back up to the 'maximum' you're one of the ones who will actually have benefited from the whole mess that is the state pension...

tamste

OK.
So when I take my pension in 2020, I will still need to make NI contributions to get the maximum state pension.

I intend to go self employed after taking my pension in 2020 and was intending to take payments as dividend from the Ltd company, with no salary. In this case would it be possible to make the required NI contributions to ensure that I maximise the state pension when this becomes payable, at which time I might not be working much so would value the maximum state pension.

triplea35

I understand that as self employed you only need to make the minimum Class 2 contributions (£153.40 a year) to qualify for State Pension.