Yet another voluntary NIC thread

pensionpuzzler

So, for the person with 40 years. They will get the full basic as they have accumulated 30 years. If the contracted out amount reduced that to below the full basic, the 'starting amount' brings it back to the full basic.

There is no relevance to the algorithm calculating that in terms of getting the full amount. Such peeps have jam on both sides, so to speak.

The new scheme is to your benefit. You can get the full basic, plus add on 5 or 6 years of the new pension to add to your full basic. The new pension requires 35 years to get the max amount, and for peeps starting in 2016 as their first year, they will need to work till 2051. Currently we are in the changeover phase and will be for some time, mixing the old and the new.

Brynsam

Perhaps do some reading other than threads on this board - e.g. https://www.pensionsadvisoryservice.org.uk/about-pensions/the-state-pension/voluntary-ni-contributions (and you could also call them if you still have queries - it may be easier to discuss 'live').

Linton

monxton wrote: »

I know I'm risking further derision with this, but here goes. If a person under the old scheme had more than 30 years of contributions, then there must be an algorithm which determined which of those years to base the calculation on if some of them were full and some of them were contracted out. I'd still like to know what this is/was. The best 30, the worst 30, the earliest 30, the latest 30, a pro-rated average of all contributions ...?

Thanks for your patience.

It doesnt work like that. 30 NI years entitled you to a full basic state pension, extra NI years did not increase the basic beyond that. In addition every year you were contracted in, not just 30, gave you extra pension in the form of SERPS, S2P or ASP depending on the exact year - it changed its name and amount several times. Similarly you paid less NI every year you were contracted out, not just the first 30.


COPE is based on a comparison between what SP you would have accrued if you were contracted in compared with what you actually accrued if you were contracted out for every year of your career. I do not know the precise algorithm - I have never seen it published and in any case it would be complicated because of the changes to the system over the years.


See https://www.gov.uk/government/publications/state-pension-fact-sheets/contracting-out-and-why-we-may-have-included-a-contracted-out-pension-equivalent-cope-amount-when-you-used-the-online-service

monxton

pensionpuzzler wrote: »

So, for the person with 40 years. They will get the full basic as they have accumulated 30 years. If the contracted out amount reduced that to below the full basic, the 'starting amount' brings it back to the full basic.

Thanks, I realise now that what you call "full basic" is the old-style basic pension, not the new-style flat-rate. All becomes clear.

There is no relevance to the algorithm calculating that in terms of getting the full amount. Such peeps have jam on both sides, so to speak.

IIUC there is more of a windfall for people who were not contracted out, because the starting amount is the greater of your old-style pension and "the amount you would get if the new State Pension had been in place at the start of your working life". So those with more than 30 years of full contributions are actually deriving benefit from them, which they did not under the old scheme. But yes, I do appreciate that my starting amount has not been decreased by the changes, and I am being offered an investment opportunity

The new scheme is to your benefit. You can get the full basic, plus add on 5 or 6 years of the new pension to add to your full basic. The new pension requires 35 years to get the max amount, and for peeps starting in 2016 as their first year, they will need to work till 2051. Currently we are in the changeover phase and will be for some time, mixing the old and the new.

A better deal for the oldies than the youngsters. Plus ca change.

Linton

monxton wrote: »

.....

IIUC there is more of a windfall for people who were not contracted out, because the starting amount is the greater of your old-style pension and "the amount you would get if the new State Pension had been in place at the start of your working life". So those with more than 30 years of full contributions are actually deriving benefit from them, which they did not under the old scheme. But yes, I do appreciate that my starting amount has not been decreased by the changes, and I am being offered an investment opportunity

No, because the extra amount of the new SP replaces the SERPS/S2P/ASP that contracted in people would otherwise have got had the old system carried on. The change from the old system to the new system was intended to be cost neutral with the higher fixed value of the SP being paid for by reduced benefits for the well paid who otherwise could have accrued much higher SERPS/S2P/ASP.


One of the main aims of the changeover was to ensure that no-one lost benefits they had already paid for.

A better deal for the oldies than the youngsters. Plus ca change.

The change over rules mostly benefit people such as yourself who were contracted out with the benefit of cheaper NI but have time post 2016 to accrue extra flat rate SP after paying for 30/35 years which they would not have been able to do under the old scheme.

monxton

Linton wrote: »

It doesn't work like that. 30 NI years entitled you to a full basic state pension, extra NI years did not increase the basic beyond that ... you paid less NI every year you were contracted out, not just the first 30.

That's rather my point. Older people started paying NICs at a time when it took 40 years to earn the basic pension. It was only relatively recently that it was reduced to 30, and I do know someone who lives under a cloud of rage because he paid voluntary contributions to get himself up to 40 years, when the reduction to 30 must have already been in the pipeline. Probably more people were contracted out towards the end of their 40 years, but few people will have a record which is 100% contracted-out. But I now understand this is only significant if your 'starting amount' calculation is based on NSP and not OSP, and that's only likely if your contracted-out period was quite short.

COPE is based on a comparison between what SP you would have accrued if you were contracted in compared with what you actually accrued if you were contracted out for every year of your career. I do not know the precise algorithm - I have never seen it published and in any case it would be complicated because of the changes to the system over the years. See https://www.gov.uk/government/publications/state-pension-fact-sheets/contracting-out-and-why-we-may-have-included-a-contracted-out-pension-equivalent-cope-amount-when-you-used-the-online-service

I have read about COPE, but there is no COPE value on my forecast, which seems odd given the circumstances. Never mind, I will accept that there is an algorithm used by the mandarins and that I am not going to find out what it is, and I will get on with life. Thanks for your further advice.

molerat

monxton wrote: »

I have read about COPE, but there is no COPE value on my forecast, which seems odd given the circumstances. Never mind, I will accept that there is an algorithm used by the mandarins and that I am not going to find out what it is, and I will get on with life. Thanks for your further advice.

Have you clicked on the link under the "You've been in a contracted-out pension scheme" heading ?

monxton

molerat wrote: »

Have you clicked on the link under the "You've been in a contracted-out pension scheme" heading ?

Hah, thanks. I had looked there, but I thought it was just generic information. I see I was wrong - though I don't know what use the COPE value is.

xylophone

Never mind, I will accept that there is an algorithm used by the mandarins and that I am not going to find out what it is, and I will get on with life.

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

bearing in mind that the BSP at 6/4/16 was £119.30 and the NSP £155.55.

drumtochty

Monexton I'm afraid that your question has changed throughout your postings and on a few occasions you have posted information that was false, in one case Asghar has had to correct your postings.


You then went on talking about the osp calc and how it was calculated when you were talking about the nsp calculation of your 2016 starting amount of the state pension.


If you are not clear in your questioning you will not get the answer you require.



Now from reading your many posts a good few times it appears you have received an online pension forecast from the DWP rather than a paper statement from the DWP.


If that is the case go back on to the online statement and click on the underline that says

you were contracted out of part of the State Pension


This will clear up a further error in the posting you have made.


Report back factually on the result of this action.