contracted out- options?

mumsiedebs

I had a private pension scheme in previous employment and in my present one. I am now going to lose out on about £50 per week from my state pension due to being contracted out. I know the private pensions should cover this shortfall- but looking at the projections its going to be very low on both of them.
is there any way to pay the contracted out amounts and if so is it worth it? I'm 62 and not due to reach spa until 66.
I feel the pressure to take the private pension- with the advice that it saved more into it due to not paying as much NI is as bad as PPI mis selling.

dunstonh

I know the private pensions should cover this shortfall- but looking at the projections its going to be very low on both of them.

Projections are synthetic and use artificially lower figures than reality in most cases. Plus, the include deductions for inflation and are shown in today's spending power. They use below market annuity rates and a type of annuity that the majority of people would never buy. But it provides the lowest rate of any type. The figures are often between 4-10 times lower than what you will really get.

What are the current transfer values and what are the income projections?

I feel the pressure to take the private pension- with the advice that it saved more into it due to not paying as much NI is as bad as PPI mis selling.

Why? You are almost certainly better off compared to if you had contracted in.

The FCA did a review of contracting out and only found a potential failure rate of just 1%. Contracting out has the lowest uphold rate of any complaint type at the FOS.

I suspect it is more to do with your lack of understanding that is giving you this view. Rather than the reality of the situation.

Silvertabby

You say that you are still working, but do you earn enough to pay NI? When do you intend to retire?

Contracting out ended April 2016 (at the latest) so you have the opportunity to add to your foundation amount of State pension (accrued to April 2016) at the rate of approx £4.50 per week up until your last full financial year before SPA.

From what you have said, then you should be able to add at least £22.50 (5 x £4.50) per week to your State pension either by working or paying voluntary Class 3 NI contributions.

xylophone

Do you mean that you have a deferred defined benefits pension and a current defined benefits pension?

What exactly does your state pension statement say?

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

At 6.4 16, two valuations were done

NI Years/30 x £119.30 + (Additional State Pension - deduction for contracting out)

(NIYears/35 x £155.65) - Contracted Out Pension Equivalent.

Your starting amount was the higher of the two.


See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf

but for Basic State Pension substitute £119.30

and for New State Pension substitute £155.65.

See also

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/204604/single-tier-pension-transition-technical-note.pdf

Re voluntary contributions (if appropriate) see

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

mumsiedebs

My view is based on how i feel as its so complicated to work it all out.

xylophone

My view is based on how i feel as its so complicated to work it all out.

What exactly does your state pension statement say?

p00hsticks

mumsiedebs wrote: »

My view is based on how i feel as its so complicated to work it all out.

People on here can help you , but to do so they'll need answers to the various questions they're asking ....

Silvertabby wrote: »

You say that you are still working, but do you earn enough to pay NI? When do you intend to retire?

xylophone wrote: »

What exactly does your state pension statement say?

Dazed_and_confused

I am now going to lose out on about £50 per week from my state pension due to being contracted out.

Can you explain why you believe you have lost out on £50? The majority of people in your situation who post on here consider themselves winners under the new system as they have had the best of both worlds. Lower NI whilst contracted out, an additional pension on top of the State Pension and the potential to now increase their State Pension amount to the maximum of the new State Pension.

woolly_wombat

mumsiedebs wrote: »

I feel the pressure to take the private pension- with the advice that it saved more into it due to not paying as much NI is as bad as PPI mis selling.

I know someone who would agree with you there, but that's because they chose an Equitable Life with(out)-profits pension and wish now that they hadn't opted out of SERPs.

Unfortunately we can't turn the clock back, but if you are still working then presumably you are earning enough to continue to build entitlement to State Pension?

How up to date is your State Pension statement?

dunstonh

I feel the pressure to take the private pension- with the advice that it saved more into it due to not paying as much NI is as bad as PPI mis selling.

It was this that made me think it was contracting out with a personal pension as those were typically sold to you and the OP was saying it was missold. However, the bit at the end about paying less NI does not apply to plans that were sold. So, there was no pressure.

Perhaps we could have some clarification on whether this is a personal pension or a defined benefit scheme?

If a defined benefit scheme, it could not be missold and you were under no pressure but thank goodness you did join it.

adamcarvell

i remember when i was 18 a man from britannic insurance coming round saying how much better off we would be I'm 52 but need one more qualifying year to get the maximum state pension of £164 somthing.