Warning: Double-check state pension forecasts after Govt admits 'significant' errors - MSE News

xylophone

If I've misunderstood, then good luck to the rest of you.
You seem to be saying that a year before 2016 might not count.

At 6.4.16, two calculations were done.

Old Rules

NI years/30 x £119.30 + ( Additional State Pension - Deduction for Contracting Out).

New Rules

(NI years/35 x £155.65) - COPE.

The higher of the two was your "starting amount".

The SA might have been the same as/more than/less than £155.65.
If the same, then you couldn't improve the amount by contributions or credits - it would only increase each year under (at the moment), triple lock.

If more than, you couldn't improve the amount - up to the NSP amount would be indexed under the triple lock and the balance by CPI.

If less than, improvement up to full NSP could be possible whether by contributions or credits - information here

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

SeeMe

Crabby wrote: »

In April 2022 I will send a cheque for 6 years NI (about £720 per year at the moment). So for approximately £4500 I will get an extra £1500 per year pension for life.

Yes remember that the cost per year will rise from £720, i need to fill year 2017/2018 at present and thats £740.

[Deleted User]

xylophone wrote: »

Old Rules

NI years/30 x £119.30 + ( Additional State Pension - Deduction for Contracting Out).

Thanks you for that - I could never understand why I have a higher state pension than normal
For all others - this is how I managed to get sort of in the right area with calculations

I found a old Pension Service letter 22/8/2006 which said I had
Basic £84.25
Additional State Pension £62.31 - no idea I had this but thank you for it
I have kept absolutely no other DWP/Pension service letters which split it out

As at 2016 I would have had over 30 years contributions no gaps - I am currently 53
I have a COPE of £44.46

I sort of based the calcs on the 42% uplift to £119.30 (from the state pension of £84.25) to give a additional state pension in 2016 as £88.23 (42% raise from £62.31)
Deducted the COPE of £44.46
Then added the extra state pension pay rises since 2016 and I end up sort of with my forecast figure of £167.36

Many thanks indeed - its taken me months to understand that

tgroom57

This is exactly what HMRC want most - people rushing for their cheque book. I have kept a letter issued 2015 saying I'll get full State Pension (less the COPE). I don't trust any of the figures currently from their website.



Just a short question, suppose someone buys up a couple of extra years, like Crabby above, ie acting on potentially false information from the govt's own website, and actually didn't need the extra years. What is their chances of getting that money back ?

[Deleted User]

tgroom57 wrote: »

This is exactly what HMRC want most - people rushing for their cheque book. I have kept a letter issued 2015 saying I'll get full State Pension (less the COPE). I don't trust any of the figures currently from their website.



Just a short question, suppose someone buys up a couple of extra years, like Crabby above, ie acting on potentially false information from the govt's own website, and actually didn't need the extra years. What is their chances of getting that money back ?

I do believe there are a few news stories about this - and the answer was none

p00hsticks

tgroom57 wrote: »

Just a short question, suppose someone buys up a couple of extra years, like Crabby above, ie acting on potentially false information from the govt's own website, and actually didn't need the extra years. What is their chances of getting that money back ?

I think we've had at least one person on here a while back reporting that they've managed to get a payment refunded - but that was shortly after having made it and where they had been misinformed by someone at DWP/HMRC...

Paul_Herring

Deleted_User wrote: »

I do believe there are a few news stories about this - and the answer was none

One such news item:

https://www.thisismoney.co.uk/money/pensions/article-6928583/Saver-buys-ups-count-DONT-improve-state-pension.html

DairyQueen

DWP miscalculated my starting value for the nSP.

It took me around 18 months, and numerous phone calls, emails and letters to HMRC, DWP and old employers, before I received a correct calculation. I eventually received the equivalent of four extra 'qualifying NI years' when my starting amount was increased by approx. £20 in 2018. I then only required one further year of NI contributions before reaching the maximum allowed. I achieved that in April this year.

My problem resulted from having been a member of some DB schemes for under two years at various times throughout my career. In the past, service of under two years meant that any pension contributions were returned at end of service and no deferred DB member benefits were retained.

As I discovered, DB schemes contracted out of SERPS so membership of a DB scheme increased the 'COPE' amount calculated by DWP. The COPE value is only relevant to the nSP when calculating the starting amount. The higher the COPE, the lower the starting amount.

In instances where an employee had left service in under two years, and therefore received no deferred DB pension benefits (and thus no contracted-out benefits), the employer was supposed to ensure that DWP were advised retrospectively that the ex-employee had been 'contracted-in' for that employment period. This required the employer to make good the SERPS deduction via an additional NI payment to DWP.

I discovered that two ex-employers had made the payment. HMRC had these payments recorded but they had not passed the relevant information to DWP, and DWP are responsible for calculating the starting amount. Two employers (including a Local Authority) had never made the retrospective SERPs payments to DWP. They had simply trousered it.

I was therefore still recorded by DWP as having been contracted-out into DB schemes from which I received no benefits when I should have been contracted-in.

I would advise anyone who has, in the past, 'lost' their deferred DB benefits (i.e. left service within two years and had their contributions returned) to reconcile their NI record with DWP, including periods of contracted-in and contracted-out employment. Differences can then be further investigated with HMRC. This is an onerous process but can be, as in my case, extremely beneficial.

I only discovered the large under-calculation of my starting amount when I noticed that service with one employer was entirely missing from DWP's record of my NI contributions (another screw-up). This triggered the call to DWP that also revealed the missing contracted-in periods.

gwapenut

Paul_Herring wrote: »

No. You're in the fortunate group of winners where you can earn back up to full state pension, while still getting the benefits of contracting out.

That £43 (which may well be more or less than that amount, depending on what you did with the NI rebates while it was in your pension fund) will be coming from your private pension.

molerat wrote:

https://assets.publishing.service.gov.uk/governmen In 2016 you were given a starting amount of the higher of x/35ths new pension - COPE or x/30ths old pension + s2p which included a contracted out deduction, this was a £ amount and the number of years held became irelevant. If that figure was short of the maximum you can make it up with post 2016 years.

Another thing I don't understand is that it knows I have contracted out, in the '00s years I think, and I have a COPE amount.

Why does it show my NI contributions as being up-to-date for those contracted out years - is this because it's in terms of the basic state pensioon rather than S2P, and so they count towards the old-system N/30 calculation?

Looking back over some old news articles, I see that in 2010 the S2P could have been as much as £134 per week, giving a maximum total state pension of £231, which is why my predicted figure still seemed high to me despite losing £43 under COPE.

So, to test my understanding...
Until 2016 I was accruing under the old system, and because of my contracting out and relatively young age would have got nowhere near the maximum S2P.

As it happens, I had 30 years of "full" contributions (including contracted out years???) by 2016, which gave me the full non-S2P credit under the old system:
NI years/30 x £119.30 + ( Additional State Pension - £43 Deduction for Contracting Out).

So until 2016 I get £119.30 + (S2P - £43 COPE).

Now, from 2016 credits under the old rules stop, but I can start earning extra credits under the new scheme:
(NI years/35 x £155.65) - £0 COPE

It says I'll be at £159.74 now or a maximum of £168.60 with 2 more years of contributions - is this because I've hit a 35 year ceiling by then? I notice the difference between the 2 figures is 2 extra years/35 x £155.65, which is why I think post-2016 I'll have earned 5/35 x 155.65 extra (£22) under the new system.

Do these calculations / understanding sound right, including the bit about my contracted out years counting as "full" contributions for the N/30 calculation?

I'm presuming my £168.60 is comprised of:
Old system £119.30 base
Old system S2P (after COPE) of £27
New system £22 for 5 years
* Plus I get my COPE of £43 amount via my prviate pension
TOTAL £211.60

And if I hadn't contracted out I would have:
Old system £119.30 base
Old system S2P (with £0 COPE deducted) of £27+£43 = £70
New system nothing because I've hit the maximum
* No COPE via private pension
TOTAL £189.30

tgroom57

My understanding is that contracted out years count as qualifying years. My record shows that the contracted out years have a full contribution record, and the contracted out years have been included in the total. But they don't count towards the additional State Pension - which makes sense if you think about it. The contracted out scheme was to replace the additional State Pension.


The MSE page on this : https://www.moneysavingexpert.com/savings/state-pensions/