State pension forecast query

horace972897

Hi


I have reviewed my state pension forecast and it says i'm forecast to have a full pension but only if i continue to contribute for the next six years. However on the national insurance record it says i've contributed in full for 32 years already. I thought you only had to contribute for 35 years to get a full pension?


I was contracted out for a whileif that makes any difference?


Thanks in advance

bioboybill

Yes, that is what makes the difference. I have 37 years, but need another 3 for that reason.

Audaxer

horace972897 wrote: »

I was contracted out for a whileif that makes any difference?

Yes, I've got over 40 years contributions, but still have 6 years voluntary contributions to make to qualify for the full state pension.

molerat

35 years is only strictly for those starting out on their NI journey from 2016. Those with a pre 2016 history are on a hybrid scheme which may mean more or less than 35 years is required with some still not getting the full amount and some getting up to £305.

badmemory

It looks like you are going to be a winner! As in managing to pay off any COPE & getting any pension relating to that.

jamesd

Congratulations! You're one of the winners from the combination of contracting out and the new state pension, 90% were expected to be winners to some extent.

35 years only applies if your first year was 2016. For others it could be half that or sometimes ten or more years more.

For those who were mostly contracted out an old rules calculation is used for the years before 2016. This is 1 / 30th of the basic state pension capped at 30 years per year plus the earnings-related part from SERPS then S2P with no cap. Contracting out eliminated the earnings-related part except for a little bit in the S2P years. It had no effect on the basic state pension part. A new rules calculation is also done and you get the higher of the two as your 2016 foundation amount.

Years from 2016 add 1 / 35th of the single tier / flat rate amount per year, capped at the single tier maximum. No earnings-related extra for these years.

What this means is that those who were contracted out will be less likely to be over the flat rate cap or more below it in 2016. Since you stop earning any more state pension once you reach the cap, the contracted out ones are working and getting more state pensions when the contracted in ones no longer are. And the contracted out ones get the earnings-related bit from the work pension as well.

So yes, the lower state pension is due to being contracted out and your employer taking responsibility for paying the earnings-related part for contracted out years.

The more years after 2016 you can benefit from the bigger your win from the double payment you get from contracting out payments from your employer plus the extra years of state pension increase.

In the NI records a full year means it counted for the 1 / 30th or 1 / 35th part without you having to pay extra to make that year count. It says nothing about the earnings-related part.

The contracted out deduction seen on the state pension statements isn't deducted from the amount of state pension it says you'll get. It's an estimate of the portion of your work pension that's being paid because it was a contracted out scheme.