Wife and I have full state pension contributions but we get different weekly amounts - why??

fatwelshbuddha

My wife and I paid the full 35 years NI contributions (in fact we paid more years) - we worked all the years without a break (we have no children so no maternity/paternity leave periods) although some of the contributions were Class 4 after we set up our own partnership business (later to change to a limited company).   Our understanding is that we should both recieve the full state pension amount based on full contrbutions but this has never seemed to be the case and my wife gets less.  The latest Pensions Service letter says I get £198.66 pw, my wife gets £184.07 pw - both of us get £175.20 state pension plus a protected payment, which is where the difference lies.

My birthdate is March 1953; hers is June 1953 - we both took our pensions from respective qualifying dates.

Could someone explain why the difference??   Could it be down to the fact that my wife's qualifying pension date falls in the year when changes were made to when females could collect, and if she had deferred her pension start date to mine then she would be collecting the same as me now??  (Old system versus new system).   This is how we intepret matters but it's all very confusing!  

JoeCrystal

Does either of you have COPE when you were contracted out? What does your letter say about the amount? You are already done well when your pensions are significantly higher than the new state pension of £168.60 per week. You may get some SERPs or State Second Pension/Additional State Pension as well.

OldMusicGuy

slipperywhenwet said:

Our understanding is that we should both recieve the full state pension amount based on full contributions but this has never seemed to be the case and my wife gets less.  

A common misconception. This is only true if both of you started paying NI after 2016. As you paid NI for many years prior to the new arrangement coming in, you will be under the transitional arrangement, which means that you may get more or less than the new state pension. Like JoeCrystal said, the fact that you both have more than the new state pension shows that you are getting elements of SERPS/additional state pension based on periods when you weren't contracted out. It's unlikely that you and your wife have exactly the same history in terms of contracting in/out, hence the difference.

The good thing for you that under the transitional arrangements your entitlement is not reduced to the new state pension level of £168.60 per week.

fatwelshbuddha

neither of us were contracted out at any time.   we both get the same state pension, but the difference lies in the "protected payment" element - mine is now £23.46; hers is £8.87.

JoeCrystal

There you go, you were lucky enough that because your already accrued state pension was higher than the new state pension, your higher payments were protected as OldMusicGuy already highlighted. 

fatwelshbuddha

thanks Joe - that's understood but why the difference in the amount we get??  is this down to my wife falling into that age band that was between the new and old systems so, as according to many pundits, means she is one of many being unfairly treated??  

xylophone

The latest Pensions Service letter says I get £198.66 pw, my wife gets £184.07 pw - both of us get £175.20 state pension plus a protected payment, which is where the difference lies.

See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf
At 6/4/16, two calculations were done for each of you.

NI years [up to 30] /£119.30 [full BSP 2016-17] + (Additional State Pension - Deduction for Contracting Out [if any])

(NI years [up to 35]/£155.65 [full NSP 2016-17]) - Contracted Out Pension Equivalent [if any].
Your "starting amount" was the higher of the two.

it appears that each you was entitled to at least the full NSP (£155.35 at the time of calculation).

Anything over and above is the "protected payment".

The NSP element increases (at the moment)  under the "triple lock" 

(a guarantee to increase the state pension every year by the higher of CPI inflation in the September prior to the following April, average earnings or a minimum of 2.5%) while the "protected payment" increases by  the September CPI.

Therefore at the moment, you have an NSP element of £168.60 and a PP of  £30.06.

Your wife has an NSP element of £168.60 and a PP of £15.47.

JoeCrystal

Not particularly. You need to bear in mind that SERPS or S2P used to pay a pension related to earnings, so it looks like in your case, you earnt more than your wife. Indeed, it was technically possible to get £305 overall per week / £15,860 per year if you earn enough. It is a real shame that they stopped that.

OldMusicGuy

slipperywhenwet said:

thanks Joe - that's understood but why the difference in the amount we get??  is this down to my wife falling into that age band that was between the new and old systems so, as according to many pundits, means she is one of many being unfairly treated??  

No, nothing to do with any of that. It depends on how much you earned and thus what your NI contributions were. Unless you both earned exactly the same amount of money (and thus made the same contributions to S2P/SERPS), the amounts will be different. 

fatwelshbuddha

OldMusicGuy said:

slipperywhenwet said:

thanks Joe - that's understood but why the difference in the amount we get??  is this down to my wife falling into that age band that was between the new and old systems so, as according to many pundits, means she is one of many being unfairly treated??  

No, nothing to do with any of that. It depends on how much you earned and thus what your NI contributions were. Unless you both earned exactly the same amount of money (and thus made the same contributions to S2P/SERPS), the amounts will be different. 

ah - right - so that in bold is where the difference lies.   before we set up our own biz in 1986 I had higher earninjgs in the roles I had, and during the 1st year of that she had minimal income until I joined her a year later after giving up the corporate life and a salary that went with it.  thereafter, we paid ourselves the same amount for nearly 30 years.  

thanks folks - you've helped solve a dilemma!   much appreciated

badmemory

If you are looking to have equal income in retirement then your wife could defer taking her state pension for under a year & half.  That is 5.8% per annum.