Why is my State Pension less than my friends?

Blackavar

Hi. I have been advised by HMRC that my pension will be £175 per week as expected. A friend who is 3 days older than me has been advised he will receive £207 per week. Neither of know why this is. I may or may not have contracted out of SERPS in the distant past if that’s it? Any ideas please?

dunstonh

Neither of know why this is.

Your friends state pension projection would tell him why. Albeit in summary form (i.e. how much protected pension entitlement he has).

The old state pension method was a basic state pension plus graduated pension, SERPS and S2P.   If your historic entitlement built up a figure higher than the current maximum single state pension entitlement, you get to keep the excess over this (known as a protected payment).

You have the maximum allowed under the single state pension.  You have not accrued enough entitlement under the old system to create an excess amount (referred to as protected on the projection).   

Your friend has a protected amount which indicates he built up some Graduated, SERPS, S2P entitlement within his pension entitlement in excess of the single state pension figure.  This suggests he spent most of his working life contracted in and probably had no period (or very little) time spent self employed.  

You were either self-employed for some/all of the period or contracted out.

Blackavar

Thanks for your detailed reply. Over time I have had some ‘between jobs’ time, maybe 8 months in total and didn’t think it would make this much difference. If only I’d been better educated on this at the time ‘going travelling’ may have seemed less inviting. 

xylophone

Did you obtain a state pension forecast? If so, what exactly did it say?

molerat

xylophone said:

Did you obtain a state pension forecast? If so, what exactly did it say?

And it will tell you if you were contracted out with a clickable link to a COPE amount.

A bit late now but having a pre 2016 forecast does make things a whole lot clearer.

p00hsticks

Blackavar said:

Thanks for your detailed reply. Over time I have had some ‘between jobs’ time, maybe 8 months in total and didn’t think it would make this much difference. If only I’d been better educated on this at the time ‘going travelling’ may have seemed less inviting. 

A mere 8 months out of work at various times won't account for that sort of difference.

Do you have any company pension at all ? As dunstonh says, your friend has accumulated a lot of SERPS by being contracted in to those schemes. As you haven't, chances are that you were 'contracted out' - meaning you paid a lower rate of NI in return for having an employer pension scheme. You need to look across all your pensions, not just the state one.

Linton

One possible reason for the difference is that your friend was at times paid more than you - the amount of SERPs (State Earnings Related Pension) you got obviously depended on you income at the time.

Silvertabby

If you did contract out (of SERPS/SP2) then you should have a private/occupational pension in addition to your State pension.

georgehere

If you have your old P60s, as well as detailing income tax and earnings, they may also show your NI contributions with a breakdown showing the contracted out amount

Blackavar

xylophone said:

Did you obtain a state pension forecast? If so, what exactly did it say?

I checked online a few weeks ago and it said I would get the full State Pension (which, in fact I am) . Today is day #1 of becoming an OAP so cannot access forecast anymore. HMRC account says a I have 45 years of full NI contributions.

Blackavar

Silvertabby said:

If you did contract out (of SERPS/SP2) then you should have a private/occupational pension in addition to your State pension.

I do have private pensions but I set these up myself.