Checking State Pension and voluntary buying Class 3 years

jem16

tigerspill said:

jem16 said:

tigerspill said:

molerat said:

There was some additional pension entitlement after 2002 for low to moderate contracted out earners so that may account for the difference. He will benefit from paying class 3 for any available post 2016 years.  There should be 3 amounts on the forecast - the current amount, the amount paying going forward and an amount including filling past years along with a maximum statement. The 2019-20 update does not seem to have been done yet for those not contributing, seems to have been delayed this year.

I can sort of understand the £164 number - £139 plus buying 5 years of £5 each giving £25 onto of the £139 = £164.  I dont understand why this cant be the £175.

As you have worked out, buying five years will increase his pension by £25 and take him to £164. He therefore needs another 2 years (slightly more actually) to get another £10pw to make the full amount. So 7 years needed in total. 

However as he’s 1955 born and reaching SPA in September 2021 he only has 5 years from 2016 that he can pay for as you don’t pay NI on reaching SPA. 

Thank you for this.  
But my (I appreciate potentially simplistic) understanding was that a full SP under the new rules was earned with 30 years contributions up to April 2016 plus 5 years contribution after April 2016.  So this would mean that surely having completed the former, that with buying these five years 2016-2021 - that he should get the full SP.
I must be missing something in my simplistic understanding?

Your understanding is basically wrong. Someone who had never contracted out and had 35 years NICs at April 2016 would get the full new State Pension even if they didn't work from April 2016 onwards. So it's not a case of 30 years before 2016 and 5 years after 2016.

As xylophone stated everyone had their Starting Amount ( also called Foundation Amount) calculated in April 2016. This was based on the best of the 2 calculations, one under the old rules and one under the new rules. Some people have way more than the full new state pension under the old rules and will still get that. If the rules had never changed in 2016, your friend would be getting the £139pw so he's not losing out by the change of rules. His additional pension is basically being paid via his occupational pension rather than the state pension as has always been the case.

He can, however, improve his Starting Amount of £139pw as we have explained. So he's now able to get more than he ever could have got.

tigerspill

xylophone said:

But on your point about S2P between 2002 and 2015 - Given they were contracted out, will they still have accrued some S2P?

Possibly. Figures for 11/12 in this article - would have been up rated in later years. S2P ended with the introduction of NSP.

https://en.wikipedia.org/wiki/State_Second_Pension

 S2P gives all employees earning up to £32,592 a year (in 2011/12) a larger pension than SERPS, regardless of whether they are "contracted out" or not - with most help going to those in the '"lowest"' earnings (up to £14,400 a year in 2011/12) - known as the "LET" or '"Low Earnings Threshold"'. 

Thanks for this.  And it might explain why he has slightly more than the Basic Pension even though he was always contracted out.

jem16

tigerspill said:

xylophone said:

But on your point about S2P between 2002 and 2015 - Given they were contracted out, will they still have accrued some S2P?

Possibly. Figures for 11/12 in this article - would have been up rated in later years. S2P ended with the introduction of NSP.

https://en.wikipedia.org/wiki/State_Second_Pension

 S2P gives all employees earning up to £32,592 a year (in 2011/12) a larger pension than SERPS, regardless of whether they are "contracted out" or not - with most help going to those in the '"lowest"' earnings (up to £14,400 a year in 2011/12) - known as the "LET" or '"Low Earnings Threshold"'. 

Thanks for this.  And it might explain why he has slightly more than the Basic Pension even though he was always contracted out.

Graduate Retirement Benefit will add a little bit too.

tigerspill

jem16 said:

tigerspill said:

jem16 said:

tigerspill said:

molerat said:

There was some additional pension entitlement after 2002 for low to moderate contracted out earners so that may account for the difference. He will benefit from paying class 3 for any available post 2016 years.  There should be 3 amounts on the forecast - the current amount, the amount paying going forward and an amount including filling past years along with a maximum statement. The 2019-20 update does not seem to have been done yet for those not contributing, seems to have been delayed this year.

I can sort of understand the £164 number - £139 plus buying 5 years of £5 each giving £25 onto of the £139 = £164.  I dont understand why this cant be the £175.

As you have worked out, buying five years will increase his pension by £25 and take him to £164. He therefore needs another 2 years (slightly more actually) to get another £10pw to make the full amount. So 7 years needed in total. 

However as he’s 1955 born and reaching SPA in September 2021 he only has 5 years from 2016 that he can pay for as you don’t pay NI on reaching SPA. 

Thank you for this.  
But my (I appreciate potentially simplistic) understanding was that a full SP under the new rules was earned with 30 years contributions up to April 2016 plus 5 years contribution after April 2016.  So this would mean that surely having completed the former, that with buying these five years 2016-2021 - that he should get the full SP.
I must be missing something in my simplistic understanding?

Your understanding is basically wrong. Someone who had never contracted out and had 35 years NICs at April 2016 would get the full new State Pension even if they didn't work from April 2016 onwards. So it's not a case of 30 years before 2016 and 5 years after 2016.

As xylophone stated everyone had their Starting Amount ( also called Foundation Amount) calculated in April 2016. This was based on the best of the 2 calculations, one under the old rules and one under the new rules. Some people have way more than the full new state pension under the old rules and will still get that. If the rules had never changed in 2016, your friend would be getting the £139pw so he's not losing out by the change of rules. His additional pension is basically being paid via his occupational pension rather than the state pension as has always been the case.

He can, however, improve his Starting Amount of £139pw as we have explained. So he's now able to get more than he ever could have got.

Thanks for this.  Every day's a school day.
I agree he is much better off now.  I am just trying to better understand this stuff and how the numbers all work.
I havent had to do this for myself as I am already at the max.  And my OH can achieve the max by buying a few years and these all seem straightforward.
So looking for someone else has introduced new stuff I am trying to get my head around - with the help of the knowledgable people on here.  

jem16

tigerspill said:

jem16 said:

tigerspill said:

jem16 said:

tigerspill said:

molerat said:

There was some additional pension entitlement after 2002 for low to moderate contracted out earners so that may account for the difference. He will benefit from paying class 3 for any available post 2016 years.  There should be 3 amounts on the forecast - the current amount, the amount paying going forward and an amount including filling past years along with a maximum statement. The 2019-20 update does not seem to have been done yet for those not contributing, seems to have been delayed this year.

I can sort of understand the £164 number - £139 plus buying 5 years of £5 each giving £25 onto of the £139 = £164.  I dont understand why this cant be the £175.

As you have worked out, buying five years will increase his pension by £25 and take him to £164. He therefore needs another 2 years (slightly more actually) to get another £10pw to make the full amount. So 7 years needed in total. 

However as he’s 1955 born and reaching SPA in September 2021 he only has 5 years from 2016 that he can pay for as you don’t pay NI on reaching SPA. 

Thank you for this.  
But my (I appreciate potentially simplistic) understanding was that a full SP under the new rules was earned with 30 years contributions up to April 2016 plus 5 years contribution after April 2016.  So this would mean that surely having completed the former, that with buying these five years 2016-2021 - that he should get the full SP.
I must be missing something in my simplistic understanding?

Your understanding is basically wrong. Someone who had never contracted out and had 35 years NICs at April 2016 would get the full new State Pension even if they didn't work from April 2016 onwards. So it's not a case of 30 years before 2016 and 5 years after 2016.

As xylophone stated everyone had their Starting Amount ( also called Foundation Amount) calculated in April 2016. This was based on the best of the 2 calculations, one under the old rules and one under the new rules. Some people have way more than the full new state pension under the old rules and will still get that. If the rules had never changed in 2016, your friend would be getting the £139pw so he's not losing out by the change of rules. His additional pension is basically being paid via his occupational pension rather than the state pension as has always been the case.

He can, however, improve his Starting Amount of £139pw as we have explained. So he's now able to get more than he ever could have got.

So looking for someone else has introduced new stuff I am trying to get my head around - with the help of the knowledgable people on here.  

I think once you understand the Starting Amount calculations, then it all becomes clear. 

tigerspill

Sorry, another question.
Do you have to "buy" the additional years BEFORE the SP starts paying out?

molerat

tigerspill said:

Thanks for this.  Every day's a school day.
I agree he is much better off now.  I am just trying to better understand this stuff and how the numbers all work.
I havent had to do this for myself as I am already at the max.  And my OH can achieve the max by buying a few years and these all seem straightforward.
So looking for someone else has introduced new stuff I am trying to get my head around - with the help of the knowledgable people on here.  

As long as you understand, if necessary, the differences between pre and post 2016 years it usually is.

Sorry, another question.
Do you have to "buy" the additional years BEFORE the SP starts paying out?

No.