State Pension

Gaffer100

I retired some 5 years ago and was fortunate to have a final salary pension hence paid little notice to what i would receive for a state pension or indeed the opting out of SERPS (when i would still have been a teenager and it meant very little). I worked for the same company (NWB) for over 43 years. Two things have occurred this month
1. As I'm 66 in August I have received my state pension advice and i am advised that despite 46 years of NI contributions (not sure where the other 2 or 3 years came from) i will not receive a full basic state pension and will be c £15 pw (£780 pa) below the full amount. 
2. I have received notification from the Pension Trustees of the annual increase and for the first time i have noticed that one element - The 'Guaranteed Minimum Pension Pre 88' has 0% rise and another  The 'Guaranteed Minimum Pension Post 88' has 0.5%

My questions are that ..............
First  most of the sites i have looked at say that if you have 35 years of contributions you should receive a full basic pension. It does seem somewhat strange that a person retiring in 2021 at age 66 with 35 years of contributions receives the full basic state pension with less contributions.
Secondly when SERPS was introduced as a result of employers / employees paying lower NI it was on the basis that the final salary scheme paid a Guaranteed Minimum Pension. All very well as mine does but if it's not protected against inflation did i really receive the full benefit and is there a case for questioning the validity of the 0% rise (i suspect it would fall on deaf ears). What %age was i saving in NI contributions by forgoing SERPs

I am aware that i can fill in missing 4 years however that comes at a cost of £800 pa which would take a minimum of 4 years to recoup.

Am i missing a trick somewhere

xylophone

2. I have received notification from the Pension Trustees of the annual increase and for the first time i have noticed that one element - The 'Guaranteed Minimum Pension Pre 88' has 0% rise and another  The 'Guaranteed Minimum Pension Post 88' has 0.5%

See 

https://forums.moneysavingexpert.com/discussion/6260776/gmp-guaranteed-minimum-pension-element-off-final-salary-pension#latest

https://forums.moneysavingexpert.com/discussion/comment/78261740/#Comment_78261740


(not sure where the other 2 or 3 years came from) 

See https://www.pensionsadvisoryservice.org.uk/about-pensions/the-state-pension/ni-credits

You may receive/ have received National Insurance credits if you:

• 
  
• if you were aged 16 – 18 before April 2010;

Dazed_and_C0nfused

The "basic" State Pension is only £137.60.

You are under transitional rules falling under the new system and as such have been able to benefit from paying reduced NI for many years and then having the opportunity to increase your State Pension to the standard "new" State Pension amount.

Not sure it is worthwhile paying for 4 post 2016 years you are only £15 short of the standard new State Pension amount as each year will add just over £5 so 3 years will get you your £15.

Could you find a better return on £2,400 than £780/year income with triple lock inflation proofing?

Gaffer100

Thanks everyone.  Sort of got my head around the GMP element and why etc. Less so about the 'reduced' full pension for 43 years of contributions. Everything i read says the full state pension is going up to £175.20pw from 22nd April. Cannot see that this is for non contracted out people only anywhere. Gov.uk says i have paid 46 years of full contributions (until retirement at age 61 in 2016/17 tax year) so another 4 would mean 50 to get a full pension the same as someone working only 35 but retiring at age 66. Regardless of a personal / corporate pension is seems unfair and i cannot see any logic behind it.

molerat

You are not fully subject to the the new pension as that only applies to those starting their NI history post 2016 but a hybrid system. At April 2016 you were given the better of the old or new pension as a starting amount and you can add to that post 2016.  You did not lose anything.

femalemonarchfemalecanine

the years you were contracted out don't count as full years, I've worked 36 years, got 2 years from age 16-18 and need 3 more years now to get the full pension. You don't pay as much when contracted out, so it doesn't get you as much.

xylophone

the years you were contracted out don't count as full years,

A misunderstanding.

Both contracted out and contracted in NI contributions qualified towards "full years".

It was just that those who contracted in paid higher contributions in order to accrue additional state pension over and above the basic.

xylophone

Less so about the 'reduced' full pension for 43 years of contributions. Everything i read says the full state pension is going up to £175.20pw from 22nd April. Cannot see that this is for non contracted out people only anywhere. Gov.uk says i have paid 46 years of full contributions (until retirement at age 61 in 2016/17 tax year) so another 4 would mean 50 to get a full pension the same as someone working only 35 but retiring at age 66. Regardless of a personal / corporate pension is seems unfair and i cannot see any logic behind it.

You have not lost any state pension that you were due.

It seems that you ceased paid employment in 2016/17 - this happened to coincide with the introduction of the new state pension but in effect the whole of your working life was under the old two tier system.

Under that system,  a person paid higher NI contributions if  he was contracted in  to SERPS/S2P and this qualified  him for Additional State Pension over and above the basic.

And in fact, in the years 2002 - 16 (when S2P replaced SERPS), it was possible for certain contracted out individuals to accrue some additional state pension. 

At 6.4.16  two calculations were done for you.

Old Rules 

Full basic (because you had at least the full 30 years required under the old system) + (Additional State Pension - Deduction for Contracting Out).

So £119.30 + (ASP - Deduction)

New Rules

Full NSP (because you had at least the 35 years required under the new system) - Contracted Out Pension Equivalent.

So £155.65 - Contracted Out Pension Equivalent.

Your "Starting Amount" was the higher of the two.

You forecast should show you your COPE.

In your situation it is virtually certain that the Old Rules calculation was the higher of the two and if you chose to make no further contributions was what you would receive at SPA ( revalued each year under the "Triple Lock").

Because you had a number of years between  6.4.16 and your SPA, you had the opportunity of increasing your SP up to but not exceeding a full NSP.

Had you still been working and earning the requisite amount. you would have paid (or been credited) NI up to the last full tax year before reaching your 66th birthday.

Otherwise you could choose to make voluntary contributions.

Either of the above contribution scenarios has the effect of "cancelling out" some part of the deduction for contracting out or (if you like) putting you in the position you would have been in if you (and indeed your employer) had made higher rate NI contributions in the years when you were a member of the occupational schemes.

mark55man

you haven't lost out you just think you have - which is painful until you understand.  

BUT if you don't get over it and act to take advantage of the ability to top up 3 years as above then I think you will be losing out.  Possibly you have lost out by not paying attention as had you done so you could have constructed some part time work or self employment to earn those years for nothing.

You probably have missed out less than those (such as I) who have now earned all the pension the scheme allows, but will carry on paying NI for no net gain (in that respect) for a few more years.  But that's just the way the system goes, in that expecting 40 - 45 years work before you could claim full pension would be hugely discriminatory

Dazed_and_C0nfused

Less so about the 'reduced' full pension for 43 years of contributions. Everything i read says the full state pension is going up to £175.20pw from 22nd April. 

Your pension isn't being reduced.

As others have explained you have for the opportunity to build up more than you would otherwise have got and get closer to the standard "new" State Pension standard amount of £179.60 (current rate from April 2021).

Not sure you fully appreciate it yet but most would consider you are a winner under the new system.

Gaffer100

Thanks guys / gals.  Not easy to follow but getting there. Thanks for all the input and at least I am assured I haven’t missed anything - timing is everything !