COPE reduction issue from SP

hyubh

Frey_Bentos said:

Molerat,
Ive been trying to compare myself and explain why, for example my sister who is 2 years older than me is currently improving on her SP figure whereas mine is stuck.
My sister has been in a DB scheme for 35 years and has a large COPE figure but is currently working part time to pay her stamp and improve her figures and her SP forecast improves each year yet mine is stuck.

it seems unfair that im putting ££thousands into NI, when I really could do with it being in my PP to help fund my own retirement, not much guaranteed income for me, small ex NHS pension and  just my PP until I hit SP age.

The single tier state pension is lower that the old basic+additional pension that pretty much any contracted-in full timer would have earned under the old system, even low paid ones. The whole point is to put a cap on future state pension bills that would otherwise ballon with an aging population.

The normal situation on this board when the topic comes up is ironically someone with a large contracted-out period moaning that they haven't got the 'full' state pension, when in reality, if they've had post-16 years to add, they typically earn a larger state pension than they otherwise would have got, with low or no impact on their contracted out occupational pension. (Isn't always the case, but frequently is.)

Frey_Bentos

Jamesd, thank you, after finding issues with my NI history, that is exactly what I have done. Its not yet clear if my COPE amount will indeed be reduced but I did find errors and the HMRC records potentially appear to now match my own records. I was unclear about COPE and if that could be reduced so now that I know It wont ever reduce due to working extra years, then thats settled. 
Its rather unsettling when you get a letter at age 40 informing you of your predicted SP and SERPS entitlement and then 10 years later at age 50 i got another letter this time showing me it had gone DOWN despite my paying class A and working the entire time. This is what prompted me to investigate plus I wanted a clear plan so I can retire early.
I already contribute to a PP at a rate of 32%, so cant really squeeze much more in without affecting my lifestyle as i have a big mortgage that im overpaying, although im almost done (2 months to go).

xylophone

as everyones situation is different.

Yes - did you read the link in my previous? 

https://forums.moneysavingexpert.com/discussion/comment/78558181/#Comment_78558181

The COPE was used once only in calculating your "foundation amount"/"starting amount" for NSP as at 6/4/16

Additional State Pension was State Earnings Related Pension ( 1978-2002) and State Second Pension (2002-2016).

Old Rules

NI years (up to 30)/30 x £119.30 (Full Basic) + ( Additional State Pension  - Deduction for Contracting Out).

New Rules

{NI years (up to 35)/35 x £155.65 (Full NSP)} - COPE.

Your starting amount was the higher of the two.

Thus ( assuming 34 years)

£119.30 + (SERPS/S2P - Deduction for Contracting Out).

 (34/35  x £155.65 ) - COPE.

It appears that your SA was given by the calculation under the old rules and was higher than a full NSP.

This meant that while you would continue to have to pay NI  up to SPA (if employed and earning the relevant amount), you could not improve your state pension.

Your SA would revalue up to SPA and then increase in payment under whatever indexing system the law required - at the moment, the amount of your pension that represents a full NSP revalues under the "triple lock" and the excess over full NSP (your "protected payment") by CPI.

https://www.gov.uk/new-state-pension/how-its-calculated

GunJack

Plus, don't forget the fact that NI does not only pay for state pension, it covers NHS and other benefits, some of which you wouldn't be eligible for without having an up to date NI record. So no, you're not paying further NI for nothing...

jamesd

hyubh said:

The single tier state pension is lower that the old basic+additional pension that pretty much any contracted-in full timer would have earned under the old system, even low paid ones. The whole point is to put a cap on future state pension bills that would otherwise ballon with an aging population.

That was part of it but it was more subtle. The minimum income guarantee is funded out of general taxation. So the single tier system was arranged so that those with bad contribution records could end up through credits getting more than the minimum income guarantee, paid for out of the state pension NI money instead of general taxation. Minimum income guarantee is delivered via pension credit. Raising what those people get cost money that had to come from somewhere funded by NI and it was taken from those future retirees with good contribution records who accrue substantially less under new rules.

Women were expected to be the main beneficiaries of the new rules but some men including me also do, notably those who spent a lot of time abroad.

Frey_Bentos

"Raising what those people get cost money that had to come from somewhere funded by NI and it was taken from those future retirees with good contribution records who accrue substantially less under new rules."
Jamesd - 
I see NI as general taxation anyway, now pension is accrued purely based on a standard set of criteria that gives everyone the same regardless of actual amounts paid in, it looks like a tax, acts like a tax....
As a woman, I was hoping to gain something from these new rules, but have seen two main changes in my lifetime.
1. Raising the retirement age from 60 (as It was when I started work) to 67 - so I have to find 7 extra years pension from somewhere or keep working.
2. My good contribution record and earnings means im subsidising the new pension and losing out on the new rules that no longer allow us to build up a better SP.

Im not a waspi woman, im in the tranch after them lot, born in the 60's, seen my retirement window and benefits constantly eroded but looking forward to the promised longer years, though has anyone explained to the government that noone wants to work to almost 70 - and as someone who works in IT and has had a career of constant change and exams and relearning my trade, plus decades of working on call at night etc I simply will not be up to it.
Im hanging up my keyboard at 56, Im going to have to just manage on drawdown and live simply.

hyubh

Frey_Bentos said:

has anyone explained to the government that noone wants to work to almost 70

But the government doesn't fund it, taxpayers do. It isn't sustainable for younger people in work to sustain c.30 years of non-means tested, index linked state pension for those who are not.

p00hsticks

Frey_Bentos said:

 has anyone explained to the government that noone wants to work to almost 70 - and as someone who works in IT and has had a career of constant change and exams and relearning my trade, plus decades of working on call at night etc I simply will not be up to it.

A lot of people won't want to work to almost seventy - but on the other hand, a lot of (often the same) people don't want to pay the higher taxes that wil lbe required to meet the projected State Pension bill if the State Pension age is not increased. If you wish to retire earlier, then you can, by make your own savings / pensions plans.

Just be thankful that (like me) you have been are in a relatively well paid and resonably sedentary profession - there are plenty of people in low-paid hard manual labouring jobs who will physically be unable to work in those jobs into their late sixties but will have had little chance to build up much of a private pension.

Frey_Bentos

p00hsticks, I get that and the drawdown rules have revolutionised the early retirement options for many, myself included. I had hoped for a better SP via SERPS, I will be getting less from it than my dad who passed away 10 years ago, so as a measure, although its evened up SP for many in the future, its also stalled for those with a decent income.
A sedentary job comes with its own challenges health wise though not through a worn out body but more a worn out brain.

I am however, grateful for all the advice ive had on here, it has not only thrown a light on the financials but has allowed me to correct my NI record, which should ultimately mean a better SP, so thank you all.