National Insurance - Why am I not being paid the full rate?

Silvertabby

t0rt0ise said:

Silvertabby said:

The oft quoted '35 years' refers to those who started work after April 2016.  The rest of us are under transitional arrangements, each with our own individual calculations.

The transitional protections set in place ensure that we won't get any less than we would have received under the old scheme, but they don't include getting something that we haven't paid for.

Those of us who were in contracted out (not opted out - that's something quite different) pension schemes paid reduced NI.  This gave us our (old) basic State pension but not the additional SERPS/SP2.  Instead, the equivalent amount is paid with our occupational pensions.

In my own case, having been contracted out for the maximum 38 years (1978 to 2016) I needed 48 years of NI contributions to qualify for the full single tier pension.  I racked up 44 years before I retired, and count myself as a winner under the new scheme as I had enough time before SPA to pay 4 years of voluntary Class 3 NI.

If that's an option for you, then it's well worth doing.  Even as a BR tax payer in retirement, you will get your investment back after less than 4 years.  After that, it's all profit.

This is what confuses me. I was contracted out from 1997 to 2016 and 48 years full NI wasn't enough to get me to full pension, so how come it was enough for you who were contracted out for longer? They don't tell how it's all worked out so I'm just left wondering if it's right.

Every calculation is so different, I'd be more concerned if two people had exactly the same result!

In my case, I started work at age 15 and so I have a bit of pre 1975 Graduated Pension.

The main difference, however, will be my SP2 top up.  When I joined the LGPS I was on a low starting rate for the first few years.  Then I went part time for my last 5 years.  Even though it was my choice to reduce my hours/pay, the SP2 top up rules only take account of the actual pay received.

Very briefly, when SERPS was re-jigged into SP2 in 2002 it was with the intention of paying more additional State pension to the 'low paid'.  As the public sector contracted out pensions calculations and software were geared to account for SERPS, I assume it was deemed to be easier/cheaper to just add the difference between SERPS and SP2 to the State pension.  So, yes, although I was technically contracted out between 1978 and 2016 I actually accrued a bit of additional State pension that someone who had always been full time/on a higher salary won't receive. 

p00hsticks

t0rt0ise said:

Silvertabby said:

The oft quoted '35 years' refers to those who started work after April 2016.  The rest of us are under transitional arrangements, each with our own individual calculations.

The transitional protections set in place ensure that we won't get any less than we would have received under the old scheme, but they don't include getting something that we haven't paid for.

Those of us who were in contracted out (not opted out - that's something quite different) pension schemes paid reduced NI.  This gave us our (old) basic State pension but not the additional SERPS/SP2.  Instead, the equivalent amount is paid with our occupational pensions.

In my own case, having been contracted out for the maximum 38 years (1978 to 2016) I needed 48 years of NI contributions to qualify for the full single tier pension.  I racked up 44 years before I retired, and count myself as a winner under the new scheme as I had enough time before SPA to pay 4 years of voluntary Class 3 NI.

If that's an option for you, then it's well worth doing.  Even as a BR tax payer in retirement, you will get your investment back after less than 4 years.  After that, it's all profit.

This is what confuses me. I was contracted out from 1997 to 2016 and 48 years full NI wasn't enough to get me to full pension, so how come it was enough for you who were contracted out for longer? They don't tell how it's all worked out so I'm just left wondering if it's right.

The basic calculation used to arrive at your starting amount at the time of the introduction of the new State Pension in April 2016 can be worked out, as described above.The main thing that you can't really work out yourself is how they arrived at the specific COPE (Contracted Out Pension Equivalent) amount which was used just once in the calcualtion when working out what your entitlement would be under the new rules at the time of introduction. 

But for most people who have spent the majority of their lives prior to then contracted out,  the exact COPE figure and  new rules  calcuation isn't usually relevant, because it's almost certainly the case that the entitlement under the old rules was higher and so that would become your 'starting amount' in 2016.

It's also relevant that immediately prior to 2016 people only needed 30 years NI to qualify for the basic state pension - so any extra years over that figure prior to 2016 wouldn't have increased your entitlement at all. Leaving aside any additional (SERPS/S2P) pension earned, someone with 30 years NI was entitled to exactly the same old basic state pension as someone with 48 years.

GibbsRule_No3.

I think there is one thing we can all agree on regarding State Pensions is that there is no “one size fits all”!  Just in my small circle none of us are the same.  All females btw. My friend a year younger at 67, single, worked mainly part time but did pay a “stamp” gets the full amount of new SP, myself, single, still working at 68, but was opted out for some tIme, gets not quite the full SP, as was able to gain some years after the 2016 adjustment but not all. Friends married sister, 69 stay at home mother, gets full SP. Their older single, sister of 70, so under SP old rules, with a CS pension and my sister 74, married but worked for CS with CS pension and old style SP.

Must be fun trying to work everything out, if this small cross section is anything to go by.

p00hsticks

GibbsRule_No3. said:

I think there is one thing we can all agree on regarding State Pensions is that there is no “one size fits all”! 

GibbsRule_No3. said:

Must be fun trying to work everything out, if this small cross section is anything to go by.

Simplification was one of the main drivers behind the introduction of the new state pension - no more contracted in and contracted out, SERPS / S2P etc etc complications .... just (once all those under transitional rules have been dealt with and people have at least 10 years NI under their belts) a pretty straightforward 'each NI year earns you 1/35th of the new State Pension amount'

t0rt0ise

Silvertabby said:

t0rt0ise said:

Silvertabby said:

The oft quoted '35 years' refers to those who started work after April 2016.  The rest of us are under transitional arrangements, each with our own individual calculations.

The transitional protections set in place ensure that we won't get any less than we would have received under the old scheme, but they don't include getting something that we haven't paid for.

Those of us who were in contracted out (not opted out - that's something quite different) pension schemes paid reduced NI.  This gave us our (old) basic State pension but not the additional SERPS/SP2.  Instead, the equivalent amount is paid with our occupational pensions.

In my own case, having been contracted out for the maximum 38 years (1978 to 2016) I needed 48 years of NI contributions to qualify for the full single tier pension.  I racked up 44 years before I retired, and count myself as a winner under the new scheme as I had enough time before SPA to pay 4 years of voluntary Class 3 NI.

If that's an option for you, then it's well worth doing.  Even as a BR tax payer in retirement, you will get your investment back after less than 4 years.  After that, it's all profit.

This is what confuses me. I was contracted out from 1997 to 2016 and 48 years full NI wasn't enough to get me to full pension, so how come it was enough for you who were contracted out for longer? They don't tell how it's all worked out so I'm just left wondering if it's right.

Every calculation is so different, I'd be more concerned if two people had exactly the same result!

In my case, I started work at age 15 and so I have a bit of pre 1975 Graduated Pension.

The main difference, however, will be my SP2 top up.  When I joined the LGPS I was on a low starting rate for the first few years.  Then I went part time for my last 5 years.  Even though it was my choice to reduce my hours/pay, the SP2 top up rules only take account of the actual pay received.

Very briefly, when SERPS was re-jigged into SP2 in 2002 it was with the intention of paying more additional State pension to the 'low paid'.  As the public sector contracted out pensions calculations and software were geared to account for SERPS, I assume it was deemed to be easier/cheaper to just add the difference between SERPS and SP2 to the State pension.  So, yes, although I was technically contracted out between 1978 and 2016 I actually accrued a bit of additional State pension that someone who had always been full time/on a higher salary won't receive. 

Ah okay. That explains it.

 I wish we knew how the COPE figure is worked out. I like to check everything, and I really don't trust them to get these things right.

xylophone

I wish we knew how the COPE figure is worked out. I like to check everything, and I really don't trust them to get these things right.

For "Rebate Derived Amount" read COPE

https://www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension/the-new-state-pension-transition-and-contracting-out-fact-sheet

joebob

So when you go on the gov.uk website and get a pension forecast will this take all NI contributions into account and be accurate ?

p00hsticks

joebob said:

So when you go on the gov.uk website and get a pension forecast will this take all NI contributions into account and be accurate ?

Yes, it will do - it will also give you a link to your COPE fugure (if you have one) and your full NI record.

I think there have been reports of a few outliers wher the system got confused with some of the dates; I can;t remember the circumstances off hand (perhaps cases where people had already exceeded the maximum at the point the nSP was introduced ?) but I'm pretty sure it was the dates rather than the figures that didn;t show correctly.

molerat

p00hsticks said:

joebob said:

So when you go on the gov.uk website and get a pension forecast will this take all NI contributions into account and be accurate ?

Yes, it will do - it will also give you a link to your COPE fugure (if you have one) and your full NI record.

I think there have been reports of a few outliers wher the system got confused with some of the dates; I can;t remember the circumstances off hand (perhaps cases where people had already exceeded the maximum at the point the nSP was introduced ?) but I'm pretty sure it was the dates rather than the figures that didn;t show correctly.

The big confusing one with dates is where the maximum had already been achieved at 2016 but could be increased even further with pre 2016 contributions as it states "based on contributions up to April 2016", that one will go away next April.