Old v New state pension

p00hsticks

militarymick said:

Interesting commentary folks, cheers!
    This only reinforces the fact that the whole UK tax/pension system is an overcomplex ill thought through jungle.The point of any legislation is for it to be simple fair and transparent to 'the man in the street'.

Which is precisely one of the reasons why the new State Pension was introduced - no contracting in, contracting out, SERPS or S2P complications any more. From 2016, every years NI simply earns you 1/35th of the full new state pension amount, with the only proviso being that you need to accumulate at least ten years to get anything. Simple, fair and transparent.

militarymick said:

   The bottom line from my perspective is( a) I've worked all my life on median wages ....contracted out.......and am on basic SP.Whereas (b) my neighbour who has precisely the same record receives £ X, more newSP with an ever increasing + disparity with each % increase
 Now ,I might be simple minded,but I do not see any fairness ?.

If that is a genuine example rather than a generalisation, then if your neighbour has precisely the same record as you, particularly if you were both contracted out, it's difficult to understand why s/he is receiving more than you. When the new state pension was introduced in April 2016 two calculations were done for everyone, under both old and new rules, and the higher of the two was taken to be their 'starting amount'. For those of us like me and  your neighbour who were approaching state pension age and had been contracted out for most of their lives, it would almost certainly have been that under the old rules, which means that you and your neighbour would be receiving exactly the same basic pension.

True, as your neighbour is a clearly a bit younger than you (as you fall under the old scheme and they the new) then if they had a few years available between April 2016 and reaching State Pension age they would have the opportunity to boost the amount up to the new maximum by either carrying on working or by making voluntary contributions (personally I'm buying an extra nine years NI at a cost of upwards of £7,000 to do so)  but this is countered by the fact that the younger they are, the higher the age at which they can start claiming is likely to be.

molerat

molerat said:

militarymick said:

Will Martin Lewis be looking at campaigning re: the ever growing discrepancy as each % rise takes place (nearly £50..!! Come April).Surely unfair and unsustainable?

I certainly think that Martin should campaign for "new" pensioners to get the £327.75 that "old" pensioners could get instead of the measly £185.15 limit - sounds fair to me

My comment was a bit tongue in cheek but makes the point that not all "old" pensioners will be worse off than "new" as there is a much lower cap on the new pension.  I wonder how many would be better off if a re-assessment of "old" pensioners was carried out - a massive and expensive operation to carry out - as I know a few who receive in excess of the new max.

Silvertabby

molerat said:

molerat said:

militarymick said:

Will Martin Lewis be looking at campaigning re: the ever growing discrepancy as each % rise takes place (nearly £50..!! Come April).Surely unfair and unsustainable?

I certainly think that Martin should campaign for "new" pensioners to get the £327.75 that "old" pensioners could get instead of the measly £185.15 limit - sounds fair to me

My comment was a bit tongue in cheek but makes the point that not all "old" pensioners will be worse off than "new" as there is a much lower cap on the new pension.  I wonder how many would be better off if a re-assessment of "old" pensioners was carried out - a massive and expensive operation to carry out - as I know a few who receive in excess of the new max.

Starting with our neighbour, who is on over £22K per year state pension.  High rate of SERPS/SP2, plus deferred payment for 5 years under the old, much more favourable, rate of over 10%.

I won't repeat what he says when told that some people believe that switching ALL pensioners to the nsp rate in April 2016 would have been 'fair' 

xylophone

 The bottom line from my perspective is( a) I've worked all my life on median wages ....contracted out.......and am on basic SP.

If you were contracted out for the whole of your working life, then you paid NI at a lower rate - you were not entitled to SERPS but if you were on a moderate income, then from 2002 you may well have accrued some S2P despite being contracted out.

What exactly is shown on your state pension statement?

luvchocolate

LHW99 said:

militarymick said:

Interesting commentary folks, cheers!
    This only reinforces the fact that the whole UK tax/pension system is an overcomplex ill thought through jungle.The point of any legislation is for it to be simple fair and transparent to 'the man in the street'.
   The bottom line from my perspective is( a) I've worked all my life on median wages ....contracted out.......and am on basic SP.Whereas (b) my neighbour who has precisely the same record receives £ X, more newSP with an ever increasing + disparity with each % increase
 Now ,I might be simple minded,but I do not see any fairness ?.

As I understand it those on the old SP can defer at a much better rate than those on the new SP

I deferred for 2 years under the old rules over 10% increase. 

Grandmama

I deferred my state pension under old rules for eight years,  lady retirement then was 60 , as I was still.working and it would have put my tax up. Decided to take higher pension instead of lump sum, tax reasons. It was good advice, you get your money worth after 9 years collecting. I retired at 68, collected higher pension and now have only 6 months to go to get my money's worth. Have had rises in basic state amount and CPI on the deferred amount, one year it was nothing but it has very nicely grown into a goodly 4 weekly sum. Not too sure  if I will get the 10% on the full amount but the rise is still welcome. If I get.the rise on all of it, yippee.

molerat

Grandmama said:

I deferred my state pension under old rules for eight years,  lady retirement then was 60 , as I was still.working and it would have put my tax up. Decided to take higher pension instead of lump sum, tax reasons. It was good advice, you get your money worth after 9 years collecting. I retired at 68, collected higher pension and now have only 6 months to go to get my money's worth. Have had rises in basic state amount and CPI on the deferred amount, one year it was nothing but it has very nicely grown into a goodly 4 weekly sum. Not too sure  if I will get the 10% on the full amount but the rise is still welcome. If I get.the rise on all of it, yippee.

Additional amounts outside the basic pension are linked to CPI which in low inflation times is often lower than the triple lock figure but this year everything will increase by the 10.1% CPI figure.

Bogof_OAP

Thanks for all the comments re. my situation folks.  You are correct re. my sister, she paid for two or three extra years to make her entitlement up to the full amount, and also I'd overlooked that she would have needed more years contributions than me, as it was only 35 years when I finished work. Part of her contributions were free due to bringing up her two children, but she would have paid in for many years from when she went back to work when they were school age.  I don't begrudge her, I love her to bits, and it was, as I said earlier, just an observation.  

Xylophone if I can find my letter in the pile of boxes that passes for a filing system I will check to see what it says!

uk1

LHW99 said:

militarymick said:

Interesting commentary folks, cheers!
    This only reinforces the fact that the whole UK tax/pension system is an overcomplex ill thought through jungle.The point of any legislation is for it to be simple fair and transparent to 'the man in the street'.
   The bottom line from my perspective is( a) I've worked all my life on median wages ....contracted out.......and am on basic SP.Whereas (b) my neighbour who has precisely the same record receives £ X, more newSP with an ever increasing + disparity with each % increase
 Now ,I might be simple minded,but I do not see any fairness ?.

As I understand it those on the old SP can defer at a much better rate than those on the new SP

That’s correct.  

We did take some hits whilst ensuring we had sufficient NI years and they would send us letters reminding us we were short and suggesting we paid  up and so we paid several years voluntary NI contributions only for them to lower the number of qualifying years and of course they would not refund.  

However, we did take lengthy deferrals and lived on savings when we retired.  The deferral rate was extremely good (10.4% for each year deferred if I recall .. ) and next year that meaty element will rise by the full 10.1% which means we feel fortunate. It is the pension version of compound interest magic.  

The non-return of the requested NI still rankles though ……  

squirrelpie

militarymick said:

    This only reinforces the fact that the whole UK tax/pension system is an overcomplex ill thought through jungle.The point of any legislation is for it to be simple fair and transparent to 'the man in the street'.

I agree wholeheartedly with your first sentence. I take issue with the second though. Whilst it is a noble goal to make life easy for 'the man in the street', it's also important to make sure there aren't holes that unscrupulous people can find their way through, and that adds complications sometimes. And rules to deal with unusual cases fairly, etc etc. But sure there's huge room for improvement.