Contracted Out - Was The Impact On Our State Pensions Really Communicated Properly?

hyubh

xylophone said:

Agreed- too many people on these boards claim that 'their pensions have been reduced' due to being contracted out, when what is actually happening is that they are only getting the basic state pension that they should always have been expecting 

Some people who are in receipt of DB pensions and who reached SPA at or shortly after inception of NSP have been badly done by - those who are not members of public service pension schemes and who were expecting the GMP indexation to be provided through the mechanism described in my previous which has been lost from the single tier SP.

Bit more complicated than that though, is it not...? Members of private sector DB schemes that adopted S148 GMP revaluation: for sure, pretty rubbish. But if the scheme adopted fixed rate and the member became deferred many years prior to 2016: not so much (though may eventually hit, depending on how long they live).

p00hsticks

xylophone said:

Agreed- too many people on these boards claim that 'their pensions have been reduced' due to being contracted out, when what is actually happening is that they are only getting the basic state pension that they should always have been expecting 

Some people who are in receipt of DB pensions and who reached SPA at or shortly after inception of NSP have been badly done by - those who are not members of public service pension schemes and who were expecting the GMP indexation to be provided through the mechanism described in my previous which has been lost from the single tier SP.

True - although in my view the worst affected by the introduction of the nSP are those relatively young people who had already built up an amount close to the new maximum by being contracted in to SERPS/S2P and paying a higher rate of NI and now face several decades of still paying NI via work for no further pension boost.

LHW99

p00hsticks said:

xylophone said:

Agreed- too many people on these boards claim that 'their pensions have been reduced' due to being contracted out, when what is actually happening is that they are only getting the basic state pension that they should always have been expecting 

Some people who are in receipt of DB pensions and who reached SPA at or shortly after inception of NSP have been badly done by - those who are not members of public service pension schemes and who were expecting the GMP indexation to be provided through the mechanism described in my previous which has been lost from the single tier SP.

True - although in my view the worst affected by the introduction of the nSP are those relatively young people who had already built up an amount close to the new maximum by being contracted in to SERPS/S2P and paying a higher rate of NI and now face several decades of still paying NI via work for no further pension boost.

Although it has always been the case that, if you have had a continuous working history, for any earning years over the maximum (30 / 35) you would not build up any additional basic / new SP, but would still have to pay NI. Any spare in the fund goes towards other things, as said elsewhere.

daveyjp

This is a little like arguing salary sacrifice is bad because it means you earn less every month.

Silvertabby

p00hsticks said:

xylophone said:

Agreed- too many people on these boards claim that 'their pensions have been reduced' due to being contracted out, when what is actually happening is that they are only getting the basic state pension that they should always have been expecting 

Some people who are in receipt of DB pensions and who reached SPA at or shortly after inception of NSP have been badly done by - those who are not members of public service pension schemes and who were expecting the GMP indexation to be provided through the mechanism described in my previous which has been lost from the single tier SP.

True - although in my view the worst affected by the introduction of the nSP are those relatively young people who had already built up an amount close to the new maximum by being contracted in to SERPS/S2P and paying a higher rate of NI and now face several decades of still paying NI via work for no further pension boost.

Yes, the ones who would have racked up  well over £200 per week - some as much as the maximum £320 per week - are the only losers under the new pension scheme.

xylophone

But if the scheme adopted fixed rate and the member became deferred many years prior to 2016: not so much (though may eventually hit, depending on how long they live).

But these people (depending on their individual situations) would not (or should not) have been expecting indexation through SP until their COD was less than the revalued pre 97 ASP.

https://forums.moneysavingexpert.com/discussion/4736856/barclays-final-salary-pension-gmp-excess-revaluation-anti-franking/p5

xylophone

Although it has always been the case that, if you have had a continuous working history, for any earning years over the maximum (30 / 35) you would not build up any additional basic / new SP, but would still have to pay NI. 

Under the old system, although your contributions for years over and above those required for Basic SP would not increase the Basic State Pension, Additional state pension could still be accrued.

https://www.which.co.uk/money/pensions-and-retirement/state-pension/your-state-pension-and-benefits/state-second-pension-and-serps-aBlEx9M8XXWY

Prior to 6/4/2010,  a man required 44  qualifying years NI for Basic and a woman 39.

This changed to 30 years for both sexes.

At 6/4/16, the ability to accrue ASP ended as the state pension became single tier. 

The number of years required for full NSP changed to 35.

LHW99

xylophone said:

Although it has always been the case that, if you have had a continuous working history, for any earning years over the maximum (30 / 35) you would not build up any additional basic / new SP, but would still have to pay NI. 

Under the old system, although your contributions for years over and above those required for Basic SP would not increase the Basic State Pension, Additional state pension could still be accrued.

https://www.which.co.uk/money/pensions-and-retirement/state-pension/your-state-pension-and-benefits/state-second-pension-and-serps-aBlEx9M8XXWY

Prior to 6/4/2010,  a man required 44  qualifying years NI for Basic and a woman 39.

This changed to 30 years for both sexes.

At 6/4/16, the ability to accrue ASP ended as the state pension became single tier. 

The number of years required for full NSP changed to 35.

True, but if we are talking about being contracted out, I understood you didn't accumulate S2P?

xylophone

True, but if we are talking about being contracted out, I understood you didn't accumulate S2P?

It was possible for moderate earners to accrue some S2P even if contracted out.

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"'. 

zagfles

xylophone said:

But if the scheme adopted fixed rate and the member became deferred many years prior to 2016: not so much (though may eventually hit, depending on how long they live).

But these people (depending on their individual situations) would not (or should not) have been expecting indexation through SP until their COD was less than the revalued pre 97 ASP.

https://forums.moneysavingexpert.com/discussion/4736856/barclays-final-salary-pension-gmp-excess-revaluation-anti-franking/p5

I think the point was that people who deferred many years ago with a fixed % GMP revaluation no longer have their COD increasing at the same rate. https://forums.moneysavingexpert.com/discussion/comment/60196239#Comment_60196239