State Pension Amount - More Than Anticipated

veradrives

Hi all. I regularly see the state pension amount quoted in the media as £221.20 per week or £11,060 per annum. I'm registered on the HMRC website. I logged in and checked what I can expect when I reach 66 in September 2025. The amount is £13,923 per annum which is more than I see headlined. That is what I would get if I was 66 today. Why am I going to receive that amount? 
I'm happy with it but I don't understand why I'm getting more.

Tescodealqueen

You were most likely not contracted out so will have earned additional pension under the State Earning Related Pension scheme and second pension scheme so as you are not limited to the maximum new state pension that has been in force since 2016

molerat

As above plus that amount has not increased, apart from the annual increases at triple lock for the full new pension amount and CPI for the protected amount above that, since April 2016.

Marcon

veradrives said:

Hi all. I regularly see the state pension amount quoted in the media as £221.20 per week or £11,060 per annum. I'm registered on the HMRC website. I logged in and checked what I can expect when I reach 66 in September 2025. The amount is £13,923 per annum which is more than I see headlined. That is what I would get if I was 66 today. Why am I going to receive that amount? 
I'm happy with it but I don't understand why I'm getting more.

Like everyone else who started work before 2000, you are under 'transitional arrangements' - so plenty of confusion to come for at least another 40+ years!

hugheskevi

veradrives said:

I'm happy with it but I don't understand why I'm getting more.

You might not be so happy about it if you understood more about the system.

As others describe above, you get more than the standard amount due to the amount of earnings-related second tier pension accrued prior to 2016 (Graduated Retirement Benefit, SERPS and State Second Pension) you accrued.

However, you could have contracted-out of SERPS and State Second Pension between 1978-2016, and rather than accrue State Pension received a rebate into a private pension instead.

When the changes to State Pension happened in 2016 you had more than the standard amount of State Pension so ceased accruing any more State Pension from that point. Whereas if you had been contracted-out you would have been below the standard amount of State Pension and would have continued accruing State Pension. Depending on time to State Pension age after 2016, that may well have left you with both a full new State Pension as well as the contracted-out rebates into a private pension. Whereas by being contracted-in you end up receiving just slightly more than the standard State Pension amount but didn't receive contracted-out rebates to a private pension.

Many people misunderstand this part of the transition. Many people who were contracted-out and find they have to contribute for more than 35 years to receive a full new State Pension consider that they have been disadvantaged, when in fact they were some of the biggest winners from the change (the self-employed being the biggest winners of all).

xylophone

At 6/4/16,  two calculations were done to establish your "starting amount" for New State Pension - it was the higher of

Old Rules

NI qualifying (full) years (max 30)/30 x Full Basic State Pension (£119.30) + (Additional State Pension - (if applicable) Deduction for Contracting Out)

New Rules

{NI qualifying (full) years (max 35)/35 x Full New State Pension (£155.65)}  - (if applicable) Contracted Out Pension Equivalent.


In your case, the old rules amount was higher than the new and was in excess of £155.65.

It comprised (a)  £155.65 (full NSP) + (b)  £ x (the "protected payment").

Since then, (a) has increased (except in 22/23) by the highest of average earnings/CPI/2.5% and (b) by CPI.

veradrives

Thank you everyone for the prompt responses and superb information. Excellent and really comprehensive. I remember that prior to to 2016 my forecast was made up of a state pension plus and 'additional state pension'. When the New Rules were introduced I thought I would lose out quite significantly but that doesn't appear to have been the case. I've been in full time employment since 1976, always for organisations with a private pension, but I'm not sure if I was ever 'contracted out'.

Sarahspangles

Enjoy your retirement

hugheskevi

veradrives said:

When the New Rules were introduced I thought I would lose out quite significantly but that doesn't appear to have been the case. 

It depends how you define lose out. 

Compared to the previous system you didn't lose any of your accrued pension as at 2016, you have gained Triple Lock increases on the difference between the old Basic State Pension and the new State Pension rate, but you have lost 8 years of State Second Pension accrual, and also lost earnings revaluation to State Pension age of your Additional Pension (which includes State Second Pension) which effectively changed to CPI as part of your protected payment - although as earnings and prices have been quite similar that won't have made much difference.

Overall, you would have received a higher pension under the old rules than you have now, exactly how much depends on your earnings between 2016-2024.

xylophone

I've been in full time employment since 1976, always for organisations with a private pension, but I'm not sure if I was ever 'contracted out'.

When you check your State Pension Forecast, do you see a COPE?

See this poster's forecast

https://forums.moneysavingexpert.com/discussion/comment/80699740#Comment_80699740

veradrives

When you check your State Pension Forecast, do you see a COPE?  Yes, I can see it now I know what to look for. Thank you.