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Armed Forces contribution to State Pension

 Hi, Just joined the forum, so apologies if this needs to be somewhere else.

Ex Military (RN), served 41 years, now aged 66 and just started state pension.
I was on AFPS 75 throughout my Military service. I heard rumblings on social media for the last 2 years about getting a reduced rate, due to a lack of NI contributions to Military pensions by the MOD.  After serving 41 years I didn’t believe this would affect me as my NI record showed all those years as full.  However when I enquired about state pension forecast I was told I would not receive the full amount.  I listened to mixed explanations about the MOD contributing a reduced rate.
My question is, can anyone explain how this is fair & justified.
A.  After giving 41 years of Military service I am drawing less state pension than if I’d been on state benefits for that time?
B.  I was never alerted to this in the past while I was serving. So when I left in 2018 I unwittingly went to work in Police custody on a zero hour contract job that did not pay NI; which again I did not believe would be an issue due to the full years on my NI record.  
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Comments

  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 16,252 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 2 October 2024 pm31 6:39PM
    You have misunderstood an awful lot of things there.

    A.  Would you prefer to have been on benefits and now just get the standard new State Pension or is the State Pension you are getting plus your military pension a better outcome?  Or aren't you getting a military pension 🤔

    B.  You don't have to pay NI to add qualifying years.  Earning above the LEL (currently £123/week) is the key thing when employed.

    You have had the benefit of paying reduced NI for many years whilst still getting the State Pension you were always expecting to get.

    To add the cherry on top you have also had the opportunity to add post 2016 years which could take you from your expected State Pension to the standard new State Pension of £221.20/week.

    If you confirm your weekly award rate and NI history since 2016 it should be clear if you can add to your current entitlement.
  • I was in the RN and was well aware that we were paying reduced NI contributions which would result in a lower Old aged Pension. It was called contracted out. It affected all government employees Civil Servants etc. So to use a pushers saying you havnt dipped out just havnt dipped in. It may be worth seeing if you can buy additional years for the time you were on the zero hours contract. If we are honest after 41 years your RN pension will be very healthy as it should be.
  • hyubh
    hyubh Posts: 3,662 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
     Hi, Just joined the forum, so apologies if this needs to be somewhere else.

    Ex Military (RN), served 41 years, now aged 66 and just started state pension.
    I was on AFPS 75 throughout my Military service. I heard rumblings on social media for the last 2 years about getting a reduced rate, due to a lack of NI contributions to Military pensions by the MOD.  After serving 41 years I didn’t believe this would affect me as my NI record showed all those years as full.  However when I enquired about state pension forecast I was told I would not receive the full amount.  I listened to mixed explanations about the MOD contributing a reduced rate.
    My question is, can anyone explain how this is fair & justified.
    A.  After giving 41 years of Military service I am drawing less state pension than if I’d been on state benefits for that time?
    B.  I was never alerted to this in the past while I was serving. So when I left in 2018 I unwittingly went to work in Police custody on a zero hour contract job that did not pay NI; which again I did not believe would be an issue due to the full years on my NI record.  
    In addition to what D&C says - your state pension situation isn't because you were in the military, but because you were a member of a 'contracted out' pension scheme, like many other public and private sector employees between 1978 and 2016.

    The old (pre-2016) state pension was in two parts, a single tier 'basic' state pension (BSP) and a salary-related 'additional' state pension (ASP). Contracting out meant you contracted out of the latter, originally at least (hence the lower rate of NI than otherwise). So, rather than accrue a generic salary related pension with the state, you accrued a much better occupation-specific salary related pension with the AFPS. On this understanding, it doesn't make sense to complain you didn't accrue ASP, since ASP was for those that didn't accrue a decent occupational pension.

    As D&C notes however, the changes to the state pension made in 2016 were actually good for many formally contracted out employees like yourself with years still to go before their state pension age, since you could now accrue the equivalent of ASP (i.e. the difference between the old BSP and the post-16 single tier level) without forgoing anything of your occupational pension. This didn't necessarily hold for people who contracted out with a private sector occupational scheme, but did for anyone in the public sector. In addition, public sector scheme members with pre-97 membership and a 'GMP' component to their pension doubly benefited, because the old limitation on increases applied to GMP by the occupational scheme no longer applied. So while it may not feel like it, you were actually a winner with the 2016 changes...
  • JoeCrystal
    JoeCrystal Posts: 3,250 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    edited 2 October 2024 pm31 7:07PM
    You won the pension provision every step of the way and you still want more?!

    You are getting the State Pension that you actually contributed to. The onus is on you to understand how it works and often clearly explained on the gov website. You had an awful lot of assumptions and beliefs that it is how it works. Well, no, you just believe that you are entitled to it without any efforts to make sure that you are covered in all aspects.

    As for fairness, it is unfair for everyone else that you and many million people was offered extremely generous deals to top up the years after paying the reduced NIs for decades. So pretty much read and understand how fortunate you have been. But hey oh, that is what the governments decided to do in their extreme generosity.
  • Marcon
    Marcon Posts: 12,971 Forumite
    Eighth Anniversary 10,000 Posts Name Dropper Combo Breaker
    Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!  
  • Silvertabby
    Silvertabby Posts: 9,710 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Photogenic
    edited 3 October 2024 am31 1:14AM
     Hi, Just joined the forum, so apologies if this needs to be somewhere else.

    Ex Military (RN), served 41 years, now aged 66 and just started state pension.
    I was on AFPS 75 throughout my Military service. I heard rumblings on social media for the last 2 years about getting a reduced rate, due to a lack of NI contributions to Military pensions by the MOD.  After serving 41 years I didn’t believe this would affect me as my NI record showed all those years as full.  However when I enquired about state pension forecast I was told I would not receive the full amount.  I listened to mixed explanations about the MOD contributing a reduced rate.
    My question is, can anyone explain how this is fair & justified.
    A.  After giving 41 years of Military service I am drawing less state pension than if I’d been on state benefits for that time?
    B.  I was never alerted to this in the past while I was serving. So when I left in 2018 I unwittingly went to work in Police custody on a zero hour contract job that did not pay NI; which again I did not believe would be an issue due to the full years on my NI record.  
    22 years RAF (PO Writer in RN speak) plus 20 years Local Government here.
    1.  Your State pension hasn't been reduced.  During your RN service (up to 2016) you paid NI at a reduced rate, meaning you didn't pay for additional State pension (SERPS/SP2) over and above the old basic State pension.  Instead, the equivalent of the  SERPS/SP2 that you (and MOD) had contracted out of paying for was including with your RN pension.  In short, you have been receiving the difference between the full single tier State pension and your actual State pension since you left the RN.
    2.  When your NI record states 'full year paid' it just means full financial year, and doesn't say if the contributions were the full rate or the reduced contracted out rate.  No, I don't know why they do that!
    3.  When you left the RN in 2018 details of how  contracting out affected the new single tier pension, introduced in 2016, were readily available.  For those who chose to read them. 

    Now the good news.  You, me and many like us are the big winners under the new pension scheme rules, because we have enough time between 2016 and SPA to add to what would have been our maximum pensions had the rules not changed.  Paying voluntary Class 3 pension contributions is much easier (and faster) if done pre SPA, but as you have only just reached 66 then it's still well worth doing.  Will add the usual rider of only paying for post 2016 contributions for the benefit of anyone else reading this, but not an issue for you as you will only have post 2018 gaps.
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    As explained above, between 1978 and 2016, it was possible for Defined Benefit pension schemes (yours was one such) to "contract

    out" of  State Earnings Related Pension Scheme (to 2002) /State Second Pension (to 2016).


    These Additional (to Basic) state pension  schemes replaced (and were far superior to) the earlier Graduated Pension Scheme

    (1961/75).




    This means that members of  such DB schemes will have no additional state pension arising from SERPS (although they might have

    some S2P if they were on a modest salary - this is because of the rules relating to S2P).


    Depending on their age, they might have some Graduated Pension .


    They will have Basic State Pension.

    Your particular scheme was not only Defined Benefit but was also non contributory for members.



    The DB  Schemes had to promise to pay members a pension at least as high as they would have received had they been

    contracted in to additional state pension - this was achieved through the Guaranteed Minimum Pension rules (to 1998)/Scheme

    Reference Test (to 2016).



    In most schemes the pension accrued by members were far higher than the minimum required by law.



    At 6/4/16, two calculations were done to establish your starting amount for NSP as you would reach SPA in the new scheme.

    It was the higher of

    Old Rules

    NI qualifying years/30 (max) x Full Basic State Pension + ( Additional State Pension - Deduction for Contracting Out).

    New Rules

    NIQY/35 (max) x Full NSP - (Contracted Out Pension Equivalent)


    In your case, your starting amount was the higher of

    £119.30 + (Additional State Pension - Deduction for Contracting Out.)

    £155.65 - Contracted Out Pension Equivalent


    Given your situation it is virtually certain that the old rules calculation was the higher of the two (because your COD/COPE would

    be very high) and was less than a full NSP.


    Any full years from 6/4/16 to the last full tax year before you reached SPA would have improved your state pension up to (but not

    in excess of) a full NSP.


    Have you checked how you can improve your SP by voluntary contributions?

    Contact  the Pension Service (as you’re already claiming the state pension) on 0800 731 0469 to find out if topping up would be beneficial. 

  • Many thanks for all replies & explanations, there was a lot in there I didn’t know and wasn’t aware of.
    I also have to say I am not alone in my naivety on the subject, there is a great many veterans out there who don’t have the level of insight on pensions that maybe they should have. Whether that’s because they ignored it or the military don’t explain it, I’m not sure. In answer to Xylophone - yes I have made some voluntary contributions to NI, which is not my issue.  I believed as many do that I had been disadvantaged by my employer; I now know from the explanations, that is not the case, so thank you.
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 16,252 Forumite
    10,000 Posts Fifth Anniversary Name Dropper
    edited 4 October 2024 pm31 12:45PM
    Many thanks for all replies & explanations, there was a lot in there I didn’t know and wasn’t aware of.
    I also have to say I am not alone in my naivety on the subject, there is a great many veterans out there who don’t have the level of insight on pensions that maybe they should have. Whether that’s because they ignored it or the military don’t explain it, I’m not sure. In answer to Xylophone - yes I have made some voluntary contributions to NI, which is not my issue.  I believed as many do that I had been disadvantaged by my employer; I now know from the explanations, that is not the case, so thank you.
    Quite, in fact I think the Armed Forces pension scheme was, or maybe still is, non contributory so it really is one of the gold plated schemes 😀.
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