Contracted out but no effect on new state pension forecast?

markbloke

Hi, I thought I'd look at the muddy world of my state pension forecast and I'm a little confused.
I just hit 60, but I only started a workplace pension in early 2002. My new state pension forecast tells me "Your forecast is £221.20 a week, £961.83 a month, £11,541.90 a year"  "£221.20 is the most you can get. You cannot improve your forecast any more.".
Great, but it also tells me I was contracted out for some of that period, and I know I was. Why hasn't that affected my pension outcome? Was it because something happened to the way contracted out periods are calculated between 2002 when I started and 2016 when contracting out ended?
NI records show full years for the entire period when I was contracted out. I've got about 40 full years in total.
Thanks!

Browntoa

It affects your private pension when you claim state pension 

In my case a decrease of £300 of my DB pension following my claim 

The state pension forecast is correct,its what you actually will get 

Ayr_Rage

The calculation assumes you will continue to pay NI for another 6 years so that'll give you the full state pension despite having been contracted out for some time.

All my contracted out years show as full too.

I needed 48.6 years to get the full whack.

Just as an aside for others, I got my invitation to claim code letter this week, dated exactly 4 months before my state pension date.

Sarahspangles

markbloke said:

Hi, I thought I'd look at the muddy world of my state pension forecast and I'm a little confused.
I just hit 60, but I only started a workplace pension in early 2002. My new state pension forecast tells me "Your forecast is £221.20 a week, £961.83 a month, £11,541.90 a year"  "£221.20 is the most you can get. You cannot improve your forecast any more.".
Great, but it also tells me I was contracted out for some of that period, and I know I was. Why hasn't that affected my pension outcome? Was it because something happened to the way contracted out periods are calculated between 2002 when I started and 2016 when contracting out ended?
NI records show full years for the entire period when I was contracted out. I've got about 40 full years in total.
Thanks!

It varies from person to person. When the sums were done in 2016 some people, even though they had been contracted out, had sufficient state pension and years left in which they could contribute so that they could reach the New State Pension limit. We were both contracted out, my OH required 44 years contributions and I needed 36 to get there.

markbloke

Ayr_Rage said:

The calculation assumes you will continue to pay NI for another 6 years so that'll give you the full state pension despite having been contracted out for some time.

All my contracted out years show as full too.

I needed 48.6 years to get the full whack.

Just as an aside for others, I got my invitation to claim code letter this week, dated exactly 4 months before my state pension date

Actually that's the thing. Until a few years ago the forecast showed I needed to contribute for another x years to get a full state pension. That's no longer the case, no more years are needed despite a good chunk of them being contracted out.

markbloke

Browntoa said:

It affects your private pension when you claim state pension 

In my case a decrease of £300 of my DB pension following my claim 

The state pension forecast is correct,its what you actually will get 

Interesting! I'll look into that thanks.

Sarahspangles

markbloke said:

Browntoa said:

It affects your private pension when you claim state pension 

In my case a decrease of £300 of my DB pension following my claim 

The state pension forecast is correct,its what you actually will get 

Interesting! I'll look into that thanks.

I don’t think this is common. Some pension schemes pay out in ‘steps’, with the private tension falling when you reach state pension age. Others offer this as an option. It’s a way of smoothing the income over years.

Sometimes people who don’t understand that the state pension is taxable income feel aggrieved when they realise that they are taxed on their private pensions. This is the only way that it is possible to pay the tax due, as there is no mechanism to tax the state pension.

molerat

Anyone who has 30 pre 2016 years, contracted out or not, cannot fail to be able to get the full new pension if retiring after April 2025.  Simple maths.

So as we go further on that 30 year requirement decreases.

Donkey2303

molerat said:

Anyone who has 30 pre 2016 years, contracted out or not, cannot fail to be able to get the full new pension if retiring after April 2025.  Simple maths.

So as we go further on that 30 year requirement decreases.

Hi Molerat, can you please explain the maths behind your comment. I need to know where I stand and perhaps a simple math example would help me with that. I have 39 full years pre 2016. I was contracted out but don't know for how long. I had to forcibly return and draw from my private pension since 2019. I am 64 and my state pension kicks in June 2026. My current Pension Forecast shows the full amount. £221.20. Thank You

Dazed_and_C0nfused

Donkey2303 said:

molerat said:

Anyone who has 30 pre 2016 years, contracted out or not, cannot fail to be able to get the full new pension if retiring after April 2025.  Simple maths.

So as we go further on that 30 year requirement decreases.

Hi Molerat, can you please explain the maths behind your comment. I need to know where I stand and perhaps a simple math example would help me with that. I have 39 full years pre 2016. I was contracted out but don't know for how long. I had to forcibly return and draw from my private pension since 2019. I am 64 and my state pension kicks in June 2026. My current Pension Forecast shows the full amount. £221.20. Thank You

If you had 30 years under old rules you would have accrued (at least) the old "basic" State Pension of £169.50 (current rate).

Adding 9 post 2016 years at £6.32/year takes you to £226.38 so the 9th year would effectively be capped so you got your personal maximum of £221.20/week.

Adding only 8 post 2016 years takes you to £220.06, just a little short of £221.20.

Donkey2303

Dazed_and_C0nfused said:

Donkey2303 said:

molerat said:

Anyone who has 30 pre 2016 years, contracted out or not, cannot fail to be able to get the full new pension if retiring after April 2025.  Simple maths.

So as we go further on that 30 year requirement decreases.

Hi Molerat, can you please explain the maths behind your comment. I need to know where I stand and perhaps a simple math example would help me with that. I have 39 full years pre 2016. I was contracted out but don't know for how long. I had to forcibly return and draw from my private pension since 2019. I am 64 and my state pension kicks in June 2026. My current Pension Forecast shows the full amount. £221.20. Thank You

If you had 30 years under old rules you would have accrued (at least) the old "basic" State Pension of £169.50 (current rate).

Adding 9 post 2016 years at £6.32/year takes you to £226.38 so the 9th year would effectively be capped so you got your personal maximum of £221.20/week.

Adding only 8 post 2016 years takes you to £220.06, just a little short of £221.20.

Hi, Thank but... I was forcibly retired in 2019 so I only have 3 years post 2016. Going back to Molerat's statement I was hoping to discover that having 39 full years pre 2016 would give me the answer I'm looking for.