Pension forecast Gov website

Tooyoungtoretire59

I am not working and rely on private income from pension and savings.  My pension forecast shows I will qualify for £221 - the most you can get, when i reach retirement age in 5 years (even though it shows that in 2018/2019 I didn’t pay full contribution that year).  

My question is, I noticed that it also says that as I was contracted out of SERPS this may affect my full state pension.  Would this mean I wont qualify for the full state pension?  Im confused.

Dazed_and_C0nfused

Tooyoungtoretire59 said:

I am not working and rely on private income from pension and savings.  My pension forecast shows I will qualify for £221 - the most you can get, when i reach retirement age in 5 years (even though it shows that in 2018/2019 I didn’t pay full contribution that year).  

My question is, I noticed that it also says that as I was contracted out of SERPS this may affect my full state pension.  Would this mean I wont qualify for the full state pension?  Im confused.

Why not post what it actually says, especially below the big green box.

No ambiguity then.

Tooyoungtoretire59

Sorry, what?

Brie

If you post a screen shot of what your forecast shows then people will be better at answering your questions.

Look in particular for the green box - it might say "you can't increase your pension".

LHW99

I think the writing in bold and the line immediately below it are the key:

£221.20 is the most you can get

You cannot improve your forecast any more

Secret2ndAccount

Look at your State Pension forecast. Scroll down a bit. If it says:

Then you are all set. You will get £221.20 per week. You can’t get any more (aside from annual inflation increases) and you can’t get any less. It doesn’t matter if you were contracted out or not.

 

Further Explanation – if you care

The deduction for contracting out did, at one time, affect your pension. However, every year of NI that you pay adds about £6 to your pension, until you hit the magic number £221.20   After that, you can't build up any more. You have paid sufficient years of NI that the deduction no longer has any effect. You will get the full £221.20   If you had retired, or ceased paying NI some years ago, maybe you would have had a lower pension as a result of the deduction.

Further Further Explanation – if you care

Your National Insurance contribution has always been somewhat in proportion to your salary. The more you earn, the more NI you pay. In the past there were various schemes where you could opt to pay a bit less NI, and divert the money into an alternative pension – often your employer’s pension scheme. Less NI meant you built up a smaller State Pension, but you knew you would get something extra from the alternative pension, so all was okay.

In 2016, the government decided to do away with Contracting Out. Your NI would be based on your salary whether you made payments into another scheme or not. They also increased the maximum value of a full, basic State Pension, but increased the number of years of contributions it took to get there – a complete reset of the rules.

For each individual, they calculated two numbers:

1.      How much State Pension you had accrued so far under the old rules

2.      How much you would have accrued had the new rules been in place for a long time

Whichever was the larger number of the two became your new starting point in 2016.

Since 2016, each full year of NI contribs increases your pension by £6.32 (2023/24 number) or £6.58 (24/25 number) until you reach the maximum. The max is £221.20 (23/24) or £230.25 (24/25) at that point, additional years don’t get you any more state pension.

For anybody who has reached their upper limit, it does not matter if they were contracted out or not. For those who have not reached their limit, it is possible that contracting out is why they need more years, or can’t get to the full amount. In all cases, the numbers in green on your pension forecast are the amounts you will receive; any reduction for contracting out has already been calculated into the numbers.