Confused about buying Pre 2016 and Post 2016 years

snowstormcat

I'm a little confused as when reading on here I keep seeing that purchasing pre 2016 years gets slightly less pension than post 2016.  I'm a few years short of full pension and every option I've been offered (combinations of pre and post 2016 years) works out at £6.32 extra per week.

Am I missing something?  Please can anyone advise?

Dazed_and_C0nfused

snowstormcat said:

I'm a little confused as when reading on here I keep seeing that purchasing pre 2016 years gets slightly less pension than post 2016.  I'm a few years short of full pension and every option I've been offered (combinations of pre and post 2016 years) works out at £6.32 extra per week.

Am I missing something?  Please can anyone advise?

A bit more detail would help.

Number of existing years pre and post 2016.

Which years are available to buy?

Current pension accrued?

molerat

snowstormcat said:

I'm a little confused as when reading on here I keep seeing that purchasing pre 2016 years gets slightly less pension than post 2016.  I'm a few years short of full pension and every option I've been offered (combinations of pre and post 2016 years) works out at £6.32 extra per week.

Am I missing something?  Please can anyone advise?

Quite simply it is based on whether your 2016 starting amount is based on the new or old rules, new will give £6.32, old £5.65.  

How do you know which yours is ?  You have to work it out, some pretty long calculations.  

Take your current amount. Remove any post 2016 years that have been added at £6.32 each, take out the triple lock increases back to 2017-18 - not the headline figures in the paper but the ones from the government documents that are down to 4 decimal places - then work out if the resulting figure is X(max 30) x 119.30/30 +S2P or X(max 35) x 155.65/35 - COPE for old or new. You won't know your S2P amount but you can deduce it if the answer does not add up to the new calculation.  If the answer puts you on the old rules you then need to work out if adding a year would switch that calculation to the new rules, you need to do that calculation for each additional year added.  You are also limited to those max 30 or 35 years.

Easy innit

Or post up the following and the answer will be produced in an instant

Current weekly £££.pp amount up to April 2024.
Number of full NI years 15-16 and earlier
Number of full NI years 16-17 and later
Any COPE amount.  If you have "You've been in a contracted-out pension scheme" on your forecast then click
here https://www.tax.service.gov.uk/check-your-state-pension/account/cope whilst logged into your tax account
How many pre 2016 years you wish to add

p00hsticks

Purchasing pre-2016 years may add less than a post-2016 year, but th devil is in the detail of your individual circumstances. 
When the new state Pension was introduced in 2016, a 'starting amount' was calculated for everyone, which was the higher of their entitlement under the old rules or new rules.  

Old rules were [(NI years up to 30) / 30 ] x old 'basic' state pension amount + any SERPS / S2P
New rules were [(NI years up to 35) / 35 ] x new state pension amount - any COPE 

So using the current values of old basic pension (£169.50) and new (£221.20),  buying an additional pre-2016 year would result in that starting amount being recalculated, and would increase the old style calculation by £169.50/30 = £5.65, (providing you only had 29 pre-2016 years or less before) and the new style calculation by £221.20/35 = £6.32 (assuming you only had 34 pre-2016 years or less before) . 

Which is then taken as your starting amount will depend on which figure is then higher. 

As per previous post, if you share the details from your forecast people will be able to advice which are the best years to buy,. 

snowstormcat

Estimate is £189.59 up to Apr 2024
30 full years pre 2016
0 years post 2016
No cope

molerat

In this particular case it is not possible to tell if your starting amount is based on new or old rules, the old or new calculations can be the same and only DWP can tell that from known information, but it is clear that any additional pre 2016 years will add £6.32.

snowstormcat

On the advise of DWP I purchased 3 extra years which have now updated in my account and my new pension is £226.33. I thought it would be slightly more so I queried it with DWP who suggested the 10/11 year purchased had added less. I was specifically told that any year purchased would add £6.32. DWP suggested asking HMRC to change one of the years to a post 2016 one which they did try but it did not add any more (it reduced the amount by 1p probably due to rounding). I spoke again to DWP who have now said there is 76p COPE - there has never been any mention of this on my forecast. This was a pension many years ago that I paid into but the total was refunded as I left the company before making 2yrs worth of payments so there will be no pension payable from that.

Please could someone have a look at this for me and check whether the figures are correct or not.

molerat

£189.59 at 24/25 is worth £206.82 at 26/27 rate. The sums do not add up without that COPE amount, your pre and post 2016 calculations are very close at £206.82 old to £205.65 new so purchasing a pre 2016 year swings you from old to new adding £6.89 to the lower new calculation as you cannot use more than 30 pre 2016 years for the old calculation. I suspect you are currently at 31 pre and 2 post which gives the same answer as 32 pre and 1 post. The only way to improve the current amount is to move another year from pre to post as that should give £227.50. With a COPE figure you should never have been advised to purchase pre 2016 years unless the cost - very cheap - outweighed the payback but that should have been pointed out.

snowstormcat

Thank you for your reply molerat. I am 31 pre and 2 post. HMRC did move 1 year from pre to post giving 30 pre and 3 post but they said the amount did not change (only by 1p rounding) so it was moved back. I'm assuming HMRC will not move 2 pre as I only purchased 1?

Also, I'm finding this very difficult to resolve as they seem very reluctant to keep moving years.

The COPE was never mentioned and was never on my account. I was actually pretty shocked when it came up during the call!

molerat

https://forums.moneysavingexpert.com/discussion/comment/81991002#Comment_81991002

With no COPE there would be no difference in purchasing pre or post 2016 years as to have, at 24/25 rate, £189.59 the new calculation must have been used. Purchasing a pre 2016 year cannot add to the pre 2016 calculation as you already had 30. But without a COPE the current amount should not be £226.33 but £227.50 whichever side of 2016 the 3 additional years came from. With that 76p COPE you get the £226.33 unless all 3 years are post 2016 then it should be £227.50. So IMO moving that year from pre to post not changing the amount does not wash.

snowstormcat

So all I need to do is move one year to post 2016? She did this whilst I was logged into my account and I saw that the only difference was 1p so she moved it back. I'm not sure whether they would be happy to move it again.