Help me understand my state pension amount

System

This discussion was created from comments split from: National Insurance Contribution top up query.

geoffu8

I have been following the advice and have checked my NI records. I am retired, and have four incomplete years, all prior to 2007.   However, even with those, I have over 35 full years. Shouldn't I be receiving full pension, rather than the slightly less that I currently receive?

Sarahspangles

geoffu8 said:

I have been following the advice and have checked my NI records. I am retired, and have four incomplete years, all prior to 2007.   However, even with those, I have over 35 full years. Shouldn't I be receiving full pension, rather than the slightly less that I currently receive?

35 years only applies to younger people who joined the work place since 2016. For those older, the range of years needed to achieve the full New State Pension ranges from 27 to 50.

New State Pension replaced the Basic State Pension. Those who retired soon after April 2016 often didn’t have enough years remaining in which to build on their baseline BSP pension to achieve full NSP. It doesn’t mean those on BSP or just a little over, are worse off as they are getting the pension that they contributed to. 

molerat

35 years only applies to anyone 100% under the 2016 pension, that is those starting their NI history from then.  Anyone else is on a hybrid scheme where at April 2016 you were given the higher of the old or new scheme calculations so you are no worse off.   With in excess of 35 years and not receiving the new full pension means you were in a contracted out pension paying less NI. 

p00hsticks

When the new state Pension was introduced in 2016, a 'starting amount' was calculated for everyone who already had an NI record as specified by transitional rules. This was the higher amount of their entitlement as calculated 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 

Which is then taken as your starting amount will depend on which figure is then higher.
The current values for the old 'basic' state pension are £169.50 and for the new £221.20. 

If you were contracted out into an employer or private pension and therefore paid a lower rate on NI you will have had a COPE ('Contracted Out Pension Equivalent') figure deducted from the new calculation, and thus even having 35 years at that point would mean that your calculated amount under the new rules was lower than those under the old. 
The consequence is that anyone falling under transitional rules can need anything from 28 to 50 years to obtain the new maximum (and some may even have a higheramount if their starting amount exceeded the new maximum thanks to a high SERPS/S2P figure). 

The introduction of the new State Pension in 2016 simplified things by doing away with contracting in and out, SERPS and S2P, and from that point on, every additional post-2016 NI year earned simply adds 1/35th of the new State Pension amount to your 2016 starting amount. 

ni_formular

p00hsticks said:

When the new state Pension was introduced in 2016, a 'starting amount' was calculated for everyone who already had an NI record as specified by transitional rules. This was the higher amount of their entitlement as calculated 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 

Which is then taken as your starting amount will depend on which figure is then higher.
The current values for the old 'basic' state pension are £169.50 and for the new £221.20. 

If you were contracted out into an employer or private pension and therefore paid a lower rate on NI you will have had a COPE ('Contracted Out Pension Equivalent') figure deducted from the new calculation, and thus even having 35 years at that point would mean that your calculated amount under the new rules was lower than those under the old. 
The consequence is that anyone falling under transitional rules can need anything from 28 to 50 years to obtain the new maximum (and some may even have a higheramount if their starting amount exceeded the new maximum thanks to a high SERPS/S2P figure). 

The introduction of the new State Pension in 2016 simplified things by doing away with contracting in and out, SERPS and S2P, and from that point on, every additional post-2016 NI year earned simply adds 1/35th of the new State Pension amount to your 2016 starting amount. 

Hi thanks for that explanation.
It now makes sense to me, I only had 29 pre 2016 full years and that was it, so my starting amount was therefore £183.28. based on the new rules.
Paid for 6 more, 35 total, but 1p short of full SP, so that's not an issue. Job done!

paneersteve

Hi everyone. I've been checking my pension forecast for the last five years and every time it said I'm eligible for the maximum. So far so good. I'm 66 in July and had my letter through this morning. I checked my pension forecast this afternoon and it's now dropped by over £200 per month with a long list of missing NI contributions since I took retirement from the police in 2012. How can this be so? How can they get it so wrong and tell me three months before I get my state pension. I have screen shots of the previous forecasts saying I'm eligible for the full amount and that there's nothing I can do to top up and now they say to get maximum pension they want 12 years of top-up. There's something horribly wrong with the system.

molerat

Did your previous forecasts mention contracted out ?  That not being mentioned is the only thing that could have gone wrong if you were reading the forecast correctly, it has come up a couple of times here.  How much is your weekly amount ? It looks like you may need 8 years to reach the max, well worth doing. With a police pension and early retirement it would be expected that you would be short and need topping up post 2016. You need to get a call back booked Request a call back to pay voluntary National Insurance contributions - GOV.UK or you could try contacting The Pension Service on the phone but it would be a long hold if you even actually manage to get through, probably now is the worst time to be retiring if there are problems needing sorting.  It may be worth raising it as a complaint and that you should be allowed to pay at the relevant in year price which you would have done had you not been misled by the incorrect forecast - that would be as low as £733.20 for 16-17, £6343.20 for the 8 years which would be recouped gross in 121 weeks at 25-26 rate.

QrizB

paneersteve said:

I have screen shots of the previous forecasts saying I'm eligible for the full amount and that there's nothing I can do to top up and now they say to get maximum pension they want 12 years of top-up. There's something horribly wrong with the system.

Share your screenshots, please. We can help you understand what's happened.