GMP and state pension

Justso65

Hi

I know this has been covered extensively in the forum but I can’t find a clear answer to my query.

I don’t reach state pension age for a few years yet but I’m planning to retire soon.  I’ve done a state pension check and it tells me I’ve reached the maximum and cannot improve on £230.25 a week in today’s numbers.  On checking my NI history I have a full history of contributions going back 43 years with one small gap of 6 months.  

So I’m assuming I can plan for having whatever the full state pension is when I retire.

During the period from 88 to 97 I believe I was “contracted out” in a DB pension.

Does this in any way affect the state pension I would get or is what I see on the gov website the definite amount, in today’s figures, of what I will get?

I have a DC pension I intend to use to state pension age and I will start the DB pension at some time between now and 67.  So I’ve made plans on the value of the DB pension plus the state pension at 67.  If I have to re-assess my plans should my contracted out time actually affect my state pension I’d like to be forewarned to take this into account.

Many thanks as usual for any replies.

JS

Dazed_and_C0nfused

Justso65 said:

Hi

I know this has been covered extensively in the forum but I can’t find a clear answer to my query.

I don’t reach state pension age for a few years yet but I’m planning to retire soon.  I’ve done a state pension check and it tells me I’ve reached the maximum and cannot improve on £230.25 a week in today’s numbers.  On checking my NI history I have a full history of contributions going back 43 years with one small gap of 6 months.  

So I’m assuming I can plan for having whatever the full state pension is when I retire.

During the period from 88 to 97 I believe I was “contracted out” in a DB pension.

Does this in any way affect the state pension I would get or is what I see on the gov website the definite amount, in today’s figures, of what I will get?

I have a DC pension I intend to use to state pension age and I will start the DB pension at some time between now and 67.  So I’ve made plans on the value of the DB pension plus the state pension at 67.  If I have to re-assess my plans should my contracted out time actually affect my state pension I’d like to be forewarned to take this into account.

Many thanks as usual for any replies.

JS

Yes it does impact it.

The figures you see on your gov.uk forecast have factored that impact in.

If you have already accrued £230.25 there is, in your particular situation, absolutely nothing you can do to increase that.  You have hit your personal maximum.

Which will be adjusted for inflation each April.  Currently under the triple lock rules.

Aretnap

The figure in your pension forecast already accounts for any years you were contacted out, so barring a major change in the law around how pensions are calculated you will get the full amount of £230/week, plus triple lock/inflation/whatever increases are applied between now and then.

Under the transitional rules around the new state pension, years spent contracted out would potentially have reduced your "starting amount" and this increased the number of post-2016 years contributions that you needed to get to a full state pension. However they didn't affect the maximum amount you can get, assuming it's physically possible for you to contribute for enough years to bring your starting amount up to the full amount.

As time goes by and people reaching retirement age will have spent more and more years under the new system, the impact of having been contracted out will become negligible for most people.

Justso65

Thank you for the swift response but can I ask?  If the maximum state pension is currently £230.25 and my forecast states I would get that how have my contracted out years impacted that forecast?  I would have thought my contracted out years may have reduced the forecast below today’s state pension amount.

Or is the forecast just that and at state pension age it will be reduced to reflect contracted out years?  If that is the case how can I get an accurate value of what I would get?

JS. 

Sarahspangles

You’re overthinking this. In 2016 when the New State Pension came in we all got a baseline calculation based on contributions up to that point. We then built on that. My OH was contracted out for the maximum possible period and as a result he needed 45 years’ contributions to qualify for the full NSP. I had a mix of contracted out and in and needed 36. There’s no further calculations assuming your record is correct.

Aretnap

You are overcomplicating this. You can get an accurate forecast by looking at the government gateway website, which you have already done.

For a brief explanation of how transitional arrangements work, see here. As I said, years contracted out can reduce your "starting amount", but you can still get the full new state pension if you contributed for enough years after 2016. Evidently you did.

https://adviser.royallondon.com/technical-central/pensions/state-benefits-pension-manuals/state-pension-transition/

Justso65

Sarahspangles said:

You’re overthinking this. In 2016 when the New State Pension came in we all got a baseline calculation based on contributions up to that point. We then built on that. My OH was contracted out for the maximum possible period and as a result he needed 45 years’ contributions to qualify for the full NSP. I had a mix of contracted out and in and needed 36. There’s no further calculations assuming your record is correct.

Thank you Sarah.  I think where my misunderstanding comes from is that I only need 30 years of NI contributions for a full state pension.  Since I have 42 full years this has negated my contracted out time.

JS

Dazed_and_C0nfused

Justso65 said:

Sarahspangles said:

You’re overthinking this. In 2016 when the New State Pension came in we all got a baseline calculation based on contributions up to that point. We then built on that. My OH was contracted out for the maximum possible period and as a result he needed 45 years’ contributions to qualify for the full NSP. I had a mix of contracted out and in and needed 36. There’s no further calculations assuming your record is correct.

Thank you Sarah.  I think where my misunderstanding comes from is that I only need 30 years of NI contributions for a full state pension.  Since I have 42 full years this has negated my contracted out time.

JS

That was the previous system which ended about 10 years ago now.

Someone under transitional rules for the current "new" State Pension system may only need 30 years but I think that would be relatively rare.

LHW99

I think a few people have reported needing less than 30, and some have needed almost 50.

The "35 years" that too many journalists seem to report is only correct for those whose working life began in 2016 (or after).

pinnks

The fewest years I have seen in just 2 cases, is 26 years, and those reaching pension age after 2016 and before 2025 could have 50 years on their record and not achieve the maximum.

Silvertabby

Contrary to popular belief, it's the ones who 'only' needed 26/28 years of NI to reach the full new single tier pension who are the losers under the new scheme.

They were obviously contracted in (to SERPS/SP2), and had been accruing high levels of additional State pension.  Until that all stopped in 2016.  Had the rules not changed, they would have continued accruing additional pension until SPA, when their total State pensions could have been way over £300 per week.  Instead of being capped at £230 a week or not much more.

I know it's down to a basic lack of  understanding of how pensions work, but I find it strange that all the complaints I've seen on these and other boards are from those with substantial contracted out service, meaning they never reached the dizzy heights of the new single tier pension, or had to pay 40 odd years of NI to get there.  Yet I can't recall a single complaint from someone with less than 30 years who has missed out on post 2016 SP2 accruals.