State Pension Estimate & Forecast... (the missing 1p!)

molerat

Although you have 35 years it is a 2016 calculation based on 30 then uprated with the 5 added each year as they accrued.  On my spreadsheet I can lose 1p uprating the 2016 starting amount then adding the post 2016 years so that is what has likely happened.  For the majority I expect it will work out, it did for MrsM, but the only people guaranteed to get the full amount with 35 years are those starting out from 2016 or those not contracted out with all 35 years pre 2016 - mainly covers housewives / self employed, the real winners of the new system.  But, as it says on the forecast, it is only an estimate and a different amount, ie the full amount, may come out in the final calculation.

Tescodealqueen

seacaitch said:

On my State Pension Summary page (accessed via my Personal tax Account):
https://www.tax.service.gov.uk/check-your-state-pension/account

...I don't see any breakdown of calculations, just the Estimated and Forecast figures I described above (plus what the Forecast figure equates to per month & year shown at the top of the page). I assumed this is the same for everybody...

I don't see any further detail - is this available somewhere else?

To get a full state pension forecast

https://www.gov.uk/check-state-pension


this is what I use in my day it was a paper BR19 form to get details rather than a summary

Qyburn

seacaitch said:

And being a data person, the "1p" discrepancy looks very suspicious to me! Clearly, it's not impossible for a valid calculation to land me with an estimate that just happens to be 1p less than the full amount, but the probability seems low, 

No less probable than any other figure.

seacaitch

Tescodealqueen said:

To get a full state pension forecast

https://www.gov.uk/check-state-pension

Thanks - that leads through to the same web page and data that I posted - there is no breakdown or further detail available there. 

seacaitch

molerat said:

Although you have 35 years it is a 2016 calculation based on 30 then uprated with the 5 added each year as they accrued.  On my spreadsheet I can lose 1p uprating the 2016 starting amount then adding the post 2016 years so that is what has likely happened.  For the majority I expect it will work out, it did for MrsM, but the only people guaranteed to get the full amount with 35 years are those starting out from 2016 or those not contracted out with all 35 years pre 2016 - mainly covers housewives / self employed, the real winners of the new system.  But, as it says on the forecast, it is only an estimate and a different amount, ie the full amount, may come out in the final calculation.

Appreciate your input!

Looking at this DWP Guidance Document:
https://www.gov.uk/government/publications/your-new-state-pension-explained/your-state-pension-explained

..it says:

"If you have qualifying years on your National Insurance record as at 5 April 2016, we work out a ‘starting amount’ for you for the new State Pension. It is the higher of either:

• the amount you would have got under the previous State Pension system up to 6 April 2016, or

• the amount you would get on your record to 6 April 2016 if the new State Pension had been in place at the start of your working life

Both amounts reflect any periods when you were contracted out of the Additional State Pension. Your ‘starting amount’ could be less than, more than or equal to the full new State Pension."

Since I was never contracted out in any of those years, my understanding is that for my situation the 2nd bullet point should apply to each of those qualifying years, ie. as if the new SP had been in place for those years, and hence for me: 30 (pre-2016) + 5 (subsequent) years all being treated as if the new SP had been in place, and therefore the total should equate to 35 full years under the new system = £230.25/week.

Is my understanding wrong, and if so in what way, and how exactly should my starting amount be calculated then? Anyone?

Still smells like a rounding error to me! 

molerat

None of us are privy to how the computer actually works and rounds but my calculations of uprating the 2016 amount to date then adding the 5 post 2016 years does give the 1p difference from uprating the new amount annually in line with the total number of years held.  There are fractions of percentages involved in the different parts of the uprating and they can have a knock on effect.

edit.  These are the past 9 percentage increases in the full pension oldest to newest.

2.50562%

3.00846%

2.58594%

3.91459%

2.51142%

3.09020%

10.09992%

8.51116%

4.09132%

DRS1

So you have 9 years to go before you hit SPA.  What are you going to do for those 9 years?  Get a job? Start your own business?  Look after a grandchild?  Sign on for benefits?  Make a voluntary contribution?  All sorts of ways of getting rid of that pesky 1p shortfall.

seacaitch

DRS1 said:

So you have 9 years to go before you hit SPA.  What are you going to do for those 9 years?  Get a job? Start your own business?  Look after a grandchild?  Sign on for benefits?  Make a voluntary contribution?  

None of the above. I'd only make additional voluntary contributions if it made economic sense for me to do so - which currently it obviously doesn't.

Legislative tax changes in the future might result in further (involuntary!) NICs from me one day.

1957DfurdPensionist

molerat said:

Although you have 35 years it is a 2016 calculation based on 30 then uprated with the 5 added each year as they accrued.  On my spreadsheet I can lose 1p uprating the 2016 starting amount then adding the post 2016 years so that is what has likely happened.  For the majority I expect it will work out, it did for MrsM, but the only people guaranteed to get the full amount with 35 years are those starting out from 2016 or those not contracted out with all 35 years pre 2016 - mainly covers housewives / self employed, the real winners of the new system.  But, as it says on the forecast, it is only an estimate and a different amount, ie the full amount, may come out in the final calculation.

I broadly agree with @molerat.  Someone correct me if I am wrong, because contrary to the views of some habitual smart-Alecs hereabouts, the 2016 calculations of Starting Amounts for all those of us falling between the old and new systems are a veritable bvggers muddle, and the "number 35" still comes into play in calculating the effect on nSP for any necessary contributions 2016/17 and beyond in order to obviate effects of COPE deductions.  Each post 2016 year gives us 1/35 x max nSP if we need it to claw our way back to something close to max nSP. 

But I don't believe in the OP's case that his NI contributions since 2016 have made a jot of difference? .

Reason being (I believe - and I'm not daft!), with 30 years prior to 6.April 2016, zero or modest S2P Additional Pension and zero COPE deduction, I think the one off 2016 comparison formula for deciding the OP's "Starting Amount" at 2016/17 rates would have simply been the greater of:

• £119.30 the old rules 2016/17 maximum - 30 years worth - basic State Pension (bSP) plus any Additional Pension, and
• £155.65 the max nSP

So in the OP's case, assuming only a modest S2P Additional Pension  had been earned before April 2016 (i.e. not enough when added to bSP to exceed the max nSP), the Starting Amount was £155.65.

Since then, Triple Lock has added the following annual increases to max nSP:
+2.5%,+3.0%,+2.6%,+3.9%,+2.5%,+3.1%,+10.1%,+8.5% and +4.1%
If you apply those cumulatively to the original £155.65 2016 max nSP, you get £230.21 not £230.25.

molerat said:

2.50562%

3.00846%

2.58594%

3.91459%

2.51142%

3.09020%

10.09992%

8.51116%

4.09132%

Edit: I only just noticed that @molerat has posted Triple Lock percentages to five decimal places   
I see they are reverse engineered from the actual max nSP's published versus the previous year's published figures - I can't imagine DWP uses or actually discovers the numbers they choose from official indices to that level of pedantry? Surely it is just a point of interest to show how silly errors can creep in?

Goodness knows what the DWP system programmers settled for in their coding for Future Pension forecasts, but clearly, in a "clean skin" case such as the OP's, there should have been a separate check routine that did not accept effects of multiple year's worth of cumulative percentage increases when exact maximum nSP Triple Lock updates have been published and should be accurately reflected.

My guess is that the programmers were far too satisfied with "near enough is good enough" when calculating the majority of cases which included

• adjustments for COPE deductions,
• Triple Lock increases to lower starting amounts,
• a myriad of CPI deferment period increases calculated to the nearest week,
• treat as paid dates for VC's to the nearest day

to worry about pennies difference (easy to dismiss as "rounding errors"), or especially to even notice that their coding didn't cleanly and accurately satisfy the simplest cases like the OP's.

And seriously, having spent an inordinate amount of time understanding my own case to the last penny, I'd be pleased for any of my pleadings above to be corrected.

Having myself been receiving pension now for some months, yet still not having received the decision letter that matches what they currently pay, but having reverse-engineered it, I can't actually double-check all their calculations because they still haven't told me exactly how they calculated my COPE!  At least the OP doesn't have to worry about that!  DWP have verbally confirmed many times that the decision letter has existed for some months, and bits of it have been read to me over the phone by DWP, but "for security reasons" they won't email it, even as a passworded pdf or some other similar method in common use by he biggest private pension providers!  It is a ridiculous Jurassic joke - yes - there be dinosaurs!  And ok, before anyone thinks it, yes maybe it takes one to know one 

Cobbler_tone

I cannot (well I can) believe the amount of discussion and work put behind the phantom penny.  ...plus of course the token comments on 35 years.