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

DRS1

"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"
@1957DfurdPensionist
 I hesitate to ask this but why is the second sum not 30/35 x £155.65?

Also why do you assume the OP has little additional pension if he was contracted in?  Maybe he was self employed?

SnowMan

The full new state pension is calculated from the previous full new state pension figure by applying the triple lock increase and then rounding to the nearest 5 pence.

My guess is that where the full new state pension hasn't been reached, the state pension is increased by the increase in the full new state pension (quoted to 4 decimal places) which because of the nearest 5p rounding isn't exactly equal to the headline 1DP increase and neither is it equal to the increase in new state pension (because of my hypothesised 4 decimal place rounding)

If you look at

https://www.gov.uk/government/publications/benefit-and-pension-rates-2025-to-2026/benefit-and-pension-rates-2025-to-2026#state-pension

you will see that for example for the 2025 transitional rate below full rate is 4.0913% (= 230.25 / 221.20) rather than 4.1%. And it's stated to 4DP which is why I am guessing 4 decimal places rounding is used but I don't know this.

So it could well be in the rounding (of the starting amount of 155.65 x 30/35 = 133.4142857 being rounded down to 133.41 interacting with the rounding of the subsequent increases) where the one pence is lost because until the new state pension is reached it's the rounded figure that applies not the unrounded figure. 

1957DfurdPensionist

DRS1 said:

"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"
@1957DfurdPensionist
 I hesitate to ask this but why is the second sum not 30/35 x £155.65?

Is it? I thought the need to get to 35 years was only for the young-uns who started their NI contributions after April 2016??  But as I have said, I could be wrong. If anyone had managed 30 years before April 2016 without contracting in even for a moment, then I thought they were home and dry on a future-proofed full nSP?

DRS1 also said:

Also why do you assume the OP has little additional pension if he was contracted in?  Maybe he was self employed?t

I have assumed that whatever additional pension the OP earned before 2016, that it wasn't enough when added to the full bSP £119.30 to take the OP beyond £155.65 and thus into protected payment territory. So the £155.65 would have been the OP's starting amount, irrespective of earned additional pension amount (I think!).

But if your 30/35 question is valid then his starting amount may have been ... well I'm not going to go there because I have seen too many sharp admonishments about 35 years having very little to do at all with our transition cases - by which I mean one foot under old rules and the other foot under the new, and getting ever closer to the grave

seacaitch

Thanks for the continued comments folks!

Regarding contributions post-2016, when the new state pension rules kicked in I found I needed to make (voluntary) NICs for a further 5 years (on top of my earlier 30 years contribs) in order to get up to the full SP amount - well, 1p short of the full amount as discussed. Once my forecast reached that point after 5 years post-2016 contribs, I ceased further contributions.

As a former audit, software and finance person, that 1p shortfall always smelled to me like a rounding artefact from compounding calculations. As mine seemed to be a relatively simple case (no COPE) in the grand scheme, my understanding of the rules, or assumptions anyway, was that I should receive precisely the full rate. I kept expecting this 1p discrepancy ("error") in my SP forecast to disappear, but it never it did, hence my question here to see if there was another explanation or if others had seen something similar. I doubt I'm alone in seeing an oddity like this

Although it's a while ago now, based on extensive dealings I once had with the software side of a "very large govt finance dept" in a previous life, I'm not surprised they struggle with such bread & butter calculations - more impressed they got to within 1p    

DRS1

1957DfurdPensionist said:

DRS1 said:

"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"
@1957DfurdPensionist
 I hesitate to ask this but why is the second sum not 30/35 x £155.65?

Is it? I thought the need to get to 35 years was only for the young-uns who started their NI contributions after April 2016??  But as I have said, I could be wrong. If anyone had managed 30 years before April 2016 without contracting in even for a moment, then I thought they were home and dry on a future-proofed full nSP?

DRS1 also said:

Also why do you assume the OP has little additional pension if he was contracted in?  Maybe he was self employed?t

I have assumed that whatever additional pension the OP earned before 2016, that it wasn't enough when added to the full bSP £119.30 to take the OP beyond £155.65 and thus into protected payment territory. So the £155.65 would have been the OP's starting amount, irrespective of earned additional pension amount (I think!).

But if your 30/35 question is valid then his starting amount may have been ... well I'm not going to go there because I have seen too many sharp admonishments about 35 years having very little to do at all with our transition cases - by which I mean one foot under old rules and the other foot under the new, and getting ever closer to the grave

Yes we are told to ignore the 35 years where we bridge the two regimes but I think for calculating the second bit of the starting amount you assume that the new rules have always been in place.  Anyway I am sure someone who knows will be along to tell me my question was ill informed.

1957DfurdPensionist

SnowMan said:

If you look at

https://www.gov.uk/government/publications/benefit-and-pension-rates-2025-to-2026/benefit-and-pension-rates-2025-to-2026#state-pension

you will see that for example for the 2025 transitional rate below full rate is 4.0913% (= 230.25 / 221.20) rather than 4.1%. And it's stated to 4DP ...

When I suggested DWP surely couldn't have reduced themselves to such pedantry as publishing figures to the nearest 5DP of a percentage point, little did I even imagine that they would ever use 4DP, either!

And @seacaitch may we spreadsheet plodders (and fellow ex audit software and finance peeps!) be put out of our misery by knowing what your 2016 starting amount actually was?  Was it as DRS1 was querying, £155.65 x 30/35 =  £131.414286 in DWP speak?

Triumph13

A fascinating little thread, thank you   I too am sure it's a rounding error deriving from the transition number in 2016.  It will only affect those people who 1) never contracted out; 2) never earned any S2P; 3) Have pre + post 2016 years adding up to exactly 35; and 4) had 30 pre 2016 years, or some other number that gives a similar error - presumably most don't.

That's a relatively small proportion of the population, but probably enough to get up a protest movement to demand redress.  Want A Single Penny Increase perhaps?  (Sorry, couldn't resist it.)

1957DfurdPensionist

DRS1 said:
Anyway I am sure someone who knows will be along to tell me my question was ill informed.

Au contraire, mon brave! It now very much looks like you were right to question my over simplistic take on it!

Triumph13 said:

That's a relatively small proportion of the population, but probably enough to get up a protest movement to demand redress.  Want A Single Penny Increase perhaps?  (Sorry, couldn't resist it.)

Well I'd say that this special, significant (but not numerous) minority should henceforth be the nominated recipients of the annual Maundy Money distribution when they reach pension age, rather than those special pennies being dished out to pretentiously networked City businessmen and the like!

seacaitch

1957DfurdPensionist said:

And @seacaitch may we spreadsheet plodders (and fellow ex audit software and finance peeps!) be put out of our misery by knowing what your 2016 starting amount actually was?  Was it as DRS1 was querying, £155.65 x 30/35 =  £131.414286 in DWP speak?

I don't know that starting amount for me, sorry. Can I see it somewhere in my SP forecast? Not to my knowledge...

Strictly interpreting the DWP wording I linked to earlier, as applicable to me:

...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

...suggests my starting amount should be = £155.65 * 30/35 as you say, so the discrepancy does perhaps follow from that calculation onwards. I suppose mine's something of a special case, where per the quoted bullet point I have in effect 30 + 5 years under the new system's rules, which if recognised (as we're able to...) would mean avoiding performing the "starter amount" fractional calculations that then lead to the small 1p error?

Triumph13

seacaitch said:

1957DfurdPensionist said:

And @seacaitch may we spreadsheet plodders (and fellow ex audit software and finance peeps!) be put out of our misery by knowing what your 2016 starting amount actually was?  Was it as DRS1 was querying, £155.65 x 30/35 =  £131.414286 in DWP speak?

I don't know that starting amount for me, sorry. Can I see it somewhere in my SP forecast? Not to my knowledge...

Strictly interpreting the DWP wording I linked to earlier, as applicable to me:

...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

...suggests my starting amount should be = £155.65 * 30/35 as you say, so the discrepancy does perhaps follow from that calculation onwards. I suppose mine's something of a special case, where per the quoted bullet point I have in effect 30 + 5 years under the new system's rules, which if recognised (as we're able to...) would mean avoiding performing the "starter amount" fractional calculations that then lead to the small 1p error?

The problem though is that redoing the calculation at retirement would mean DWP had to maintain all the records and processes to calculate the interaction of old SP, new SP, S2P and COMP amounts for 35 years.  It was just so much more practical to do a one-off exercise at 2016 to calculate a single transition amount for every person, then move forward from there.