Checking State Pension increase

Silvertabby

https://forums.moneysavingexpert.com/discussion/comment/82119199#Comment_82119199

You may well have had pre 2016 years available to purchase, but they wouldn't have added to your pension. Suspect that the person you spoke to could only see the gaps, and it wasn't their job to point out which ones would actually add to your pension.

I had 5 NI gap years (all post 2016) between retirement and SPA, but only need 4 to take me to the full single tier pension. I paid for these on line, and when my NI records were updated the 'missing' year was high-lighted as unpaid, with instructions on how to pay it. I knew that paying it wouldn't have added a single penny to my pension, and so ignored it. But other people may have read that as "advice' on how to increase their pensions.

goodValue

You may well have had pre 2016 years available to purchase, but they wouldn't have added to your pension. Suspect that the person you spoke to could only see the gaps, and it wasn't their job to point out which ones would actually add to your pension.

I don't understand why purchasing some years will improve your pension, and others will not.

How is one year different to another?

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82119199#Comment_82119199

Can I suggest you think of a store in Oxford Street and outside it is a Fagin from the East End inviting you to buy a mystery box for a Lady Godiva. That box is "available for purchase" but you know that when you open it there will be nothing inside and you will have wasted your money. Those two years are like that mystery box. They are available for purchase but that doesn't mean buying them is a good idea.

QrizB

How is one year different to another?

Pre-2016 years determined your (and my, and millions of other people's) "starting amount" for the New State Pension.

Post 2016 years let you accrue more pension on top of your starting amount, up to the full NSP.

pinnks

https://forums.moneysavingexpert.com/discussion/comment/82119221#Comment_82119221

As was explained at length in 2016 the rules changed o 5 April 2016 and it was "out with the old SP" with its basic pension based on a maximum of 30 NI years, plus either additional pension from the second state offering, or a workplace/private pension that was contracted out of the second state scheme, and "in with the new SP" based on 35 years, but only for those who started paying NI from 2016/17 onwards.

Everyone with a pre-2016 NI record is in transition and to move us onto the new rules in a way that ensures you are not worse off, DWP did 2 calculations and awarded you the higher amount as your "starting amount" for the new rules. They were the higher of:

1. what you would have got under the old rules, so up to £184.90 basic pension with 30 or more NI years, PLUS any entitlement to second state pension, LESS a Contracted out Deduction as you were, well, contracted out.
2. what you would have got had the new rules always applied, so a pension based on a maximum of 35 years, LESS a Contracted out Pension Equivalent as you had been contracted out.

For any year 2016/17 onwards that you add to your NI record you add 1/35 x "nSP max" to your starting amount. However, as you reached pension age in 2016/17 that does not apply to you as the final NI year (tax year) that counts toward the SP is the one that ends before you reached pension age (2015/16 for you). Also, as you already had more than 30 and a substantial amount of COPE, paying NI gap years would not change anything.

Calculation 1 gives the higher amount and even if you increased your NI years to the absolute maximum of 35 it would not change your starting amount because of the size of your COPE.

Had the rules not changed you would have got exactly the same amount from the state as you get now, plus of course the workplace or private pension on top. You could not have changed that under the old rules and cannot changed it under the new ones either.

goodValue

https://forums.moneysavingexpert.com/discussion/comment/82119230#Comment_82119230

So is poohSticks ability to improve his pension with post 2016 years not because they replace contracted out years, and thus reducing the penalty of contracting out?

Is it that the contracting out deduction is set in stone, and no purchase of years is ever going to affect the contracted out deduction.

pinnks

Contracted out years are NEVER replaced. You contracted out of the second state pension, not the basic pension. You simply cannot improve your pension and need to put all of that out of your head. Sorry if that sounds harsh but you have the exact amount you would have received had the rules not changed. There are not years 2016/17 and later that can change your position. Those reaching pension age in 2017/18 or later do have the opportunity to increase the amount they get if they pay or are credited with NI for years 2016/17 and later.

LHW99

So is poohSticks ability to improve his pension with post 2016 years not
because they replace contracted out years, and thus reducing the
penalty of contracting out?

poohSticks could increase his pension (up to the maximum NSP) because his pension age is later than 2016.

poohSticks could have continued to work, but instead bought extra years from 2016 onwards.

Doing either may help to offset a "contracted out pension equivalent" (COPE) or it could be because the 2016 starting amount was lower than NSP due to some other reason, but isn't possible if you had already retired by April 2016.

goodValue

I've realised I have made the assumptions:
if DWP mention a figure of about £120, they mean Basic State pension
if DWP mention a figure of about £155, they mean New State pension

This led me to believe the DWP calculation was greater for NSP, when they gave me the forecast just prior to taking payment.
However, it seems replies to this thread think the BSP was a greater amount for me, even though not knowing my full situation.

My lack of knowledge means I am repeatedly going from one confusing pension situation to another;

So now, for someone with 35 qualifying years, they are ELIGIBLE for both the full Basic State pension and the full New State pension amounts.
The main adjustment to give the Actual pension amount, is due to being contracted out.
Wouldn't the contracted out deduction be less for the NSP calculation by virtue of a smaller ratio of contracted out years compared with total number of years (30 and 35 for BSP and NSP respectively).

eskbanker

Anyone reaching state pension age after 2016 receives the new state pension, so nobody is eligible for the old one as such, even if its 2016 entitlement valuation may have been used (on a one-off basis) to determine the starting point for the calculation of the NSP entitlement.

35 qualifying years isn't relevant for anyone born before this century, other than by coincidence.