MSE News: Government outlines flat-rate state pension

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
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  • jamesdjamesd Forumite
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    How?

    The deduction only applies for contracted out years. The self-employed person wasn't contracted out, or at least not due to the self-employment, so how does the new rule calculation for contracted out deduction affect them at all?

    How does the new rule contracted out deduction affect the low earner who's never been contracted out and has no contracted out deduction calculation at all?

    Maybe the new rule contracted out deduction calculation will help the contracted out low earner. Depends how low you mean I suppose.

    Each of those might be better off in final pension terms, but I was asking about how the new rule contracted out deduction could produce a better result than the old rule contracted out deduction.
  • edited 20 January 2013 at 8:13PM
    SnowManSnowMan Forumite
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    edited 20 January 2013 at 8:13PM
    jamesd wrote: »
    How?

    The deduction only applies for contracted out years. The self-employed person wasn't contracted out, or at least not due to the self-employment, so how does the new rule calculation for contracted out deduction affect them at all?

    How does the new rule contracted out deduction affect the low earner who's never been contracted out and has no contracted out deduction calculation at all?

    Maybe the new rule contracted out deduction calculation will help the contracted out low earner. Depends how low you mean I suppose.

    Each of those might be better off in final pension terms, but I was asking about how the new rule contracted out deduction could produce a better result than the old rule contracted out deduction.

    If you are adding an extra condition that they must have a non zero rebate derived amount

    34 years self employed 1 year contracted-out
    34 years contracted in, 1 year contracted-out, low earner
    35 years contracted-out low earner
    17 years contracted out, 18 year contracted in, low earner
    10 years contracted-out, 10 yaers self-employed, 15 years contracted in low earner

    Apart from a low earner with any mix you can think of of contracted-out, contracted-in, self-employment, credits through caring, credits through looking after children, and a few predominently self employed high earners, I can't see where the new system calculation including the rebate derived amount will bite.

    It is of course logical to deduct the rebate derived amount because the new scheme amount of £144 would have required full national insurance contributions to have been made.

    It is not logical to deduct anything from the old scheme calculation of the basic state pension + additional state pension accrued guarantee, because these are benefits the person has actually earned from the state. However what would be logical would be to only allow future accrual from the foundation amount up to x (where x = 144 - rebate derived amount, and of course no future accrual when x was less than the foundation amount). That would be messier though but fairer.
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  • As this is just a proposal at the moment, what are the chances this will get though in its current form ? will there be opposition ? there is certainly a lot of debate here which highlights the concerns and isuues that will arise. When in 2017 are the condems planning on bringing this in ? before the election or after ? (which might make a difference when they are banished to the wilderness)
  • gadgetmindgadgetmind Forumite
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    Johnn64 wrote: »
    As this is just a proposal at the moment, what are the chances this will get though in its current form ?

    I would be surprised to see any major changes. There might be a few concessions for a few groups, but other than that, I think this is how it will go.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • I made additional contributions while I worked overseas back when you had to have 44 years of contributions instead of 30 to get a full pension. I also contracted out for about 10 of those years.

    By the time I retire I will have made 46 years of NI contributions, 16 years more than required for a full pension. Will I still have my state pension reduced because I contracted out, or will it be recognised that I was contracted in for more than the required 30 years?
  • LintonLinton Forumite
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    I made additional contributions while I worked overseas back when you had to have 44 years of contributions instead of 30 to get a full pension. I also contracted out for about 10 of those years.

    By the time I retire I will have made 46 years of NI contributions, 16 years more than required for a full pension. Will I still have my state pension reduced because I contracted out, or will it be recognised that I was contracted in for more than the required 30 years?


    When do you reach State Pension Age? In your case having more than enough NI years:

    A) If its before 2017 then you get your full basic state pension + Contracted-in ASP.

    B) If its after 2017 you get the larger of £144 and ((A) +/- the difference between how they account for contract-out now and how they will account for it in 2017).

    In both cases, assuming your contracted out doesnt come from a FS pension, you also get the income generated by your contracted-out pension pot.
  • Hi, can anyone help please, I understand we have to contribute 35 years of national insurance contributions, is this 35 full time working years, or do part time years count as a whole year? I have worked a mixture of ful- time and part-time due to looking after children over the years.
  • jamesdjamesd Forumite
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    The person in a household who's registered to get child benefit receives a credited year towards the total for each year receiving CB. So it's likely that you have many years already, maybe even 35.

    Part time years do not necessarily count but may, there's a minimum income needed each year to qualify.

    What you should do is get a State Pension Statement to see what your record currently says about how many qualifying years you have, then ask any further questions based on that.

    The Future Pension Centre will be able to tell you your recorded income for each year and whether that year counted towards the basic state pension under current rules, and years that count for that would also count for the new one. If you ask them for this information please be ready to take notes so that they only have to do it once, since it'll take a while to read out all of the details for you.
  • If you worked all your life and was contracted out all your life, would you get just the basic state pension of £107?

    If you worked 30 years and was not contracted out say earning the equivalent of £15k a year? What additional pension could you expect?

    If you work 30 years and have contracted out for 5 years at a wage of £15k would you get more than £144 anyway?
  • sunshine11 wrote: »
    Hi, can anyone help please, I understand we have to contribute 35 years of national insurance contributions, is this 35 full time working years, or do part time years count as a whole year? I have worked a mixture of ful- time and part-time due to looking after children over the years.

    You have to be paid over the lower earnings limit in a tax year for the year to count. This year the limit is £5564.

    Here is a nice table showing how much that threshold has been since 1978.
    http://www.watsonwyatt.com/europe/pubs/statistics/render2.asp?ID=7
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