MSE News: Government outlines flat-rate state pension

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
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  • gadgetmindgadgetmind Forumite
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    momist wrote: »
    As such her pension will change from 26/30ths of the basic rate to 26/35ths of the flat rate. This changes a shortfall of £380/year to an eye-watering shortfall of £1500/year! :eek:

    26/30*107=£92.73
    26/35=£106.97

    It looks to me like you'll be getting more under the new system. Please can you show me how you work out that you'll be £1500 pa worse off?
    We can't make any rational decision on buying back lost years without knowing it has been passed.

    Any additional years or work your wife does pre-retirement, including self-employment, will earn extra years.

    Each extra year will be worth £4.11 per week, so nearly £214 (index linked) per year until death.

    Look up what buying back years costs, and what class 2 self employed NI costs per year, and you'll be able to make a decision.
    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.
  • momistmomist Forumite
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    gadgetmind wrote: »
    Please can you show me how you work out that you'll be £1500 pa worse off?

    I mean worse off than anyone with a full contribution record would be. This has to colour whether it is worth dumping cash that can only be invested at 1.8% into buying back years instead.

    Yes, I still need to work out the odds of survival, and whether it makes sense to buy back any at all.
  • jem16jem16 Forumite
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    momist wrote: »
    I mean worse off than anyone with a full contribution record would be.

    if that's your way of looking at it, it would be 9/35ths of £144 which is £1925.49 so still not sure where you are getting your figures from.

    Under the old system it would be 4/30ths of £107 which is £741.87.

    However you are only comparing the basic rate. Does she have no SERPS/S2P to be included in the original 26/30ths?
  • momistmomist Forumite
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    jem16 wrote: »
    9/35ths of £144 which is £1925.49

    Yep, sorry, arithmetical error. Not £1500 a year, but £1900 a year. That's worse! :eek:

    No, there are no additional factors to consider. Because of the proposed changes (which had been passed by parliament) she can currently buy back more than the normal six years, and of course there are three years still available for class 3 contributions, I think. I'm no expert in these matters!
  • gadgetmindgadgetmind Forumite
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    momist wrote: »
    I mean worse off than anyone with a full contribution record would be.

    Why is that a factor in your decision? Those will a full contribution record have worked more so surely it's right that they get more? Your wife is also getting more, so where's the problem?
    This has to colour whether it is worth dumping cash that can only be invested at 1.8% into buying back years instead.
    I completely fail to see why you say that. All you can do it look your own situation.
    Yes, I still need to work out the odds of survival, and whether it makes sense to buy back any at all.

    Buying back old years typically only needs 3-4 years post SP age to pay for itself. Paying class 2 NI pays for itself in the first six months!
    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.
  • jem16jem16 Forumite
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    momist wrote: »
    No, there are no additional factors to consider.

    So was she in a contracted out pension scheme for all of her 26 years?
  • momistmomist Forumite
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    gadgetmind wrote: »
    Buying back old years typically only needs 3-4 years post SP age to pay for itself.

    So to justify buying back nine years needs a survival prospect of 4 * 9 = 36 years? That's possible but not likely.

    It does sound like I need to investigate the NI class system though.
  • momistmomist Forumite
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    Getting back to the original question here, the form describing NIC voluntary contributions says:
    "If you retire after April 2016 you should wait until Pension Statements for single-tier Pensions become available before you decide whether to pay voluntary NICs."

    Can anyone suggest when this may happen please?


  • gadgetmindgadgetmind Forumite
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    momist wrote: »
    So to justify buying back nine years needs a survival prospect of 4 * 9 = 36 years? That's possible but not likely.

    No. Each year you buy will take that long to pay for itself, but they all boost the pension from day one and so pay for themselves at the same time, and keep paying for themselves year after year after that.

    BTW, I don't think you can buy 9 years using class 3. I'm not sure on this as I looked at this class of NI and decided to go for a different option.

    My wife only worked for a few years, but then has starter years, and HRP years. She now at 28 years and will get to 35 by paying voluntary class 2 as a self-employed ... well we picked something suitable (and novel!) that also reduced her car insurance! We didn't go for sage/poet in the end, but it's as good as anything.
    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 must admit, I'm a bit confused about the rebate derived amount. In 2016, I will have 16 years contracted out (final salary pension) and 14 years contracted in - I will have 36 years NI years.

    It seems to me that if the rebate derived amount is applied in 2016 rather than my SPA of 2029, then the 14 years contracted in years have effectively no value because the 16 years contracted out will bust me back from £144 to about £114.

    If I had been contracted out for the whole 30 years - The foundation amount would be the standard pension of £110 - because that is the higher valuation of old and new scheme.

    Or should the valuation under the old scheme be used? i.e £110 plus the 14 years contacted in- around £140?

    The problem is the rebate derived amount/ COD because under the old rules, it wouldn't be applied until SPA which brings into play all of the contracted in payments from 2016-2029...

    you can see why this has confused me....
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