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  • FIRST POST
    • MSE Helen Saxon
    • By MSE Helen Saxon 31st Mar 16, 12:09 PM
    • 75Posts
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    MSE Helen Saxon
    New State Pension Guide
    • #1
    • 31st Mar 16, 12:09 PM
    New State Pension Guide 31st Mar 16 at 12:09 PM
    Hi!

    This is the discussion thread for the



    Click reply below to discuss. If you havenít already, join the forum to reply. If you arenít sure how it all works, read our New to Forum? Intro Guide.


    Thanks folks,
Page 1
    • SnowMan
    • By SnowMan 31st Mar 16, 1:15 PM
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    SnowMan
    • #2
    • 31st Mar 16, 1:15 PM
    • #2
    • 31st Mar 16, 1:15 PM
    In the table the maximum weekly pension under the old system should be something slightly above about £280 per week and not £119.30 per week. The £119.30 per week is the maximum basic state pension and not the maximum state pension. To exclude additional state pension is not comparing like with like.

    The losers who will end up with less than £155.65
    ......................
    This is mainly due to the numbers of people who ........ and, critically, those who have been what's known as 'contracted out' of the old state pension in the past
    Please stop perpetuating this myth that those who have been contracted-out are losers, in general they are winners

    The Parliamentary report on the mis-communication of the changes says
    People with periods of contracting out typically gain from the new state pension. That many such people believe wrongly that they are disadvantaged is in part a failure of Government communication.
    In this case the mis-communication is by MSE (not the first mis-communication by MSE on this).

    The article fails to cover how the transitional period works. It needs to explain that everyone has a starting amount at April 2016.

    If this is more than the £155.65pw full single tier pension, then no further accrual is possible after April 2016 (although amounts are still uprated with the triple lock and CPI on the protected amount)

    And if the starting amount is below £155.65pw, then 1/35th of the single tier amount (about £4.45pw) can be added for each post April 2016 qualifying year until the full single tier pension is reached. An example to show how many post April 2016 years were needed to reach £155.65pw would be a good idea.

    A couple of diagrams showing these 2 scenarios would be good.

    There is also a typo of £155.95pw as the full single tier amount at one point.
    Last edited by SnowMan; 31-03-2016 at 1:44 PM.
    I came, I saw, I melted
    • greenglide
    • By greenglide 31st Mar 16, 1:33 PM
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    greenglide
    • #3
    • 31st Mar 16, 1:33 PM
    • #3
    • 31st Mar 16, 1:33 PM
    Presumably MSE count as part of "the press" and "the press" have shown a total lack of understanding or nSP (and pensions in general) or a deliberate move to stir up confusion?
    • GunJack
    • By GunJack 31st Mar 16, 2:08 PM
    • 10,670 Posts
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    GunJack
    • #4
    • 31st Mar 16, 2:08 PM
    • #4
    • 31st Mar 16, 2:08 PM
    I thought it was "Single Tier", not "Flat Rate"?

    Also, male SP age is already at least 67 (well, mine is) so why do you insist on olny mentioning the increase to 66 by 2020?
    ......Gettin' There, Wherever There is......

    I have a dodgy "i" key, so ignore spelling errors due to "i" issues, ...I blame Apple
    • EdGasket
    • By EdGasket 31st Mar 16, 2:23 PM
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    EdGasket
    • #5
    • 31st Mar 16, 2:23 PM
    • #5
    • 31st Mar 16, 2:23 PM
    Looks like the the 'flat rate for everyone' is a con. Anyone contracted out for most of their working life will get a deduction from the 'flat' rate of quite a substantial amount. The argument being 'oh well your private pension will make it up' BUT that wasn't the point of a private pension which was to provide extra income NOT make up the shortfall in BASIC state pension because they changed the rules.

    Well it looks to me as though those contracted out will lose out because with annuity rates so low the private pension will not make up the shortfall in the basic state pension.
    Last edited by EdGasket; 31-03-2016 at 2:26 PM.
    • greenglide
    • By greenglide 31st Mar 16, 2:25 PM
    • 3,284 Posts
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    greenglide
    • #6
    • 31st Mar 16, 2:25 PM
    • #6
    • 31st Mar 16, 2:25 PM
    The term "SPa" (State Pension age) refers to the age at which they reach State Pension age - for me it is 65 (May this year). The term SPa date is used to specify the exact date on which you achieve it.

    Also there are uses such as "Female SPa" which is used for qualifying for bus passes, Winter Fuel Payment etc which is the date on which a female born on the same day would reach SPa.

    It was all simpler in the 1990s!
    • greenglide
    • By greenglide 31st Mar 16, 2:30 PM
    • 3,284 Posts
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    greenglide
    • #7
    • 31st Mar 16, 2:30 PM
    • #7
    • 31st Mar 16, 2:30 PM
    The argument being 'oh well your private pension will make it up' BUT that wasn't the point of a private pension which was to provide extra income NOT make up the shortfall in BASIC state pension because they changed the rules.
    Sorry but the reason for contracting out was because the pension scheme member gave up entitlement to the additional pension (SERPS / S2P) in exchange for the employee and employer paying less NI.

    Since such members didnt contribute to the second pension why should they benefit from the transitional measures to close down the SERPS / S2P schemes?
    • SnowMan
    • By SnowMan 31st Mar 16, 2:35 PM
    • 3,185 Posts
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    SnowMan
    • #8
    • 31st Mar 16, 2:35 PM
    • #8
    • 31st Mar 16, 2:35 PM
    Separately, the new state pension rules will make it very difficult to pass on any additional or second state pension you may have built up to loved ones when you die. The old regime allowed this to take place without too many restrictions
    Another bit that needs a complete rewrite.

    The real change is the removal of virtually all inherited and derived rights under the new state pension except for married women who have been paying reduced (E) rate contributions (for example the ability to use some or all of a spouse or civil partner's contribution record on death, retirement or divorce to gain some entitlement or extra entitlement than that based on your own record only)

    The writer of the MSE article does not understand that this affects both basic state pension and additional pension effectively. The only real relevance of additional pension is that some of the limited protections that apply during the transition are mainly in relation to additional pension.
    Last edited by SnowMan; 31-03-2016 at 2:42 PM.
    I came, I saw, I melted
    • EdGasket
    • By EdGasket 31st Mar 16, 2:46 PM
    • 3,456 Posts
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    EdGasket
    • #9
    • 31st Mar 16, 2:46 PM
    • #9
    • 31st Mar 16, 2:46 PM
    Sorry but the reason for contracting out was because the pension scheme member gave up entitlement to the additional pension (SERPS / S2P) in exchange for the employee and employer paying less NI.

    Since such members didnt contribute to the second pension why should they benefit from the transitional measures to close down the SERPS / S2P schemes?
    Originally posted by greenglide
    Exactly, it was giving up the right to additional pension BUT not the Basic pension. Now they are using contracting out as an excuse to reduce the basic 'flat' pension from £155 to something much less.
    • SnowMan
    • By SnowMan 31st Mar 16, 2:50 PM
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    SnowMan
    Exactly, it was giving up the right to additional pension BUT not the Basic pension. Now they are using contracting out as an excuse to reduce the basic 'flat' pension from £155 to something much less.
    Originally posted by EdGasket
    Someone with 30 qualifying years under the old system to date, and who had always contracted-out, would get the full basic state pension of £119.30pw as a starting amount under the new system, with the additional bonus of being able to accrue further state pension in relation to post April 2016 qualifying years.

    So there is no reduction of the basic pension only the additional pension, and in some cases there is no reduction in the additional pension either because of this ability to 'buy' this back through post April 2016 qualifying years.

    Consider Frosty who has 30 years all contracted-out to April 2016 (and so has earned no additional state pension) and his twin Olaf who has 30 contracted-in years during which he has earned about £36pw of additional state pension say. Assume both have 9 years before they reach SPA (all of which are qualifying years).

    Both will have an eventual state pension of £155.65pw. However Frosty will have his private contracted-out benefits as well, and may have paid lower national insurance up to April 2016. Olaf will have no separate private contracted-out benefits and may have paid higher national insurance.

    Frosty, the contracted-out snowman is the winner.
    Last edited by SnowMan; 31-03-2016 at 3:04 PM.
    I came, I saw, I melted
    • coyrls
    • By coyrls 31st Mar 16, 3:04 PM
    • 1,187 Posts
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    coyrls
    Also, male SP age is already at least 67 (well, mine is) so why do you insist on olny mentioning the increase to 66 by 2020?
    Originally posted by GunJack
    It's not all about you; my (male) SP age is 66 because I will be 66 in 2022.
    • EdGasket
    • By EdGasket 31st Mar 16, 3:12 PM
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    EdGasket
    The gov website says Frosty will get approx £127 instead of £155 due to being contracted out. What if Frosty can't get any further employment after 2016?
    • SnowMan
    • By SnowMan 31st Mar 16, 3:17 PM
    • 3,185 Posts
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    SnowMan
    The gov website says Frosty will get approx £127 instead of £155 due to being contracted out.
    Originally posted by EdGasket
    If Frosty has 30 qualifying years to April 2016, and then achieves 9 qualifying years post April 2016 then he will get £155.65pw. That's a simple fact regardless of his contracted-out past
    What if Frosty can't get any further employment after 2016?
    Frosty should get credits for being unemployed and seeking work, but if he is lazy and just likes sitting outside melting in the sun, then he can buy the post April 2016 years at currently generous rates. The cost of purchasing those extra years will be more than outweighed by the extra contracted-out pension pot and possible past national insurance saving that he has relative to Olaf.
    Last edited by SnowMan; 31-03-2016 at 3:22 PM.
    I came, I saw, I melted
    • greenglide
    • By greenglide 31st Mar 16, 3:22 PM
    • 3,284 Posts
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    greenglide
    What if Frosty can't get any further employment after 2016?
    He may be entitled to pension credit if his occupational / personal pension and other income dont take him above the PC limit.

    What would he have done before nSP came along? He hasnt had his pension reduced in any way.
    • JezR
    • By JezR 31st Mar 16, 3:28 PM
    • 1,582 Posts
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    JezR
    Latest estimates are that under new SP roughly 90% of people who have contracted out in the past will gain and the remaining 10% will be unaffected compared with the old SP.
    • SnowMan
    • By SnowMan 31st Mar 16, 3:36 PM
    • 3,185 Posts
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    SnowMan
    Latest estimates are that under new SP roughly 90% of people who have contracted out in the past will gain and the remaining 10% will be unaffected compared with the old SP.
    Originally posted by JezR
    They've estimated there is only one contracted-out loser and that is greenglide (sorry greenglide)
    I came, I saw, I melted
    • JezR
    • By JezR 31st Mar 16, 3:42 PM
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    JezR
    The GMP disadvantaged is postulated to be small through balancing factors of triple lock extension and extra single rate accrual and the short term updating referred to. Unlikely to be just the one though ...
    • greenglide
    • By greenglide 31st Mar 16, 3:52 PM
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    greenglide
    They've estimated there is only one contracted-out loser and that is greenglide (sorry greenglide)
    But it looks as though the LGPS are going to inflation proof my GMP! I suspect that I may end up better off than I would have been in the inflation proofing as the indexing by the State Pension took into account the COD, AP and the GMP and only started to pay once the AP had been totally offset which could take some time?

    The triple lock on the whole of the nSP amount rather than just the Basic Pension is nice though (I have enough AP to get me a Protected Payment).
    • GunJack
    • By GunJack 31st Mar 16, 10:27 PM
    • 10,670 Posts
    • 8,002 Thanks
    GunJack
    Someone with 30 qualifying years under the old system to date, and who had always contracted-out, would get the full basic state pension of £119.30pw as a starting amount under the new system, with the additional bonus of being able to accrue further state pension in relation to post April 2016 qualifying years.

    So there is no reduction of the basic pension only the additional pension, and in some cases there is no reduction in the additional pension either because of this ability to 'buy' this back through post April 2016 qualifying years.

    Consider Frosty who has 30 years all contracted-out to April 2016 (and so has earned no additional state pension) and his twin Olaf who has 30 contracted-in years during which he has earned about £36pw of additional state pension say. Assume both have 9 years before they reach SPA (all of which are qualifying years).

    Both will have an eventual state pension of £155.65pw. However Frosty will have his private contracted-out benefits as well, and may have paid lower national insurance up to April 2016. Olaf will have no separate private contracted-out benefits and may have paid higher national insurance.

    Frosty, the contracted-out snowman is the winner.
    Originally posted by SnowMan
    looks like I'm Frosty
    ......Gettin' There, Wherever There is......

    I have a dodgy "i" key, so ignore spelling errors due to "i" issues, ...I blame Apple
  • jamesd
    As Snowman wrote earlier, the maximum weekly payout from the old system is more like £260 a week. This piece is repeating the common mistake of equating the flat ate state pension with only the Basic State Pension part of the common system when even a person on a low income for a full working life would get more like £190 a week from the combination.

    "NI years needed for full rate" is wrong, it's not 30 and 35 years. It's 30 years for old full BSP and full working life at high income for full £260 or so rate. For flat rate it's not 35 years unless the whole working life was under the flat rate system, it's usually going to be less initially except for those who were contracted out who may need more.

    This is misleading:

    "even if you reach the full entitlement of 35 years' NI contributions before you reach your state retirement age, you'll still have to keep on paying NI until you reach the official age"

    It's not the 35 years that matters, it's when you reach the flat rate cap. That's likely to be sooner than 35 years for most in the next decade or two unless they spent a long time in a defined benefit pension scheme that was contracted out or not working.

    This is wrong:

    "However, the Government has so far refused to change the speed of the age rises, or make any concessions."

    There was a major concession that reduced the maximum increase time. It's also very unimpressive that MSE appears to be supporting increased gender discrimination and lower state pensions for women.

    Why mention WASPI but not the Collection of Women Against Real Injustice and Inequality of the State Pension (CARIISP) who argue that it is unjust to deny women the flat rate state pension in part because Around 650,000 women reaching State Pension age in the first ten years will receive an average of £8 per week (in 2014/15 earnings terms) more due to the new State Pension valuation of their National Insurance record". WASPI is in fact making arguments that would make most of the affected women worse off, not better off, by causing women to reach state pension under the less generous to most women old system instead of the new one, by making their state pension age before the flat rate came in.

    This is probably an outright falsehood: "Behind it all lay a desire to cut the State’s pension bill". At least for private pension contracting out introduced during the Thatcher years it was more about handing control to individuals as a matter of principle.

    As a straightforward fact it doesn't result in lower state pension cost because all a person who contracted out needs to do is carry on making working or signing on and they can end up with the full flat rate state pension and also the extra personal or employer pension, while the person not contracted out would only get the flat rate.

    This section is irrelevant and misleading:

    "This means that, for the purposes of eligibility, you may not qualify for a full £155.65 despite having what you thought were 35 years of NI contribution.

    What counts is having had 35 years of full NI contribution - not ones where you paid a lower NI rate.
    "

    It is not 35 years that matters, it is when you reach the full flat rate. Since those 70% or so who contracted out are normally winners under the flat rate system it's particularly unpleasant to see this sort of misrepresentation.

    This is incomplete:

    "So, the Government has decided it will deduct a sum from your new state pension - the equivalent of what you missed out on by being contracted out."

    For those who were in a contracted out work defined benefit pension it's mostly right. For those who were contracted out into a personal pension it's mostly wrong because they were never credited with any thing while being contracted out anyway (except during some years early on and under S2P there's still some ASP accrual even when contracted out).

    The whole contracted out section really needs reworking. One of the more persistent myths about the flat rate system is that those who were contracted out are worse off when the opposite is usually going to be true and it'd be nice if MSE didn't reinforce that myth. if I recall the number correctly the official DWP figure is that 90% of those contracted out will end up better off. In the remaining 10% the portion who end up with less state pension are those who are retiring in the next few years who won't have more working time to get to the flat rate cap level so don't end up double dipping like those later on who get both full flat rate and the contracted out money. But even those do end up also with their contracted out pension from employer or personal pension so are probably better off anyway overall.

    This is plain daft:

    "Here's an example of how it can work.

    Bernard's due a £7,000/year state pension (he's at the full state pension rate, plus he has some second state pension)"

    This article is about the flat rate. If Bernard is at the full flat rate level he's on £8,093.80 plus his ASP, not £7,000 including it. And he doesn't have some second state pension, he'd have some additional state pension accumulated via second state pension NI contributions.

    It is good to have both flat rate and ASP in the example because that will be the most common situation for those with a full contracted in working history for some years yet. They will have partly the Triple Lock full flat rate and partly the protected ASP portion above that level with only CPI increases. Though do see greenglide's later note about the name change.

    This is just the author being confused about the state pension pieces, as usual in both the old and new SP articles:

    "the new state pension rules will make it very difficult to pass on any additional or second state pension you may have built up to loved ones when you die. The old regime allowed this to take place without too many restrictions."

    Second state pension contributions are one of the things that produced additional state pension, not something different. All the first sentence needs to mention is additional state pension.

    Beyond that, just what is the basis in truth for that whole paragraph? Normally nothing is passed on when you die under either system but for those relying on a spouse's contributions there are changes, though the detailed rules are fairly fiddly to understand particularly when it comes to some niche transitional protection issues. As Snowman wrote, the BSP is included in this under old system rules. One significant difference in inheritance is extra state pension from deferring, which isn't inheritable under the new rules unless you die while deferring.

    This is pretty silly:

    "The key that defines whether it's worth bothering is how many NI years you already have. HMRC should send notices to people with NI gaps and is developing a website where you will be able to log on and see for yourself. "

    The very next paragraph contains a link to the already existing state pension statement site that will tell you for your whole working life what years count. It's in the Your National Insurance record section and provides details like these examples for some possible years and situations (not real years):

    2015-16 Your record for this year is not available yet
    2014-15 Full year
    1990-91 Year is not full You did not make any contributions this year. It's too late to pay for this year.
    1981-82 Year is not full You have contributions from When you were claiming benefits or unable to work we credited you National Insurance for 41 weeks
    1983-84 Year is not full You have contributions from Paid employment: £31.04 When you were claiming benefits or unable to work we credited you National Insurance for 16 weeks
    Last edited by jamesd; 01-04-2016 at 9:35 AM.
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