Contracted out for total employment history

Pollycat wrote: »

Morning
I have very recently qualified for my state pension.

I have the full 35 qualifying years and was aware that I wouldn't get the full state pension of £164.35 per week as I'd been contracted out for the whole of my working life.

I can't seem to find any information about how much my state pension would be/has been reduced because of this.

The amount I'm getting is just over 77% of the full state pension and I'd like to know if this is correct.

Thanks

£126.87 by any chance? It looks like you have a slightly out of date forecast as that would be your full old SP at 2017-18 rates, plus your 2016-17 stamp, again at last year's rates.


Did you reach SPA before or after the end of the 17/18 tax year? If after then if you get a new forecast it should say £135.34 or thereabouts (assuming you were still working last year). If you reached SPA before the end of the tax year then £130.64

Okay, that's either the old state pension plus about £1 of SERPS / S2P or the new one less COPE.
Either way you should definitely look at paying voluntary NICs for 2016/7 and 2017/8. A one off cost of roughly £1,500 to increase your SP by £489 a year is an absolute bargain.

!!!8220; Okay, that's either the old state pension plus about £1 of SERPS / S2P or the new one less COPE.
Either way you should definitely look at paying voluntary NICs for 2016/7 and 2017/8. A one off cost of roughly £1,500 to increase your SP by £489 a year is an absolute bargain.
Originally posted by Triumph13 !!!8221;

Pollycat wrote: »

This is probably a very silly question but...
If I have the full 35 qualifying years - and therefore don't have any gaps - how can I pay voluntary NICs?

But you don't have 35 full qualifying years for the new single tier pension - so you will receive the old basic State pension instead.


Don't even think about paying for any post age 50/pre 2016 years as that won't affect your pension at all. However, as Triumph says, you would benefit by paying for your full post 2016 years - ie, 2016/17 and 2017/18.

I'm in a similar situation, as I retired at 60 having always been contracted out. In my case, my foundation amount was more than the basic State pension because I have some post 2002 SP2 top ups. However, I have the scope to 'buy' 4 years of post 2016 voluntary NI contributions, which will take me very close to the maximum State pension.

Still can't get my head round the post 2002 SP2 top ups, though - this was intended to help the low paid, even if they were contracted out - but I was only 'low paid' because I chose to work part time.

The 35 years applies to those who spent their whole working lives in the single tier system which started on 6 April 2016. So nobody today or for the next 33 or so years is certain to be covered by it.

People reaching state pension age have their state pension entitlement worked out in two parts:

A. The portion up to 6 April 2016. This is calculated using both the old rules and the new rules and you get the higher of the two as your "foundation amount". For people with lots of contracted out years it's normally the old rules calculation that ends up being used; this pays 1/30th of the basic state pension for each year that counts, capped at 30, plus a small amount of earnings-related additional under S2P if contracted out, more if not under both S2P and the previous SERPS.

B. Starting from 6 April 2016 each extra year adds 1/35th of the single tier pension to the foundation amount until you reach its cap of 164.35.

Your situation is fairly straightforward:

A. 35 years and always contracted out so we can be certain that your foundation amount is based on the old rules and that there is no increase possible from buying years through 2015/16 inclusive. Don't buy any of these years, it gains you nothing.

B. Your state pension is to be 127.30 so we can be certain that each year you buy from 2016/17 onwards will get you an increase of 164.35/35 = 4.69 a week.

Cost is 14.10 a week for 2016/17 and 14.25 for 2017/18. 733.20 and 741 a year. Ignoring the triple lock increases and income tax the break even times are 3.01 and 3.04 years.

If you expect to live for at least a hair over three years plus income tax effect buy the 2016/17 and 2017/18 years.

It'll take a little while for the system to catch up with the change but the extra money is due from the time you got your state pension and you'll get an extra payment to make up for the weeks you were short.

Triumph13 wrote: »

You do need to live slightly longer if you are paying tax. 3.74 / 3.78 years for a 20% taxpayer and 4.99 / 5.04 years for anyone paying 40% tax in retirement .

True, pretty likely to still live long enough.