SP Forecast Not adding Up

I spoke to HMRC (Contracted-out Section) yesterday. The current situation at HMRC seems not dissimilar to the situation with our roads - full of pot holes.

The conversation degenerated into farcical on occasion. Luckily I am not a kick-the-cat kind of person.

Tax Officer (TO): "We issued a letter regarding 2004/2005 and 2005/06 in August last year".
Me: "What letter? I have received zero communication from yourselves".
TO: "Oh, didn't you? We confirmed that company X paid the extra NIC due on your refunded pension contribution in December 2005. Our records have always shown this."
Me: "Huh? That isn't what I was told by DWP. Last year their records showed that I am contracted-out by company X for that period".
TO: "I don't know what records they are working from".
Me: "They told me that they worked from records that you sent them".
TO: "You have always been recorded as contracted-in for that period of employment. We haven't updated that year".
Me: "But DWP thinks I was contracted-out and they are responsible for calculating my COPE. If they are working from different records then my SP will be reduced by too much COPE."
TO: "I will send you a detailed record of your history".

That was just one example.

She also told me that I was only recorded as self-employed from April 98 through October 99 and that I must have advised them of this in order for it to be recorded (not so and not so). Then, later in the conversation, contradicted herself by saying that I was contracted-out by company Y for the same period and have a full Class 1 NIC record for years 98/99 and 99/00.

I am still recorded (by HMRC and DWP) as having been employed by organisation Z for the entire 97/98 tax year, and contracted-out into their DB scheme. I was actually employed by them for around 6 weeks at the start of that tax year and they refunded my pension contributions when I left service. I actually joined company Y in October 97 and was contracted-out into their DC scheme from then until I left service in October 99. I became self-employed (and advised HMRC to that effect at the time) in November 99, and remained self-employed until 2001.

HMRC do not appear to have any record of my employment with company Y for the 97/98 tax year and that year is therefore shown as non-qualifying. They don't seem to know whether I was employed by company Y or self-employed (or both) for the period Apr 98 thru Oct 99 (I was actually only employed by company Y). TO seemed completely baffled when I challenged her conflicting information and it was difficult to establish whether she was reading the information correctly.

To add to the fun she then started waffling about tax year 2001/02, This was an entirely new issue. I thought DWP's records were correct for that year. It seems that HMRC have a query on this year. I am shown as being contracted-out to company A's DB scheme from April to October (here we go again).

I was a self-employed contractor for company A for a longish period and then seamlessly became an employee for some months in tax year 2001/02. I was unaware that I had been enrolled into their DB scheme. No idea whether they refunded any pension contributions when I left service and, according to HMRC, they didn't pay any extra NI to contract me back in.

I have never received any communication from company A about deferred benefits.

There is a theme running through many of my errors. Exiting a DB scheme after less than two years' membership more-often-than-not resulted in organisations refunding pension contributions but failing to subsequently pay the extra NIC they had previously claimed under SERPs. The result being that periods of contracting-in are incorrectly recorded by both HMRC and DWP as contracted-out.

So, where am I now? Still up a gumtree apparently.

I will be checking HMRC's written schedule when it appears in around 8 weeks but it seems that, according to their current records (which, apparently, differ from those held by DWP):

1) Tax years 88/90 and 89/90 are correct (NIC and COPE).
This covers the period when (according to DWP) I was contracted-out to two pension schemes concurrently after a company takeover. I was actually a member of only one scheme. I believe that my COPE should now be reduced as a result of this correction.

2) Tax year 97/98 still shows that I was employed (and contracted-out) by organisation Z throughout the entire tax year (actually employed by them for 6 weeks). HMRC has no record of my NIC and COPE for company Y for that tax year. This explains the pittance recorded in NIC. I communicated with organisation Z (a member of the LGPS) last year. So far they have not refunded the NIC due to HMRC, nor advised HMRC that I was not employed by them for the whole tax year. I assume that this organisation's false reporting has muddied the waters with respect to my starting date with company Y.

I have been asked by HMRC to provide P60/payslips for company Y for 97/98 if I wish to 'prove' my earnings and NIC. As this was paid under PAYE I am a tad perturbed that our tax system appears to have reduced to third-world status.

As Simple Soul kindly pointed-out, even if I am (correctly) credited for that year it will make zero difference to my starting amount as I had 30 years net of 97/98 in 2016.

This 30-year record was achieved courtesy of voluntary top-ups paid on three tax years before 2015. I am therefore out of pocket to the tune of one year's voluntary payment (Class 3?). I would not have paid had I known that 97/98 had been excluded from my qualifying years.

However, my earnings and NIC were much higher for company Y than organisation Z during 97/98. Am I right in thinking that if the COPE calculation is based only on Y's paltry NIC then it will be less than if X's correct amount is included? If that's the case then the offset between the two (and the marginally higher nSP that would result) could, over time, balance the wasted top-up I made. I am tempted to leave well alone for this tax year, and also write-off the refund I am due for the extra year's voluntary payment. The effort required to sort-it may outweigh any benefit to me and I could end up with less SP and no refund.

3) Tax year 2001/02 is a new issue. HMRC have a query next to this year but appear to have taken zero action to investigate. Obviously HMRC and DWP wish to keep me busy throughout this summer correcting others' mistakes.

HMRC records state that I was contracted out into company A's DB scheme from April through October. Now, I'm pretty sure that my status as employee didn't run for 6 months. I believe that I switched from self-employed in around May and left sometime in August. I think it highly unlikely that I have any deferred benefits under their pension scheme and, even if I do, then it would only cover a period of about 3 months so any pension would be about 2p per year. However, company A have claimed reduced NI contributions for 6 months and I am shown as contracted out for the same period.

I will be contacting company A's pension administrator to see whether I have any deferred benefits and over what employment period. Any discrepancy in their favour, and at my and taxpayer expense, will be reported to HMRC.

The false reporting of NI and SERPS seems systemic.

4) HMRC's record of employment with company X for tax years 04/05 and 05/06 reconcile to my records and also to records held by company X. Company X is the only organisation to have correctly reported and paid NI following an exit from a DB scheme with repayment of contributions. I am tempted to name them so any ex/current employee reading this is aware that X is run professionally. However, HMRC failed to advise DWP of X's Dec '05 payment and so DWP still have me recorded as contracted-out.

I will be contacting DWP again after I receive HMRC's records to try and ensure that the left-hand matches the right-hand - which I very much doubt.

By the way, TO also stated: "Why are you concerned now? Everything will be correct when you claim your state pension. You have several years yet". I barely suppressed a long cackle of manic laughter. Why she thinks these errors will self-correct is a mystery. I suspect it is more a case of kicking my complicated case down the line until it can't be kicked any more.

I can imagine the very, VERY long delay in payment of my SP if all these errors are still o/s in 2025.:eek:

Thanks for the reality check molerat.

molerat wrote: »

Will a decreased COPE amount affect your April 2016 starting amount ?

Yes, my starting amount will increase.

molerat wrote: »

Will any added pre 2016 years affect your starting amount ?

No, but I topped-up one additional year prior to 2016 unnecessarily thanks to HMRC's under-recording of Class 1 NIC in 97/98 tax year.

molerat wrote: »

Will there be any SERPS / S2P addition to your starting amount ?

Only if HMRC include the correct SERPS for 97/98. This is the only year in which SERPS is currently under-recorded by HMRC. All other errors overstate SERPS.

molerat wrote: »

As you are on track to get the maximum anyway do your plans going forward preclude that ?

I am only on track if I pay Class 3 until the max years are reached. If my COPE deceases then the starting amount will increase and I may need less years to reach the max. I am retired, have zero earned income, and have no plans to work again. Therefore any extra years required will be purchased directly by me. Less years = less Class 3.