State Pension and Contracting out

[Lesleyfool]

I am affected by the change of date when I can receive my pension as I was born in the fifties.

Can someone answer this question for me please as I'm very confused.

I'm talking about the old state pension now. I don't believe that there was a deduction for being contracted out. Am I correct? If so anyone who retired before April 2016 had no deduction even though they were contracted out at some time.

With the new one effective from April 2016 I know that a deduction is made for being contracted out because it affects me.

Just trying to get my head around this pension mess.

Thanks

[swill453]

I think the simple answer to your question is yes. But there are other things to take into account, not least being that the full flat rate pension is now nearly £165 per week. The old basic pension is about £126 per week.

Scott.

[Alaric]

I think the simple answer to your question is yes.

The system of contracting out was that you got an additional State Pension when you were contracted in, with the private pension making up the difference if you had been contracted out. The rules are a tangle, not helped by the State Pension being expressed as a weekly amount whilst GMPs are expressed as yearly. I think there's still an adjustment downwards if you have a GMP although they don't call it GMP.

[mc2fool]

I'm talking about the old state pension now. I don't believe that there was a deduction for being contracted out. Am I correct? If so anyone who retired before April 2016 had no deduction even though they were contracted out at some time.

There was a "deduction" in the sense that if you were contracted out you didn't get any additional state pension for that period, whereas if you weren't you did.

At the very best the additional state pension could be as much as an extra £172 a week, taking your overall state pension from £126pw (basic) to potentially £298pw (basic + ASP). If you were contracted out (always) you'd only get the £126pw. Of course, the private pension you contracted out into should make up the difference.

[vrdiver]

I don't believe that there was a deduction for being contracted out.

Not a deduction as such, but by being contracted out you were not eligible to accrue the Additional State Pension (SSP or SERPS, depending on the year involved). As such, your State Pension (under the old rules) would be less than somebody with the same number of years, but contracted in.

You should be able to get a statement that shows you your pension entitlement under both old and new rules as at April 2016, as well as your current situation, but take a look at https://www.gov.uk/new-state-pension/how-its-calculated to see if this explains your specific situation.

VRD

[Lesleyfool]

Okay.

I think I'm beginning to understand. I have a lot of old pension forecasts which show that I have loads of years contributions of NI.

In these early statements it makes no mention of any serps pension which it wouldn't do if I was contracted out. I had not realised that this was an extra that I didn't have.

I'm pretty sure that my pension figures are probably correct but as I have currently 44 years and still can't get it until I'm 66 I'm just trying to understand it.

The annoying thing is that way back I paid extra NI contributions to secure it under the advice of DWP but that has now given me too many years. It's too long ago to get back either. Unless anyone knows different?

[ursaminortaur]

Okay.

I think I'm beginning to understand. I have a lot of old pension forecasts which show that I have loads of years contributions of NI.

In these early statements it makes no mention of any serps pension which it wouldn't do if I was contracted out. I had not realised that this was an extra that I didn't have.

I'm pretty sure that my pension figures are probably correct but as I have currently 44 years and still can't get it until I'm 66 I'm just trying to understand it.

The annoying thing is that way back I paid extra NI contributions to secure it under the advice of DWP but that has now given me too many years. It's too long ago to get back either. Unless anyone knows different?

Have you got a state pension forecast ?

https://www.gov.uk/check-state-pension

If you haven't then get one. If it isn't the maximum then even though you have 44 years of NI contributions you may still be able to boost it by making further NI contributions either through continued working or by making voluntary contributions. Note if you retire this year then you won't be able to do this since you cannot buy a year of NI contributions for a year during which you are at or above pension age.

http://www.thisismoney.co.uk/money/pensions/article-3627480/Can-pay-extra-NI-state-pension-155-65-week.html

With regard to future years, the key question is whether your starting amount is less than £155.65, regardless of whether it was worked out under the old system or the new system.
If your starting amount is under this rate, then any full year of contributions or credits from 2016/17 onwards will add to your state pension.
The price of voluntary contributions is generally relatively modest compared with the extra pension you get, so as long as you draw a state pension for four or so years then you will get back what you have paid and more.
Unfortunately, you say in your question that you are retiring next March. This means that you reach pension age during 2016/17 and you cannot buy a year of NI contributions for a year during which you are at or above pension age.


Note this article is from May 2017 and the full pension is now more than the £155.65 mentioned in the article.

[Lesleyfool]

Thanks

Yes I have an up to date pension forecast obtained today. I obtain them regularly.

I have three more years to go before I am 66 so I know that the extra can be paid for should I choose to.

There is a lot going on with women's pensions at the moment - not that I expect anything to happen but if it does I don't want to give them any more money until I have to having already obtained 44 years.

Thanks for the clarification. I think I'm wiser now.

[mc2fool]

There is a lot going on with women's pensions at the moment - not that I expect anything to happen but if it does I don't want to give them any more money until I have to having already obtained 44 years.

Understandably, but do be aware that, while you can pay voluntary NICs up to 6 years after, their cost is only fixed for two years, and after that it goes up.

E.g. the class 3 NIC for 2016/17 cost £733.20 and will do until 5-Apr-2019, but if you buy the 2016/17 class 3 NIC after that date it'll cost whatever the cost of class 3 NICs is in the year you buy it.