The Lemon Fool

Bouleversee wrote:All that is beyond my comprehension. Although my state pension is paid as a lump sum, the basic pension (old rate) is calculated separately from the SERPS entitlement and they go up at different rates. I don't see why they should and nor do I see why those who didn ' t contract out should be penalised. You would think it would be the other way round, especially as those who contracted out can leave whatever unused benefits which accrued in a pension plan to heirs tax free. The difference between old and new basics is already significsnt and will go on compounding indefinitely. How did the govt. get away with that?

The advantage is for those who were contracted in who reached their NRA after 2016 since their S2P/SERPS was rolled into the new "flat rate" system (upto the maximum under the new system) which was then subject to the triple lock. (Anything which couldn't be rolled into the new "flat rate" pension because it would have taken them over the maximum then being designated as an additional protected pension which, like S2P/SERPs payments for those reaching the NRA before 2016, only then rises with inflation).

There was no extra advantage for those contracting out as they hadn't built up any S2P/SERPs for those years they were contracted out.
(The 2016 starting amount was calculated as the maximum of what one would get under the old system and under the new system but with a large reduction applied called COPE for the new system calculation if you had been contracted out. This removed any possibility of someone contracted out getting any pseudo S2P/SERPS addition to their new "flat rate" pension ie if someone had always been contracted out then their 2016 starting amount would have been the old basic pension that they had built up).

Bouleversee wrote:All that is beyond my comprehension. Although my state pension is paid as a lump sum, the basic pension (old rate) is calculated separately from the SERPS entitlement and they go up at different rates. I don't see why they should and nor do I see why those who didn ' t contract out should be penalised. You would think it would be the other way round, especially as those who contracted out can leave whatever unused benefits which accrued in a pension plan to heirs tax free. The difference between old and new basics is already significsnt and will go on compounding indefinitely. How did the govt. get away with that?

Lorna, in addition to the basic state pension, you should be getting "Additional Pension" based on SERPs and probably Graduated Pension. Presumably on your late husband's record. If he (or you) were contracted out, you will see a Contracted-out deduction.

The Basic State Pension is indexed by reference to the Triple Lock, so that is the higher of CPI inflation in September, Wage inflation in April and 2.5%. The others are indexed by reference to CPI inflation alone. The ratio od "old" and "new" should stay the same, as both are indexed by the same measure.

I might add that, because of SERPs and despite being partially contracted out, I get considerably more than the "New" pension. Had I not been contracted out, I would be getting about £360 per week. I happened to get to pension age at precisely the right moment in 1998.

TJH

tjh290633 wrote:

Bouleversee wrote:All that is beyond my comprehension. Although my state pension is paid as a lump sum, the basic pension (old rate) is calculated separately from the SERPS entitlement and they go up at different rates. I don't see why they should and nor do I see why those who didn ' t contract out should be penalised. You would think it would be the other way round, especially as those who contracted out can leave whatever unused benefits which accrued in a pension plan to heirs tax free. The difference between old and new basics is already significsnt and will go on compounding indefinitely. How did the govt. get away with that?

Lorna, in addition to the basic state pension, you should be getting "Additional Pension" based on SERPs and probably Graduated Pension. Presumably on your late husband's record. If he (or you) were contracted out, you will see a Contracted-out deduction.

The Basic State Pension is indexed by reference to the Triple Lock, so that is the higher of CPI inflation in September, Wage inflation in April and 2.5%. The others are indexed by reference to CPI inflation alone. The ratio od "old" and "new" should stay the same, as both are indexed by the same measure.

I might add that, because of SERPs and despite being partially contracted out, I get considerably more than the "New" pension. Had I not been contracted out, I would be getting about £360 per week. I happened to get to pension age at precisely the right moment in 1998.

TJH

Thanks, Terry. Guy was never contracted out and my pension does include all those extras. Presumably the increase in the SERPs component will be higher than usual this year as CPI is up quite a lot. It doesn't make much difference to me as I have other income but it might to others and I was just trying to understand what seemed to be a rather unfair arrangement. Perhaps I am just being thick. However, duly reprimanded, I will leave it there.

Bouleversee wrote:I should have thought a state pension forecast was pretty useless since the pension changes every year. Here are the latest figures for next year:

https://www.lovemoney.com/news/61140/ho ... e1headline

In short, £141.86 p.w. for the old; £185.17 p.w. for the new.

Being rather ancient, I get the lower rate. I never did understand why older people got less than younger people on retirement

That'll be the Best Deal specifically for David Willets's privileged generation. You older folks get your deal, while younger folks lose out on some of your years of the freebie. Note that younger folks include my own generation (born early 1960s) who haven't shared Willets's good fortune but have been scapegoated for it when he lumped us in alongside himself as "boomers" (a term I first heard back when I started school age 5, and the hordes of then-teenage kids at the big school were quite scary on my way to school).

Having said that, isn't your deal rather better than that headline rate, in that you have SERPS/S2P to add to it? Quite apart from the range of perks like bus pass, winter fuel payment, etc - that amplify the loss of those extra years.

[edit] Sorry Terry, didn't see your moderator message until after posting.

Whilst I was working there were lots of people moaning about the 2016 changes and how it was so unfair that they were not going to receive a full state pension based on their pension statement (which they didn’t understand) despite having made NI contributions for the full number of years.

There was always a deafening silence when I pointed out that they had been contracted out and had saved on NI contributions prior to 2016, and unlike those who were contracted in, their post 2016 NI contributions would increase their pension up to the full New State Pension anyway within the few years that they were intending to work anyway.

The conclusion I drew was that most people know damn all about their pension entitlement but most people like a good moan, even if it is about something they don’t know about.

AF62 wrote:Whilst I was working there were lots of people moaning about the 2016 changes and how it was so unfair that they were not going to receive a full state pension based on their pension statement (which they didn’t understand) despite having made NI contributions for the full number of years.

The conclusion I drew was that most people know damn all about their pension entitlement but most people like a good moan, even if it is about something they don’t know about.

Yes. However, I am prepared to let people off the hook on this one (by and large!). Because:

1. The SP system had, over the years, become genuinely complicated. Most people had little reason to investigate it in any depth. You really could not understand it by simply 'understanding it'. You would need instruction about it: Mine was via 'The Which Guide to Pensions' - Jonquil Lowe, 2nd Ed. April 1997

2. The New State Pension was, in the words of Ros Altmann, "Oversold" - Didn't the boy George claim "This is the biggest rise in the State Pension for a generation"?
Most of the press led with headlines about the great "New Flat Rate Pension" (mis)leading most prospective pensioners to conclude they were all going to get the same amount from the off.

Loads of people were initially disappointed or surprised to find they were "getting less than..." and it "Wasn't fair!" Usually(!) when it was explained they calmed down and more or less understood it. However (as ever) there are/were a hard core of "It snot fair!" who refused to understand the explanation - because they didn't want to. These are likely the people you describe as just liking a good moan.

And in practice, with the new SP, there will be individual winners and losers.

XFool wrote:

AF62 wrote:Whilst I was working there were lots of people moaning about the 2016 changes and how it was so unfair that they were not going to receive a full state pension based on their pension statement (which they didn’t understand) despite having made NI contributions for the full number of years.

The conclusion I drew was that most people know damn all about their pension entitlement but most people like a good moan, even if it is about something they don’t know about.

Yes. However, I am prepared to let people off the hook on this one (by and large!). Because:

1. The SP system had, over the years, become genuinely complicated.

Indeed. By contrast, compare to the US system which, as far as I can tell from my wife's SSI statements, has just two rules:

1) If you work and contribute for more than 10 years, then you are entitled to a state pension. Otherwise you are not.

2) The amount of that pension is related 100% to your average earnings over the period in question, subject to a cap (of about £3,000 a month).

It really can be that simple, along with not stealing NI/SSI contributions to fund other pet political projects and welfare entitlements.

mc2fool wrote:

monabri wrote:people who make investments for themselves or others - but not as a business and without getting a fee or commission

You'd think that'd be an obvious one for folks on these boards but I don't recall anyone here saying they'd taken that route. Take a dig through this board to see what others have done.

I have just done it - full details here - viewtopic.php?f=49&t=32121&p=529010#p529010

AF62 wrote:

mc2fool wrote:

monabri wrote:people who make investments for themselves or others - but not as a business and without getting a fee or commission

You'd think that'd be an obvious one for folks on these boards but I don't recall anyone here saying they'd taken that route. Take a dig through this board to see what others have done.

I have just done it - full details here - viewtopic.php?f=49&t=32121&p=529010#p529010

Congratulations, you are the second (declared at least) TLF guinea pig for this! (bwel earlier in the linked thread was the first).

Do let us know if any gotchas spring up in future.

mc2fool wrote:

AF62 wrote:

mc2fool wrote:

monabri wrote:people who make investments for themselves or others - but not as a business and without getting a fee or commission

You'd think that'd be an obvious one for folks on these boards but I don't recall anyone here saying they'd taken that route. Take a dig through this board to see what others have done.

I have just done it - full details here - viewtopic.php?f=49&t=32121&p=529010#p529010

Congratulations, you are the second (declared at least) TLF guinea pig for this! (bwel earlier in the linked thread was the first).

Do let us know if any gotchas spring up in future.

The 'gotchas' seemed to be that the HMRC call centre teams are not quite sure how to set it up, with the issues detailed in the other thread.

And although I had received the confirmation of registering, and then the withdraw of the requirement to submit self-assessment returns, I wanted to wait until we had actually received the NI payslips before confirming 'success' prematurely.

Obviously now I will in due course to see that the payment has been applied to my NI record, and hopefully nothing more now needs to be done for next year and the year after (we both needed to make three more years of payments to get the full new state pension).

ursaminortaur wrote:Upto, I think 2010, the requirement was for 44 years for a man (and possibly 39 for a woman).

Quite: the 30 years requirement was a short-lived and typically extravagant example of Brownbollocks.

I had made 45 years of contributions, it turned out. So I subsidised all those 30 year skivers and lead-swingers.

Kantwebefriends wrote:

ursaminortaur wrote:Upto, I think 2010, the requirement was for 44 years for a man (and possibly 39 for a woman).

Quite: the 30 years requirement was a short-lived and typically extravagant example of Brownbollocks.

I had made 45 years of contributions, it turned out. So I subsidised all those 30 year skivers and lead-swingers.

So you'll be pleased to learn I was one of those "30 year skivers and lead-swingers."

Kantwebefriends wrote:

ursaminortaur wrote:Upto, I think 2010, the requirement was for 44 years for a man (and possibly 39 for a woman).

Quite: the 30 years requirement was a short-lived and typically extravagant example of Brownbollocks.

I had made 45 years of contributions, it turned out. So I subsidised all those 30 year skivers and lead-swingers.

Nah, doesn't work like that, does it ...