SERPS

[Bouleversee]

I know one can no longer contribute to SERPS but I was surprised to read in an article in FT Money by Paul Lewis of Money Box that everyone who reaches pension age from Apr 6 2016 will get the same £155.65 weekly state pension. Does that mean that those who were not contracted out during the period one could pay into SERPS will get nothing for those contributions whereas those who were contracted out and paying into a personal pension presumably will have accrued some benefit?

[mc2fool]

I know one can no longer contribute to SERPS but I was surprised to read in an article in FT Money by Paul Lewis of Money Box that everyone who reaches pension age from Apr 6 2016 will get the same £155.65 weekly state pension. Does that mean that those who were not contracted out during the period one could pay into SERPS will get nothing for those contributions whereas those who were contracted out and paying into a personal pension presumably will have accrued some benefit?

No, none of that is correct and either Paul Lewis has got it very wrong or you've misunderstood the article. Got a link to it?

[FanciThat]

I know one can no longer contribute to SERPS but I was surprised to read in an article in FT Money by Paul Lewis of Money Box that everyone who reaches pension age from Apr 6 2016 will get the same £155.65 weekly state pension. Does that mean that those who were not contracted out during the period one could pay into SERPS will get nothing for those contributions whereas those who were contracted out and paying into a personal pension presumably will have accrued some benefit?

No, none of that is correct and either Paul Lewis has got it very wrong or you've misunderstood the article. Got a link to it?

Here's the link https://www.ft.com/content/e38a47d6-f1d ... 4e55513608

Cheers, FT

[mc2fool]

Thanks. No, the statement in the article that "Everyone who reaches state pension age from April 6 2016 with at least 35 years of national insurance contributions gets the same £155.65 weekly state pension " is complete nonsense. Shame on you Lewis!

Very briefly (as I have to go out soon), everyone who reaches state pension age from April 6 2016, and who made any contributions (at all) prior to then will have a "starting amount" at that date that is the higher of the old system (including additional state pension from SERPS, etc) and the new system.

Quite a few people reaching SPA from April 6 2016 who have 30 years all contracted in (on a reasonable salary) will get more than £155.65, whereas quite a lot with 35+ years who were contracted out will get less than £155.65, and everything in-between. How it's all figured has been covered many times on this board and the old TMF equivalent one.

[Bouleversee]

That's a relief. My son has never worked for a firm offering a pension scheme so did make the additional contributions for some years till he became self-employed. I had attempted to find the answer from DWP but although they said these contributions could be used towards achieving the full pension if one hadn't paid in enough years and might make you qualify for it in less than 35 years, I couldn't quite pin them down to confirming that if 2 people worked 35 years and A was contracted out and B wasn't, B would get more pension than A. They suggested my son should ask for a forecast but admitted it wouldn't actually give any breakdown which would show what the SERPS had added. One would have to specifically request that.

Incidentally, I have also read or heard that if one does the forecast online, one is likely to get different figures from paper forecasts. Evidently, DWP is 6 months behind in inputting all the necessary information. It would seem that the way the pension is calculated is extremely complicated. I can't help thinking that the govt. would save itself a heck of a lot of money if it made pensions and taxes much simpler.

[DrBunsenHoneydew]

To be fair, they are simplifying it, but we are in the very complicated transition period.
I have more than 35 years NI service at age 57, but all are contracted out, so I only get less than £120 as it stands, but can increase it by working from 2016 to age 66 and get 9 further years in at the new higher rate, but I don't think I can ever get it up to the full new rate can I? (even though I'm paying over £1000 a week in tax & NI !).

[Bouleversee]

So it's very misleading, then. We were given the impression that that was going to be the basic state pension without taking into account contributions for the additional pension. All smoke and mirrors and give with one hand and take away with another. Some people are in for a shock. SERPS was a good idea for those who didn't want the risk or bother of stock selection. It added quite a chunk to my late husband's pension, from which I am now benefitting. I think many would have been happy to pay more to retain the extra benefit in retirement rather than have to manage a SIPP.

It would be interesting to know whether Dr B H's contracted out payments into a personal pension achieved more or less than would have been achieved in additional state pension had he not been contracted out.

[DrBunsenHoneydew]

It would be interesting to know whether Dr B H's contracted out payments into a personal pension achieved more or less than would have been achieved in additional state pension had he not been contracted out.

I'm pretty sure it did better as it is 'gold-plated' public sector final salary NHS scheme.

[mc2fool]

So it's very misleading, then. We were given the impression that that was going to be the basic state pension without taking into account contributions for the additional pension.

No we weren't. We were never given that impression. I know some people didn't bother to read beyond the headline figure and jumped to that conclusion but that's wrong.

The basic thing to note is that nobody will get less than they thought they would have got before the new system came into effect. Everyone will get at least the amount they would have got under the old system, and maybe more.

[Bouleversee]

It would be interesting to know whether Dr B H's contracted out payments into a personal pension achieved more or less than would have been achieved in additional state pension had he not been contracted out.

I'm pretty sure it did better as it is 'gold-plated' public sector final salary NHS scheme.

Lucky you!

Before starting this thread I should have read last Sunday Times Money Section (it had temporarily disappeared into the pile), where there is an article (I must have read the headline earlier) about the incorrect figures given if one does a pension forecast online. It says that employees can no longer contract out but anyone who did so in the past will receive a basic pension entitlement and a payment from their contracted-out Serps entitlement, or fund. This is known as the contracted-out pension equivalent (COPE) and is paid by the private or workplace scheme they contracted out with. It also says that you need 35 years to get the full new state pension of £155.65 but the amount you will receive is reduced by how long you were contracted out of Serps.

So, unless I have completely lost my marbles, that means that you will only get the full new state pension if you have paid NI contributions for 35 years and never been contracted out and if you have not been contracted out, your contributions are not going to give you any addition to the new state pension. And contracted out members will get the same state pension after 35 years because some of their private pension is going to be pinched to fund the void in their state pension contributions.

Mc2fool -

As I'm 80 and have been in receipt of the state pension for some years, I think I can be forgiven for not knowing the detail of the above and for going by the headlines and the party speak. I doubt if you wouldt have gleaned the above from the budget, though I admit that because of my husband's illness I only gave that cursory attention. However, more to the point, it would be interesting to know how many employed people who will be affected by the changes are aware of how their pension entitlement will be calculated. I'm pretty sure neither of my sprogs will be and that they think they will be getting more than the £155.65 because of not being contracted out because it would not have occurred to them that contributions to a private pension could be clawed back to fund the state one. Can't wait to ask them.

It is, of course, possible that the Sunday Times has got things wrong. In view of the apparent chaos at DWP and HMRC, one wonders whether one can ever be sure one is getting the right pension, never mind the right forecast.

[mc2fool]

I have more than 35 years NI service at age 57, but all are contracted out, so I only get less than £120 as it stands, but can increase it by working from 2016 to age 66 and get 9 further years in at the new higher rate, but I don't think I can ever get it up to the full new rate can I? (even though I'm paying over £1000 a week in tax & NI !).

Yes you will. With 30+ years all contracted out your starting amount at 6-Apr-16 will be £119.30. Each additional year of contributions from 2016 onwards (whether by working or by voluntary NICs) will boost that by £155.65/35. So, 8 more years will get you to £154.88 and the 9th year will get you the extra 77p to get you to the full new rate amount.

It would be interesting to know whether Dr B H's contracted out payments into a personal pension achieved more or less than would have been achieved in additional state pension had he not been contracted out.

I'm pretty sure it did better as it is 'gold-plated' public sector final salary NHS scheme.

That's nothing to do with it. The amount of GMP (Guaranteed Minimum Pension) you get as a result of SERPS is revalued at a statutory rate, being by RPI/CPI (it changed over the years) while still active, which was the same as the ASP, and by either national earnings or statutory fixed rates, depending on the scheme rules, in deferment, both of which have, with a few rare exceptional periods, been better than the ASP, often significantly so.

[mc2fool]

Before starting this thread I should have read last Sunday Times Money Section (it had temporarily disappeared into the pile), where there is an article (I must have read the headline earlier) about the incorrect figures given if one does a pension forecast online.

Let's no over-generalise here. The online system gives some incorrect figures, not all. Some are not actually incorrect, per se, but just not yet up to date. Those are easy to spot as the page will say it's according to your NI record up to 5-Apr-15. The others, which are incorrect, only affect some contracted out folks and are to do with incorrect COD (the flip side of GMP) revaluation rates and are all but unspottable.

Each, of course, means (as I've often said in this board and its predecessor) that one should get a paper statement to be sure. I have and in my case the online figures are the same as the paper ones (and I have been contracted out).

It also says that you need 35 years to get the full new state pension of £155.65 but the amount you will receive is reduced by how long you were contracted out of Serps.

No, that's wrong. How long you were contracted out has nothing to do with it.

So, unless I have completely lost my marbles, that means that you will only get the full new state pension if you have paid NI contributions for 35 years and never been contracted out and if you have not been contracted out, your contributions are not going to give you any addition to the new state pension.

No, as I've already explained, that's wrong. Go back and reread the fourth post in this thread.

And contracted out members will get the same state pension after 35 years because some of their private pension is going to be pinched to fund the void in their state pension contributions.

The first half of that is also wrong -- and there is no "pinching" going on here 'cos that was exactly the deal with contracting out, right from the start. That's what contracting out meant, that the private scheme would provide your "additional" pension rather than the state.

it would be interesting to know how many employed people who will be affected by the changes are aware of how their pension entitlement will be calculated.

Probably very few, but that'll be 'cos the vast majority of people seem to have a total mental block at even the mention of pensions. It's not 'cos the information isn't out there, at least for the basics. https://www.gov.uk/new-state-pension/how-its-calculated

The COPE (comprising of COD+RDA) is pretty difficult to calculate, unless you're a pensions geek, but you don't need to, it's simple enough to get a state pension statement, which will tell you the COPE (and you can cross check it with your private pension scheme if you wish), and having got that projecting forward is simple primary school level arithmetic.

[swill453]

Please don't ever leave us, mc2fool! Otherwise this board will turn into a paranoid Daily Mail style ranting platform.



Scott.

[StepOne]

Please don't ever leave us, mc2fool! Otherwise this board will turn into a paranoid Daily Mail style ranting platform.

Agreed!

StepOne