State Pension Forecast

[deano12]

Hi, Like many on here,l would imagine l,ve just received my Forecast,even though its 8 years away????? Reading it l,m not going to be getting the full amount,as l was " contracted out" ? Says l,ve to contribute another 4 years,though to get the maximum amount,You have to have 35 years worth. l,ve got 39? l presume this is because of paying into the workplace pension? lt states my COPE per week is estimated at £40 weekly, and this should be paid by my pension provider. l won,t hold my breath for it!!! I was never told about any of this ever. l presume everyone is in the same boat. Cheers Deano

[RobertT]

Hi, Like many on here,l would imagine l,ve just received my Forecast,even though its 8 years away?????

Unless something has changed you have to request a state pension forecast, they don’t usually automatically send them out as far as I know. But it’s always a good thing to do because it helps your retirement planning and tells you how to increase your state pension, if you need to.

Reading it l,m not going to be getting the full amount,as l was " contracted out" ? Says l,ve to contribute another 4 years,though to get the maximum amount,You have to have 35 years worth. l,ve got 39? l presume this is because of paying into the workplace pension? lt states my COPE per week is estimated at £40 weekly, and this should be paid by my pension provider. l won,t hold my breath for it!!!

The whole point of contracting out of the state second pension, was that your works scheme would provide at least as much as you’d be losing from the state.

But with the introduction of the ‘new state pension’ in April 2016, you can now have the benefit of the RM contracted out pension and still build up the full rate of the state pension, currently £159.55, by paying NIC's for a few extra years. The best of both worlds!

You may also remember that our National Insurance rates were increased from the contracted out rate of 10.6% to the normal 12% last April. so if we were paying in less, then it's reasonable to assume we might also get less out.

Personally, before the state pension changes and based on the current amount I quoted above, the maximum SP I would have got was only about £130 per week (including some S2P I’ve built up). With the new scheme I should have built up the full rate by the time I’m 55 and that’s on top of my contracted out pension off RM.

I was never told about any of this ever. l presume everyone is in the same boat. Cheers Deano

I have a plan guide from 2000 which states we’re contracted out of the state second pension and that we’re building up a guaranteed minimum pension instead. The current plan guide also says the same! It’s available on the pensions website if you haven’t got a copy yourself.
The information is there if you want to read it.

[deano12]

Cheers for the reply Robert. l finished on IHR in 2013. l work 3 days a week 18 hours,don,t make enough to pay tax or NI. l received a letter last year stating how much state pension l would get. £159 in 7 years time!!! Then l get another one last week stating l,m 4 years short and would only get £144!!!. l,ve got 39 years of NI??? Its all very confusing to me,obviously that figure of £40 estimate l.ll never see from Royal Mail. l,ve wrote a letter to DWP asking them why they say l,m 4 years short. l,ve got 7 years to sort it ha ha.Once again thanks. Deano

[RobertT]

Before April 2016 everyone’s state pension was made up of two elements:

1. Basic state pension, which is accrued by earning qualifying years of NIC’s.
2. State Second Pension, sometimes known as Additional State Pension, SERPS or S2P. Which accrued on the basis of how much you earn and so how much NIC’s you paid. So high earners would earn more S2P than someone on the minimum wage.

Some employers including RM offered pensions that were contracted out of the S2P, so we were only building up our basic state pension entitlement. But in return our RM pension would pay at least as much as we would have got had we been contracted in to S2P.
I see no reason why you wouldn’t get that amount from your RM pension – it forms part of your standard entitlement based on your working time with RM!

From 6th April 2016 the old arrangement was replaced by the ‘new state pension’.
Based on your entitlement on that date you were given a ‘starting amount’ of pension, which will be made up of Basic State Pension and any S2P you accrued from previous jobs, minus any COPE amount for being contracted out. But the minimum starting amount will be at least as much as what you would have got under the old system.

I obviously can’t say why you’ve had two different quotes from DWP. However you may well have paid NIC’s for 39 years, but some of that time you were contracted out and so paying at a lower rate, hence the COPE reduction.

From the above date onwards everyone now builds up state pension on the basis of 1/35th of the full entitlement(currently £159.55) for each year you’re building up NI credits. So about £4.55 for each qualifying year. While your starting amount will rise along with any annual increases in the state pension.

The fact that you don’t pay NIC’s doesn’t necessarily mean you’re not still building up your state pension! You only need to earn a minimum of £113 per week to accrue NI credits. It’s not until you earn £157 that you actually start paying NIC’s. Info: https://www.gov.uk/national-insurance/overview" onclick="window.open(this.href);return false;

[deano12]

Cheers Robert. l understand things a lot better now. Much appreciated Deano