PSE and State Pension?

[meercat]

Does anyone know how the PSE scheme will effect ones NI contributions in relation to your State Pension amount?

So could going into the scheme (for some) negatively impact on the amount of State Pension someone receives on retirement by reducing their NI Contribution factor? I believe the amount of your State Pension is partly determined by how much NIC you have paid in your life-time?

[RobertT]

The way the state pension is worked out is quite complicated and will get even more complicated from April 2016 when the ‘new state pension’ is introduced. But part of that change means that from that date when contracting out of the State Second Pension ends, members of the RMPP will actually start to build up more state pension entitlement than before, hence the increase in NIC’s. PSE is just a way to reduce that increase.

To put it simply, as long as you earn enough to pay NIC’s, you’ll be building up your state pension.

[meercat]

Thanks Robert, by that I take it there is no way anyone will be worse off when they retire by having accepted this PSE.

[RobertT]

Members of the RMDCP will see a very minor reduction in the amount of Additional State Pension they may get, as detailed in the guide we all received. But at about £1.80 per year over their retirement, it’s negligible and will be more than made up for by what they save by participating in PSE.

RMPP members will actually be building up more state pension than before thanks to the increased NIC’s.

It will have no effect on the amount of RM pension you’re likely to get.

[meercat]

Thanks. The guide made my head spin so forgive me for asking here.

Looks like the only significant downside for some is the reduction in basic pay (as opposed to take-home pay) which will effect a mortgage or loan application.

[RobertT]

Thanks. The guide made my head spin so forgive me for asking here.

I agree, I think a lot of the ‘guides’ we’ve had over the last few years concerning pensions, shares and now PSE have been particularly badly written.

Looks like the only significant downside for some is the reduction in basic pay (as opposed to take-home pay) which will effect a mortgage or loan application.

But even that shouldn’t be a problem as detailed on page 18 of the guide.

[arnold cheshire]

Thanks. The guide made my head spin so forgive me for asking here.

Looks like the only significant downside for some is the reduction in basic pay (as opposed to take-home pay) which will effect a mortgage or loan application.

it wont affect you for mortgage application has RM will provide the full yearly wage to banks etc

[meercat]

Thanks. The guide made my head spin so forgive me for asking here.

Looks like the only significant downside for some is the reduction in basic pay (as opposed to take-home pay) which will effect a mortgage or loan application.

it wont affect you for mortgage application has RM will provide the full yearly wage to banks etc

Well that would be a decision for the bank/loan arranger concerned to make and I don't know their policies.

[arnold cheshire]

Thanks. The guide made my head spin so forgive me for asking here.

Looks like the only significant downside for some is the reduction in basic pay (as opposed to take-home pay) which will effect a mortgage or loan application.

it wont affect you for mortgage application has RM will provide the full yearly wage to banks etc

Well that would be a decision for the bank/loan arranger concerned to make and I don't know their policies.

rm will give full details of your full gross pay before pension just like they do now

[arnold cheshire]

Thanks. The guide made my head spin so forgive me for asking here.

Looks like the only significant downside for some is the reduction in basic pay (as opposed to take-home pay) which will effect a mortgage or loan application.

it wont affect you for mortgage application has RM will provide the full yearly wage to banks etc

Well that would be a decision for the bank/loan arranger concerned to make and I don't know their policies.

there will be no change for mortgage applications

[arnold cheshire]

do low earners below 10600 pay national insurance ?

[RobertT]

do low earners below 10600 pay national insurance ?

My understanding is that if you earn less than £112 per week your pay doesn't get assessed for NIC's and that will affect your entitlement to state pension and other benefits like Job Seekers Allowance, etc.

Earn between £112 and £155 per week and you're assessed for NIC's but you don't pay them. It's only when you earn over £155 per week that you actually start paying.

[arnold cheshire]

do low earners below 10600 pay national insurance ?

My understanding is that if you earn less than £112 per week your pay doesn't get assessed for NIC's and that will affect your entitlement to state pension and other benefits like Job Seekers Allowance, etc.

Earn between £112 and £155 per week and you're assessed for NIC's but you don't pay them. It's only when you earn over £155 per week that you actually start paying.

thanks Robert t