State pension

[prowler]

Just wondering if anyone has retired recently and is on the new state pension, and how much they are getting due to the fact we were opted out of the full pension?

[RobertT]

The state pension is a very individual thing based on your own National Insurance contributions over your working life, so it’s largely irrelevant what other people are getting.
You can find out what your entitlement is likely to be, including any reductions for being contracted out, by getting a state pension statement: https://www.gov.uk/check-state-pension" onclick="window.open(this.href);return false;

[GEZ61]

The pre 2016 State pension for payment of the basic state pension was based on 30 years national insurance contributions.
Those on defined pensions were contracted out from 1978 to 2016 have the chance to ask for a forecast from HMRC. Those pensioners with 30 years service plus and serving with Royal Mail will find they will be issued with a foundation amount to start from in the New State Pension will have a figure that will be the higher of a figure drawn from the pre 2016 basic state pension level of 119.25.The New State Pension to receive the higher amount of 155.25 is based on 35 years of National Insurance Contributions
For the contracted out deduction the HMRC will deduct the G M P amount from the £155.25 and this figure will be well below the £119.25 quoted above.

[heapsy]

Just wondering if anyone has retired recently and is on the new state pension, and how much they are getting due to the fact we were opted out of the full pension?

Contributions to the 2nd state pension, made up from additional N.I contributions due to overtime etc, only stopped in April 2016. So hardly any state pension, people are receiving, will be solely from the new scheme. I would imagine the difference would be negligible.

[RobertT]

The pre 2016 State pension for payment of the basic state pension was based on 30 years national insurance contributions.
Those on defined pensions were contracted out from 1978 to 2016 have the chance to ask for a forecast from HMRC. Those pensioners with 30 years service plus and serving with Royal Mail will find they will be issued with a foundation amount to start from in the New State Pension will have a figure that will be the higher of a figure drawn from the pre 2016 basic state pension level of 119.25.The New State Pension to receive the higher amount of 155.25 is based on 35 years of National Insurance Contributions.

Everyone will be given a foundation amount or it’s often called the starting amount, based on their own work/NIC’s history over their working life. It will be no lower than what they would have got from the old state pension system. And it will be possible to add to that amount by continuing to work.

For each year worked from April 2016 onwards you’ll be adding 1/35th of the rate of the new state pension onto your overall SP entitlement. Based on the current £155.65, that works out as £4.44 per year.

For the contracted out deduction the HMRC will deduct the G M P amount from the £155.25 and this figure will be well below the £119.25 quoted above.

This amount is known as the COPE amount which stands for Contracted Out Pension Equivalent. It relates to the pension amount you’re getting from your employer based pension rather than from the State Second Pension. So if age is on your side, it is possible to get the benefits of being contracted out via your RM pension and the full rate of the state pension too.

Personally under the old system I would have got around £126 per week from my state pension and it would not increase from that figure, other by inflationary increases each year. Under the new system, that is just my starting amount and I will be able to increase that up to the maximum rate, currently £155.65, by continuing to work. I should have reached that maximum amount by the time I’m aged 55. That's on top of my RM pension.

[nataddick]

As with so many of the numerous State/Company/Personal pension changes all is not as straightforward as it seems ! For a more detailed explanation of the impact of GMP on contracted-out schemes read the following illuminating article, as GMP ceased in 1997 and so may only be partially responsible for the difference in COPE.

http://www.thisismoney.co.uk/money/pens ... plies.html" onclick="window.open(this.href);return false;

If you are not confused, you don't understand the problem !

[stephen500]

In 2015 my pension forecast was £120, reduced as with many others in the defined benefit scheme. No one told us about this until contracting out was ceased. Some were and are in for a shock when they reach state retirement age. But there is good news (after the government decided to end contracting out and increased our National insurance contributions to the normal level) For those affected state pensions will rise by £4.45 each year, until you either reach state retirement age or stop paying a stamp. So if you had 7 and half years to go after around 2016, then you would receive a full state pension. I will receive around £135 as I plan to leave at 60 and will stop paying a stamp. I could continue paying class 3 stamp at around £733 per year to get a full state pension. For the 3 years I would have to go to reach a full state pension, I would pay around £2100 in class 3 stamps and it would take me living 3 years into my state pension age to get my money back.

[RobertT]

I have a RM pensions booklet(section c) dating back to 2000 which does say that we are contracted out of the state second pension and we will only get the basic state pension. Although I agree that communication on the matter hasn’t been as good as it could have been.

The problem many people make is to assume they will get the full rate of the state pension, but that won’t necessarily be the case! And they perhaps don’t take the correct amount into account when they’re planning their retirement. So I suggest everybody gets themselves a forecast: https://www.gov.uk/check-state-pension" onclick="window.open(this.href);return false;

Stephen500: Paying for those extra 3 years sounds like a great deal – you should go for it!

As a side note, the state pension is due to increase to £159.55 from 6th April.

[ROSSCO]

I'm a little confused after reading this post.
I am 36 with 19 yrs service. I plan to retire at 65 if I can and the jobs still around! Big ask I know.
I will have 29 more yrs contributing to my state pension so will I be 6 yrs short of getting the full state pension?
I requested a forecast and it said I need 16 yrs more contributions to get a full state pension.
cheers

[RobertT]

I'm a little confused after reading this post.
I am 36 with 19 yrs service. I plan to retire at 65 if I can and the jobs still around! Big ask I know.
I will have 29 more yrs contributing to my state pension so will I be 6 yrs short of getting the full state pension?
I requested a forecast and it said I need 16 yrs more contributions to get a full state pension.
cheers

In simple terms, people who’ve been contracted out have still been building up their state pension but not by as much as they might have done if they weren’t contracted out. They have been building up pension via their employers scheme instead.

The headline amount of years of NIC’s you need to get a full state pension is now 35. Although that could effectively be more for some people if they’ve spent a considerable time contracted out of the state second pension as all members of the RMPP were up to April 2016, due to the COPE reduction. But that will depend on age and personal circumstances to a large degree.

So based on the figures you’ve given, you’ve already been paying NIC’s for 19 years , I would estimate your current state pension forecast so far is for about £85?
Therefore you only have another 16 to go before you reach 35. That would take you to age 52, although you wouldn’t be able to claim your SP until 68 at the earliest.

[fly-catchers]

I could continue paying class 3 stamp at around £733 per year to get a full state pension. For the 3 years I would have to go to reach a full state pension, I would pay around £2100 in class 3 stamps and it would take me living 3 years into my state pension age to get my money back.

Would you pay those for those class 3 stamps while still working or could you after you leave and before you reach state pension age?

[ROSSCO]

I'm a little confused after reading this post.
I am 36 with 19 yrs service. I plan to retire at 65 if I can and the jobs still around! Big ask I know.
I will have 29 more yrs contributing to my state pension so will I be 6 yrs short of getting the full state pension?
I requested a forecast and it said I need 16 yrs more contributions to get a full state pension.
cheers

In simple terms, people who’ve been contracted out have still been building up their state pension but not by as much as they might have done if they weren’t contracted out. They have been building up pension via their employers scheme instead.

The headline amount of years of NIC’s you need to get a full state pension is now 35. Although that could effectively be more for some people if they’ve spent a considerable time contracted out of the state second pension as all members of the RMPP were up to April 2016, due to the COPE reduction. But that will depend on age and personal circumstances to a large degree.

So based on the figures you’ve given, you’ve already been paying NIC’s for 19 years , I would estimate your current state pension forecast so far is for about £85?
Therefore you only have another 16 to go before you reach 35. That would take you to age 52, although you wouldn’t be able to claim your SP until 68 at the earliest.

Yes you are right my current pension to date is £85.Thanks for clearing that up RobertT

[stephen500]

I could continue paying class 3 stamp at around £733 per year to get a full state pension. For the 3 years I would have to go to reach a full state pension, I would pay around £2100 in class 3 stamps and it would take me living 3 years into my state pension age to get my money back.

Would you pay those for those class 3 stamps while still working or could you after you leave and before you reach state pension age?

I don't know if I could pay class 3 stamps whilst still working. But I may pay for them once I leave at 60 and before I reach 67. Total cost per year around £733. How much you would have to pay would depend on how short you were of making up the contracted out short fall. I am due £142 at 67, so to get to around £155, I would have to pay 3 years of class 3. A total of just over £2100. Meaning I would have to live to 70 to get my money back. If I live to 100 I would be £18,000 in profit. Bad news though is my dad passed away at 51 and my Grandfather at 72!

[BeamishStout]

Yes I too will be a little short of getting full state pension entitlement (£12.48) because of opting out rather than the number of years needed to get the full whack. In my case I reckon I would need 3 years contributions at some point between 60 and 66 to get the full amount. Now the question comes as to when to get these extra years should I choose to do so. Working past 60 for another 3 years is not an option I am prepared to take for the sake of my sanity and health. So £12.48/wk is equivalent to £650 pa (ignoring any inflationary rises) and is likely to be more lucrative than dividend monies payable from the shares I will have accrued by December 2017. I am fortunate in having funds that I can use to purchase these extra years in addition to my shares obviously. The benefit to me personally in getting the full whack will probably pay for itself in monetary terms within 4 years if I go along this route delaying the purchase of these extra years for as long as possible to maximise any dividend benefits between now and 2104 should I use the share monies rather than ISA investments.

Presumably there is no issue ATM in making these lump sums for NI state benefit purposes once I retire from work at 60 in 2018.

[RobertT]

If you have gaps in your NI record you can pay extra to fill those gaps whenever you want to.
But you can’t pay for NIC’s you expect to miss in the future, just for what you’ve already missed.

If you check your NI record it will tell you if you have any gaps and how much it will cost to plug them: https://www.gov.uk/check-national-insurance-record" onclick="window.open(this.href);return false;