New State Pension from April 2016 forecast shock

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fyfin
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New State Pension from April 2016 forecast shock

Postby fyfin » Mon Jan 12, 2015 6:39 pm

Like many others I was secretly pleased to think that for once I was coming out on the right side of something because of my age i.e. the new state pension from April 2016 (my birthday is in July). The press was full of the new basic being around £140 but I had read some of the small print and knew there would be deductions for when I opted out.

However, I was very surprised to receive a statement today which showed what I would receive under the new state pension rules and what I would receive under existing pension rules. The form also stated that they had based these figures on a full rate of £148.40 for the new state pension. It also stated that I had 45 qualifying years.

I don't mind people knowing what the figures are as it may help others - Under the new rules I would get £38 per week and under the existing rules I would get £130 per week. This £130 is made up of basic plus some serps and graduated NI.

I was slightly shocked as I expected some reduction but not nearly £100 per week, so I telephoned Newcastle for an explanation. I was simply told that the figure was right as I had opted out on 2 occasions which was correct and so deductions were made. I foolishly thought that by opting out I would still get the basic state pension and the only thing that would be influenced was the serps i.e. no serps but the private pension would make up for it.

So if someone hadn't worked at all and their contributions were paid by the state, I assume they would receive £148.40 under the new scheme, about £40 more than under the old scheme but those who tried to help themselves will lose out.

I am happy to be corrected if I have misunderstood and indeed I am happy enough insomuch that I will not lose out because the nice man at Newcastle said I will receive whichever is the higher anyway.
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Free at Last
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Re: New State Pension from April 2016 forecast shock

Postby Free at Last » Mon Jan 12, 2015 7:26 pm

You are not alone - in fact only 45% of those due to retire between 2016 and 2020 will receive the full amount of the new State Pension.

http://www.theguardian.com/money/2015/j ... government

The only guarantee those who spent part of their working life contracted out have is that they will not receive any less than under the present system - although, as you say, someone who had spent most of their life on benefits will get the full amount.

I wonder how people who don't qualify for the full amount will be treated when the next Government (whoever it may be, I think it will happen whatever) starts to cut the add-ons like Pension Credit, WFA (even for those in the UK), free bus passes, etc.

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Re: New State Pension from April 2016 forecast shock

Postby anyroads » Mon Jan 12, 2015 7:39 pm

That is why I am drilling into my son's head, just starting out, one year company pension under his belt, to make the most of his company pension. Especially when his company will match his contributions up to 5%-7.5% depending on how long he works for them. I shall fund over 50% of his own contribution for 2015 as a Christmas present.

Future generations should not rely on the old age pension. Also, I have never heard anyone yet say, they paid too much into a private / company pension !

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Re: New State Pension from April 2016 forecast shock

Postby olive » Mon Jan 12, 2015 7:48 pm

That is easy to answer, anyone who doesn't qualify for the full amount will have it automatically made up to the full amount. No government would want its pensioners to suffer whilst those in poorer EU countries got a nice whack.

I did an online forecast today and it came out at £113 a week. We will see!

If that doesn't happen , I have the millions made from olives to fall back on so I am safe. :lol: :lol:

I always advise people who ask what to do about future pension funding to do : Either

1. Pay as much into their scheme as they cannot afford OR
2. Spend any and all available money and hope that in retirement you die early or the state looks after you.

There isn't a middle course

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Re: New State Pension from April 2016 forecast shock

Postby fyfin » Mon Jan 12, 2015 8:27 pm

Sounds about right Olive. They keep changing the rules as my wife keeps reminding me. She will be 60 this year and at one point thought she'd be getting her state pension then. No chance , now she has to wait until age 67 and at one point it was 30 years worth of contributions but it's changing to 35 although it was 39 for a woman before that.

The estimate I got was different to anything I'd had before because it showed two different figures, one under the new scheme and one under the old. I just couldn't see why they were so different. But hey-ho I'm no worse off so that's a bonus!
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Re: New State Pension from April 2016 forecast shock

Postby CapnBilly » Mon Jan 12, 2015 10:14 pm

This is my understanding of how they calculate the contracted out reduction

"– For contribution years between 1978 – 1997: there was a guaranteed minimum pension for those who contracted out. This is paid by your private pension provider. Your GMP will be calculated and used as the contracted out deduction for these years.
– For contribution years between 1997 – 2002. Additional State Pension was not added so there is no contracted out deduction for time contracted out during these five years.
– From 2002 onwards – there is a flat rate, so there is a similar calculation to the 1978-1997 calculation to work out a contracted out deduction."

I was contracted for most of my working life so my figure under the new scheme was about £30, so I will receive the current basic. I know what the GMP is from pension paperwork I have, so on the basis of the above mine looks about right.

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Re: New State Pension from April 2016 forecast shock

Postby fyfin » Mon Jan 12, 2015 11:07 pm

CapnBilly many thanks for that, I have no idea what the GMP figures were as I was not in a proper company scheme. It was a group private scheme and we opted out individually as the scheme was opted in. The previous company was a proper company pension but I transferred it to a private scheme when I left the company.

At least I know that my figure of £38 is not unique and at least I will receive no less than I would have done under the old scheme.
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Re: New State Pension from April 2016 forecast shock

Postby Wicksey » Wed Jan 14, 2015 4:33 pm

fyfin wrote:They keep changing the rules as my wife keeps reminding me. She will be 60 this year and at one point thought she'd be getting her state pension then. No chance , now she has to wait until age 67
When I was 55 about 18 months ago my OH and I both received letters from the DSS saying we would get our state pension at aged 66. On the back of the letter are some FAQs and one of them refers to the proposals to increase the pension age to 67 that will come into force between 2026 and 2028 and it says "you will not be affected by this proposal. Your pension age of 66 will not change"

I'm not holding my breath for much of a state pension and am just grateful that in my early 20s I 'fell into' a good job that gave me a pension. At the time I never even thought about pensions and probably wouldn't have started paying into a private one until I was in my late 30s.

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Re: New State Pension from April 2016 forecast shock

Postby fyfin » Wed Jan 14, 2015 5:05 pm

I stand corrected, I just carried out the check on the gov.uk website and in fact she will get her pension at age 66 so not as bad as we thought but still a big change from 60.
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Re: New State Pension from April 2016 forecast shock

Postby Mowser » Thu Jan 15, 2015 11:02 am

Fyfin

Same here. I'll be 65 in July 2016. I don't qualify for the full rate. Shower of barstewards.
Dave

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Re: New State Pension from April 2016 forecast shock

Postby Lyric » Thu Jan 15, 2015 1:10 pm

I was all miserable as I miss the 'new' pension being 65 next month. Suddenly I don't feel so bad, especially as my notice of pension due is more than I expected.

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Re: New State Pension from April 2016 forecast shock

Postby jogger » Tue Jan 20, 2015 11:43 pm

Hi

How would you know if you opted out at any time, sorry if this is a stupid question but from reading the OP I was quite happy to hear from the DWP I have now paid enough stamps but after reading this thread I hope I never at any stage opted out without knowing it.

I am not due to receive the OAP for another nine years.

Thanks

Roy

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Re: New State Pension from April 2016 forecast shock

Postby Lyric » Tue Jan 20, 2015 11:58 pm

I am not sure about a personal, private pension, but if you have been in a company pension scheme then you automatically opt out of the 'Second Pension' or SERPS call it what you will. I have just received a further letter detailing how I was opted out, for how long, and how much of the second pension I will not be getting.( all of it )

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Re: New State Pension from April 2016 forecast shock

Postby gus » Wed Jan 21, 2015 11:55 am

Lyric,
Not quite as clear cut as that!!
Being in a "company pension scheme" did not mean , necessarily, being contracted out of the second tier state pension scheme. This was a choice made by the scheme in the case of final salary (or defined benefit) schemes and again, was a choice.
If you were contracted out then both you and your employer paid a lower rate of national insurance contributions on (part) of your earnings.
If the company scheme was final salary then the benefits it provided had to meet a guaranteed minimum level at all times.
Money purchase (or defined contribution) schemes are similar to personal pensions in that the contributions are invested on your behalf and you get whatever the fund will buy when you retire - no guarantees - which is why so many people now are finding pensions are lower than they expected.

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Re: New State Pension from April 2016 forecast shock

Postby jogger » Wed Jan 21, 2015 10:44 pm

Hmmm, I'm in a company final pension scheme, it's a semi public service type thing and I am not aware of opting out, hopefully I will get the full pension,because my NI contributions are quite high......

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Re: New State Pension from April 2016 forecast shock

Postby morlandg » Thu Jan 22, 2015 2:12 pm

Whilst the title of this thread implies that it is the UK state pension that is being discussed, I think it allows me to mention my Spanish state pension!!
I received notification today that my pension will increase by 6 cents every month (from 24.90 euros to 24.96). YESssssssssss.

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Re: New State Pension from April 2016 forecast shock

Postby morlandg » Thu Jan 22, 2015 2:14 pm

.......and to follow on:
Can anyone tell me if like spanish salaries my pension will be paid 13 times each year?

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Re: New State Pension from April 2016 forecast shock

Postby Mowser » Thu Jan 22, 2015 2:34 pm

Yes. State pension paid every 4 weeks.
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Re: New State Pension from April 2016 forecast shock

Postby Mariacristina » Thu Jan 22, 2015 4:57 pm

Anyroads commented that he had never heard anyone say that they had paid too much into a private pension. . . . . . Those of us who paid our retirement money to Equitable Life would be unlikely to agree with that. Just as well that we can have a great life in Spain without it costing a fortune.

My baby olive tree produced 7 olives this year . . . . so I am relying on that for those important little extras!

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Re: New State Pension from April 2016 forecast shock

Postby El Cid » Thu Jan 22, 2015 5:22 pm

Mariacristina wrote: Those of us who paid our retirement money to Equitable Life would be unlikely to agree with that.
Well, the UK government keep sending me very large cheques in compensation for that fiasco - I couldn't be happier!

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