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Pension question

Discussion in 'The Lounge' started by lisadb, May 3, 2019.

  1. lisadb

    lisadb Well-Known Member

    Hi, I'm considering packing in work next year and am trying to find out if for the UK state pension a contributing year is a financial year ie. April to March or a working year ie. I started work in September. I'm not due to it for at least 10 years, but was contracted out in the 90s and will have worked for 39 years solid by September 2020. So it would be daft to miss out on a contributing year by leaving a few months too early. Any information gratefully received.

    Thanks, Lisa.
     
  2. Gezza

    Gezza Well-Known Member

  3. Malcolm_Stewart

    Malcolm_Stewart Well-Known Member

    Have you tried your Citizens Advice Bureau?
     
  4. PeteRob

    PeteRob Well-Known Member

    That's a good question. I don't know the answer. You can top up missing contributions but I think that is fixed sum per year. It is worth getting a pension statement. It is not clear how they work it out - there is a minimum number of contribution years, above that the pension is a ratio of years/some number or 1 (whichever is smaller) * the new state pension. I'm not clear what "some number" is so I won't give a value. There's lots of info on the government gateway pages. I don't think there is distinction between contracted in/out contribution years anymore. The new pension is taxable so how much you get to keep depends on your total income.
     
  5. lisadb

    lisadb Well-Known Member

    Yes, done that thanks and I'll be short of a few years for getting full state pension due to the contracting out. Hence the question. :)
     
  6. lisadb

    lisadb Well-Known Member

    Not yet, thanks for the suggestion :)
     
  7. Bazarchie

    Bazarchie Well-Known Member

    Does the calculator allow you to change your planned retirement age?
     
  8. RovingMike

    RovingMike Crucifixion's a doddle...

    My understanding is full years 6 April to 5th April, but I'm no expert.
     
  9. PeteRob

    PeteRob Well-Known Member

    Contracting out meant you were not contributing to SERPS - which no longer exists*. The new state pension depends only on the number of contributing years and you will still have paid NI contributions if you worked. Years out of work but raising children while claiming child benefit also counted. There is a trap for some people now that child-benefit is means tested, those that don't register because they'd get no child benefit payment, lose a NI contribution year.

    I'll try to remember to log on to my self-assessment account which for the last few years has included NI contribution history and state pension projection. I've been contracted out all my working life (24-60, before that in full time education) and I won't get a full state pension at 67 but the difference is minimal. I think I have 39 contributing years because I lost 3 at ages 21-24 doing post-grad through not filling in a form to say I was in full time education. I don't remember details other than being annoyed at that. I think it likely the contribution years are aligned with the tax years because payslips show NI contributions in line with tax deductions.

    *They did something transitional for those expecting a state earnings related pension top up to the old state pension on the basis of having made additional contributions but I think that is now passed.
     
  10. saxacat

    saxacat Well-Known Member

    I finished work in 2010 and have 39 years of contributions; along with many other government workers I was contracted out in the 90s.

    All that shows on my pension forecast are the years that I have not contributed (2010 onwards). The dates for voluntary contributions to fill these gaps are always 5th April in whichever year is relevant for that payment. So it would seem that the Tax Year is used for the contribution year, but of course it might not be that simple; as previously suggested CAB might be your best option. If you have lots of time on your hands, you could always try the HMRC helpline :rolleyes:
     
  11. PeteRob

    PeteRob Well-Known Member

    Ok - they changed the HMRC login - grrrrrrrrr!

    I was wrong about contracted out: Clear as mud. The pension forecast ignores contracted out completely - in that I was correct but the pension forecast ain't what you get. Part of it comes from your pension provider but might not say how this is done.

    In the past my pension scheme used to deduct the state pension from its payout when state pension age was reached. They don't say this anymore but from what is written below it sounds as if they may just do this "silently". Maybe you don't find out what you actually get from the state until you apply for the pension. I'm reading below that the State will pay the Pensions Forecast less the COPE amount and the COPE amount is included in the occupational pension.



    This is from my tax account.

    In the past you’ve been ‘contracted out’ of the additional State Pension.

    When you were contracted out:
    • you and your employers paid lower rate National Insurance contributions, or
    • some of your National Insurance contributions were paid into another pension scheme, such as a personal or stakeholder pension
    The amount of additional State Pension you would have been paid if you had not been contracted out is known as the Contracted Out Pension Equivalent (COPE).

    Your COPE estimate is xxxxxxx

    This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government.

    In most cases the private pension scheme you were contracted out to:
    • will include an amount equal to the COPE amount
    • may not individually identify the COPE amount
    The total amount of pension paid by your workplace or personal pension schemes will depend on the scheme and on any investment choices.​

    and from https://www.gov.uk/new-state-pension/how-its-calculated

    The full new State Pension is £168.60 per week. What you’ll receive is based on your National Insurance record.

    Valuing your National Insurance contributions and credits made before 6 April 2016
    Your National Insurance record before 6 April 2016 is used to calculate your ‘starting amount’. This is part of your new State Pension.

    Your starting amount will be the higher of either:

    • the amount you would get under the old State Pension rules (which includes basic State Pension and Additional State Pension)
    • the amount you would get if the new State Pension had been in place at the start of your working life
    Your starting amount will include a deduction if you were contracted out of the Additional State Pension. You may have been contracted out because you were in a certain type of workplace, personal or stakeholder pension.

    If your starting amount is less than the full new State Pension
    You can get more State Pension by adding more qualifying years to your National Insurance record after 5 April 2016. You can do this until you reach the full new State Pension amount or reach State Pension age - whichever is first.

    Each qualifying year on your National Insurance record after 5 April 2016 will add about £4.82 a week to your new State Pension. The exact amount you get is calculated by dividing £168.60 by 35 and then multiplying by the number of qualifying years after 5 April 2016.​
     
  12. lisadb

    lisadb Well-Known Member

    Thanks for the replies. Pete, yeah clear as mud ain't it and it's likely I'll not know how much I'll get until the day. I am just trying to maximise my options. Lisa.
     
  13. lisadb

    lisadb Well-Known Member

    Ah, having read Pete's post again the important bit is the very last sentence - number of qualifying years after 5 April 2016.

    Thanks, Lisa.
     
  14. cliveva

    cliveva Well-Known Member

    Contracting out just means that you get a lower level of state pension and will still be payed at the same age, contributing years are tax years, April to March
     

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