State Pension potential shortfall warning

[Sheepshanks]

JamesD74 said:

Must be linked to £ contributed as well as number of years.

Just checked mine:

29 full years paid. Current forecast £165.98.
Forecast if I contribute 1 more year before 2040 £168.60.
You cannot improve your forecast any further.

SERPs must be bumping you up. Once you get to £168.60 you can't get more than that, unless you were already over it under the pre-2016 rules (basic pension plus SERPs).

[FiF]

Sheepshanks said:

FiF said:

OK, devil's advocate, let's assume they think it exists, it being a period of contracting out, but the COPE is too small to show, or even mention, then why the 20 quid reduction?

Plus I come back to a question asked earlier and no one answered, if the contracting out reduction is simply to deal with contracting out from SERPS and forerunners, why can the reduction take the pension below what the old basic state pension would have been, ie no additional SERPS ?

I looked back for the question you asked earlier and you did say earlier in the thread that your missus was contracted out for 3yrs.

As said earlier, there's two parts to this. There's the pre-2016 calculation - you need 30yrs of full contributions (doesn't matter if opted out or not) to get the basic state pension of around £130. If you weren't opted out then there will be a SERPs figure to add. Then there's the post 2016 calcuation - you need 35 yrs of non-opted out contributions to get the new full pension of £168.

Your pension will be whichever figure is higher.

I was wrong on that 3 years of opting out. We'd assumed she was opted out as didn't have those details to hand, it now looks as if she wasn't. Even so 3 years of opting out, = 20 reduction?

Something is odd. Let's say there were 3 years, 39 - 3 = 36 still more than 35, plus of course the years where she made contributions but not enough to count for a full year.

It's all a bit academic for us as we are fixed ok financially with other income. But I feel for folks who haven't made such additional provision.

[croyde]

Gawd this is depressing. Having to live frugally just in case I'm still alive when the government finally lets me retire.

I have enough money sitting around in pensions and investments to actually have some fun now, whilst I'm still reasonably fit, yet I must be sensible.

So blooming annoying

[Sheepshanks]

croyde said:

Gawd this is depressing. Having to live frugally just in case I'm still alive when the government finally lets me retire.

I have enough money sitting around in pensions and investments to actually have some fun now, whilst I'm still reasonably fit, yet I must be sensible.

So blooming annoying

Must admit life expectancy, particularly healthy life expectancy, plays on my mind as I near retirement. I could pop my clogs tomorrow, but I could have a good 30yrs ahead.

[The Leaper]

CoolHands said:

My facts


Question 2: I'm was a teacher so contributed to teacher pensions, and latterly Local Government Pension Scheme. These were regarded as contracted out up until April 2016 (I’ve just checked). Consequently the cope estimate above of £1814 a year is a woeful under estimate of my actual other pensions so far accrued. So where are they getting that COPE estimate from?

Edited by CoolHands on Monday 6th January 20:52

The £1814 is the portion of the Teachers Pension Scheme pension that represents and is in place of SERPS had you not been contracted out: it is part of your Teachers total pension which total is likely to be much higher that £1814.

"They" work out the COPE based on the information sent to DWP at the time that your period of contracted out employment ended.

R.

[dingg]

Sheepshanks said:

croyde said:

Gawd this is depressing. Having to live frugally just in case I'm still alive when the government finally lets me retire.

I have enough money sitting around in pensions and investments to actually have some fun now, whilst I'm still reasonably fit, yet I must be sensible.

So blooming annoying

Must admit life expectancy, particularly healthy life expectancy, plays on my mind as I near retirement. I could pop my clogs tomorrow, but I could have a good 30yrs ahead.

I'm 59 I reckon I'll last until 84, that's what I've calculated to.

That'll do me........

Until I'm 83 I guess lol

[rigga]

Plan on retirement this year at 55, according to the gateway I need to work till I'm 59 to get the full amount, but I can if I choose take a level pension option from my works, which will increase my pension up until 67, then it will drop down by the state amount, so level all along should I last that far, no idea on the future, so better now than later I'm figuring.

[CoolHands]

Thanks the leaper yeah I kind of understand that bit now.ie it’s not what my teachers pensions will actually be, it is the cope amount I have forfeited by contracting out.

[anonymous-user]

There is a tapered system in place currently, which is going to take another 10 or so years to work its way out of the system.

The Royal London linked docs explain it.

[tighnamara]

Out of interest checked up on my pension.
Website states.

You will get your pension July 2034
Estimate based on NI insurance record up to April 2019 - £167.51per week

Forecast if you contribute another year before April 2034 - £168.60

You have:

36 years of full contributions
15 years to contribute before 5th April 2034

You do not have any gaps in your record.

No reference whatever on the pension being reduced if you don’t pay after taking early retirement.

[TwigtheWonderkid]

Sorry to revive this contentious thread, but it occurred to me to ask:

Let's suppose, for the sake of argument, the OP was right. If you retire early, and draw down £12500 a year out of your pension to avoid tax (assuming that's your only income), I guess you would still have to pay your NI on that (which kicks in at around £8500 ish). So if you do have to pay your NI on your tax free pension drawdown, would that solve the problem as you'd be paying NI up to retirement?

[LeoSayer]

TwigtheWonderkid said:

Sorry to revive this contentious thread, but it occurred to me to ask:

Let's suppose, for the sake of argument, the OP was right. If you retire early, and draw down £12500 a year out of your pension to avoid tax (assuming that's your only income), I guess you would still have to pay your NI on that (which kicks in at around £8500 ish). So if you do have to pay your NI on your tax free pension drawdown, would that solve the problem as you'd be paying NI up to retirement?

NI is not payable on pension income.

[anonymous-user]

You can pay NI shortfall contributions from any source.

[TwigtheWonderkid]

LeoSayer said:

TwigtheWonderkid said:

Sorry to revive this contentious thread, but it occurred to me to ask:

Let's suppose, for the sake of argument, the OP was right. If you retire early, and draw down £12500 a year out of your pension to avoid tax (assuming that's your only income), I guess you would still have to pay your NI on that (which kicks in at around £8500 ish). So if you do have to pay your NI on your tax free pension drawdown, would that solve the problem as you'd be paying NI up to retirement?

NI is not payable on pension income.

OK, that answers that then. Maybe it should be. That would get around the clear inequity of wealthier people retiring early and getting a full state pension in due course after 35 yrs of contributions, whilst poorer people who can't retire early perhaps end up making 45+ years of NI payments for no extra benefit.

[dingg]

On the other side of the coin, big money earners have paid in full whack ni contributions as opposed to low earners who have paid in the minimum.
Life's not fair just the way it is.

[TwigtheWonderkid]

dingg said:

On the other side of the coin, big money earners have paid in full whack ni contributions as opposed to low earners who have paid in the minimum.
Life's not fair just the way it is.

But that's tax, from each according to his means to each according to his needs etc.

The principle though, of the wealthy paying NI for 10 or so fewer years than the rest, and those who work to state pension age getting no extra benefit for those extra years of contribution, seems wrong. Even though I fall into the early retirement group.

[dingg]

You miss the point I think.
Someone paying in the minimum may have only chipped in 800 a year
Someone on the max possibly the equivalent of 8000 a year

[TwigtheWonderkid]

dingg said:

You miss the point I think.
Someone paying in the minimum may have only chipped in 800 a year
Someone on the max possibly the equivalent of 8000 a year

No, I get the point. The wealthy pay in far more the average worker.

My point is about the time you pay in for, not the amount you pay in. Poorer people end up paying up to state retirement age, whereas the wealthy my pay for 10 years less, yet both get the same state pension if the early retiree has done 35 years. The poorer bloke paying in for 45 years gets no extra benefit.

I suspect someone paying £800/year misses that money far more than someone paying £8000/year.

[dingg]

Turn it the other way then
Those paying in much more should get a higher state oap.
Same argument but other side of the coin.

[Patrick magooagain]

I've just found this thread after I did a pension forcast today. It says that I need to pay a further four years to achieve the max state pension.£168 odd.

I have been self employed most of my working life and left the uk in 2002.

In 2004 I did a pension forcast and spoke to the NI contribution office. I was told,if I wanted to carry on paying for another two years then all would be well for the max basic state pension.

So now I have four years more to pay for and I have to pay it befor April 2023 as I retire in February 2024.

Not a problem and I have applied for the NI 28 form which I will fill in along with thier DD mandate.

The vast majority of my contributions have been the minimum self employed class 2 or 3.

I just thought this info may help someone.