SIPP & Pension guidance - IM Private Clients

[Tony Angelino]

Jasey_ said:

I was opted out and it states that on my pension forecast - I guess if you weren't opted out then it doesn't show.

I guess you could call them up - here's some reading if you can't be arsed spending 2 days on the phone

https://www.gov.uk/government/publications/state-p...

Thanks, I'll have a read. This is what it actually says on the gateway:

Your forecast

is not a guarantee and is based on the current law
does not include any increase due to inflation

You need to continue to contribute National Insurance to reach your forecast Estimate based on your National Insurance record up to 5 April 2021
£172.73 a week Forecast if you contribute another 2 years before 5 April 2046 £179.60 a week
£179.60 is the most you can get

You cannot improve your forecast any further, unless you choose to put off claiming.

[Intelligent Money]

Tony Angelino said:

Potential daft question here please lads........

I am doing a bit of budgeting for the future, specifically retirement, and I am trying to work out what my state pension is likely to be. Now I have logged onto Government Gateway and my forecast is £179.60 per week (assuming I contribute for another 2 years), I understand this is the maximum. Now my question is what about the Additional State Pension or SERPS and if I am likely to get it. I can't seem to find any way of checking for sure other than waiting and seeing.

A bit of background:

Employed full time for the last 25 years, no gaps.
Only had a private pension for the last 8 years.
Never knowingly opted out.

Can anybody offer and help please?
Thanks

Hi Tony Angelino

SERPS accrual ended on 5/04/2002 and was replaced by S2P

If you had any SERPS benefits they will be paid along with any S2P benefits.

SERPS was based on “mid band earnings” i.e. earnings between a lower earnings and upper earnings limit. You accrued 1.25% of that band for each year for a maximum of 20 years. So in theory you could gain 25% of that band. That was reduced to 20% max from 6/04/1988.

In your case the maximum you could receive would have been 20% but as you would not of got 20 years in by the time it ended in 2002 you will have accrued 1.25% for each year you were in.

If that looks complicated welcome to S2P!!!

From 2002 to 2010 S2P worked as follows:
Band 1
Lower Earnings Limit to Low Earnings Threshold Accrues at 40%

Band 2
Low Earnings Threshold to Secondary Earnings Threshold Accrues at 10%

Band 3
Secondary Earnings Threshold to Upper Earnings Limit Accrues at 20%

From 2010 to 2012
Band 1
Lower Earnings Limit to Low Earnings Threshold Accrues at 40%

Band 2
Low Earnings Threshold to Upper Accrual Point Accrues at 10%

From 2012
Band 1
Flat rate announced each year

Band 2
Lower Earnings Threshold to Upper Accrual Point Accrues at 10%


The various thresholds are update each year

S2P Calculation

The calculation for the S2P is based on a three-step process.
• Earnings for each tax year from 2002/03 onwards are split across the bands and revalued from the tax year in question up to the tax year before you reach state pension age (earnings in the tax year before state pension age are not revalued).
• The revalued earnings at state pension age in each band are then multiplied by the accrual rate applicable to that band.
• These revalued earnings are divided by the total number of years in your working life since 1978 to give the S2P benefit. Working life is defined as being from age 16 to state pension age.

In summary based on the info you have supplied you will have accrued some SERPS and S2P benefits but calculating exactly how much is a bit of a task!!

Cheers

Nik

[Tony Angelino]

Intelligent Money said:

Hi Tony Angelino

SERPS accrual ended on 5/04/2002 and was replaced by S2P

If you had any SERPS benefits they will be paid along with any S2P benefits.

SERPS was based on “mid band earnings” i.e. earnings between a lower earnings and upper earnings limit. You accrued 1.25% of that band for each year for a maximum of 20 years. So in theory you could gain 25% of that band. That was reduced to 20% max from 6/04/1988.

In your case the maximum you could receive would have been 20% but as you would not of got 20 years in by the time it ended in 2002 you will have accrued 1.25% for each year you were in.

If that looks complicated welcome to S2P!!!

From 2002 to 2010 S2P worked as follows:
Band 1
Lower Earnings Limit to Low Earnings Threshold Accrues at 40%

Band 2
Low Earnings Threshold to Secondary Earnings Threshold Accrues at 10%

Band 3
Secondary Earnings Threshold to Upper Earnings Limit Accrues at 20%

From 2010 to 2012
Band 1
Lower Earnings Limit to Low Earnings Threshold Accrues at 40%

Band 2
Low Earnings Threshold to Upper Accrual Point Accrues at 10%

From 2012
Band 1
Flat rate announced each year

Band 2
Lower Earnings Threshold to Upper Accrual Point Accrues at 10%


The various thresholds are update each year

S2P Calculation

The calculation for the S2P is based on a three-step process.
• Earnings for each tax year from 2002/03 onwards are split across the bands and revalued from the tax year in question up to the tax year before you reach state pension age (earnings in the tax year before state pension age are not revalued).
• The revalued earnings at state pension age in each band are then multiplied by the accrual rate applicable to that band.
• These revalued earnings are divided by the total number of years in your working life since 1978 to give the S2P benefit. Working life is defined as being from age 16 to state pension age.

In summary based on the info you have supplied you will have accrued some SERPS and S2P benefits but calculating exactly how much is a bit of a task!!

Cheers

Nik

Thanks Nik, appreciate the detailed reply. I'll read through and digest - as you say it's really complecated (or it is for somebody with my level of understanding). Do people generally just wait and see what happens? How do they know if it's right or wrong?

Hopefully I will have a modest top up for my IM pension.

[Intelligent Money]

PM3 said:

What would the typical tax implications of transferring an overseas ( USD based ) employer pension into a UK SIPP ?
The amount is not large ( high 5 digit ) and was closed to new payments about 10 years ago . Rather coincidentally it is managed by a british company , but I am ideally planning to gather up a couple of these lower value pensions into one plot to manage as a lump sum for official retirement in 9 years.
Currently not working ( and not planning to either ) and have drawn no monies from any pension plan.
I have checked with the provider , they have no barrier to closing and moving the money to another provider while under nominal retirement age .
As I am Uk based now I am long term interested in moving the money out of USD (even if I might keep some vested in US investments )

Hi PM3

Unfortunately the answer is it depends! The main considerations are whether the existing scheme is a Recognised Overseas Pension Scheme in eyes of HMRC, the type of scheme and the tax treaty that exists between the UK and the territory that the scheme is registered in.

Happy to take a look if you want to send me some more details, [e-mail]

Regards

Nik

[Carbon Sasquatch]

Tony Angelino said:

Thanks Nik, appreciate the detailed reply. I'll read through and digest - as you say it's really complecated (or it is for somebody with my level of understanding). Do people generally just wait and see what happens? How do they know if it's right or wrong?

Hopefully I will have a modest top up for my IM pension.

I've just been looking into mine. There is a COPE estimate on - https://www.tax.service.gov.uk/check-your-state-pe...

Mine is quite a lot higher than I had expected - Your COPE estimate is £68.97 a week.

That means my state pension will reduce by that amount and so down from £179.60 to £110.63

[Mr Pointy]

Carbon Sasquatch said:

I've just been looking into mine. There is a COPE estimate on - https://www.tax.service.gov.uk/check-your-state-pe...

Mine is quite a lot higher than I had expected - Your COPE estimate is £68.97 a week.

That means my state pension will reduce by that amount and so down from £179.60 to £110.63

Are you sure about that? It's still possible to achieve a full SP of £179.60 a week even if you were contracted out - I have. My COPE estimate is £39.08 a week but in reality it's a meaningless figure as HMRC don't know how your COPE pension is performing. The big number at the top of your forecast is what you will get, the COPE value isn't taken off that.

[Jasey_]

The cope statement is what you could have had if you hadn't contracted out.

It is not taken off you state pension.

[Carbon Sasquatch]

Well that's cheered me up - the Gov site seems very confusing - or at least it confused me.....

It talks about opting out, reduced NI payments & statements like - "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)."

If I can still get the full whack then happy days - only a couple more years NI payments to go

[Jasey_]

Carbon Sasquatch said:

Well that's cheered me up - the Gov site seems very confusing - or at least it confused me.....

It talks about opting out, reduced NI payments & statements like - "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)."

If I can still get the full whack then happy days - only a couple more years NI payments to go

One of the very rare things where something that seems to be too good to be true actually is .

[Tony Angelino]

Mr Pointy said:

Carbon Sasquatch said:

I've just been looking into mine. There is a COPE estimate on - https://www.tax.service.gov.uk/check-your-state-pe...

Mine is quite a lot higher than I had expected - Your COPE estimate is £68.97 a week.

That means my state pension will reduce by that amount and so down from £179.60 to £110.63

Are you sure about that? It's still possible to achieve a full SP of £179.60 a week even if you were contracted out - I have. My COPE estimate is £39.08 a week but in reality it's a meaningless figure as HMRC don't know how your COPE pension is performing. The big number at the top of your forecast is what you will get, the COPE value isn't taken off that.

I can only see the State Pension forecast and nowhere to check anything else. Where abouts is it please?

Thanks

[Mr Pointy]

Tony Angelino said:

Mr Pointy said:

Carbon Sasquatch said:

I've just been looking into mine. There is a COPE estimate on - https://www.tax.service.gov.uk/check-your-state-pe...

Mine is quite a lot higher than I had expected - Your COPE estimate is £68.97 a week.

That means my state pension will reduce by that amount and so down from £179.60 to £110.63

Are you sure about that? It's still possible to achieve a full SP of £179.60 a week even if you were contracted out - I have. My COPE estimate is £39.08 a week but in reality it's a meaningless figure as HMRC don't know how your COPE pension is performing. The big number at the top of your forecast is what you will get, the COPE value isn't taken off that.

I can only see the State Pension forecast and nowhere to check anything else. Where abouts is it please?

On your SP Forecast click on the link under "You've been in a contracted-out pension scheme" - it's only there if you have been in one. It's meaningless though as it's just a made up figure of what you would have earned if you hadn't been contracted out. HMRC don't know how the pension scheme your payments went into has performed so the actual value could be lower or higher.

[Tony Angelino]

Mr Pointy said:

Tony Angelino said:

Mr Pointy said:

Carbon Sasquatch said:

I've just been looking into mine. There is a COPE estimate on - https://www.tax.service.gov.uk/check-your-state-pe...

Mine is quite a lot higher than I had expected - Your COPE estimate is £68.97 a week.

That means my state pension will reduce by that amount and so down from £179.60 to £110.63

Are you sure about that? It's still possible to achieve a full SP of £179.60 a week even if you were contracted out - I have. My COPE estimate is £39.08 a week but in reality it's a meaningless figure as HMRC don't know how your COPE pension is performing. The big number at the top of your forecast is what you will get, the COPE value isn't taken off that.

I can only see the State Pension forecast and nowhere to check anything else. Where abouts is it please?

On your SP Forecast click on the link under "You've been in a contracted-out pension scheme" - it's only there if you have been in one. It's meaningless though as it's just a made up figure of what you would have earned if you hadn't been contracted out. HMRC don't know how the pension scheme your payments went into has performed so the actual value could be lower or higher.

Thanks Mr, I don't have this option - so presumably this means I don't have anything......

[Mr Pointy]

Tony Angelino said:

Mr Pointy said:

Tony Angelino said:

Mr Pointy said:

Carbon Sasquatch said:

I've just been looking into mine. There is a COPE estimate on - https://www.tax.service.gov.uk/check-your-state-pe...

Mine is quite a lot higher than I had expected - Your COPE estimate is £68.97 a week.

That means my state pension will reduce by that amount and so down from £179.60 to £110.63

Are you sure about that? It's still possible to achieve a full SP of £179.60 a week even if you were contracted out - I have. My COPE estimate is £39.08 a week but in reality it's a meaningless figure as HMRC don't know how your COPE pension is performing. The big number at the top of your forecast is what you will get, the COPE value isn't taken off that.

I can only see the State Pension forecast and nowhere to check anything else. Where abouts is it please?

On your SP Forecast click on the link under "You've been in a contracted-out pension scheme" - it's only there if you have been in one. It's meaningless though as it's just a made up figure of what you would have earned if you hadn't been contracted out. HMRC don't know how the pension scheme your payments went into has performed so the actual value could be lower or higher.

Thanks Mr, I don't have this option - so presumably this means I don't have anything......

It looks like this so if you can't see this paragraph HMRC think you have never been contracted out:

[Tony Angelino]

Mr Pointy said:

It looks like this so if you can't see this paragraph HMRC think you have never been contracted out:

I don't have the last paragraph.

Now I am really confused, I assumed that as I had never contracted out (worked since 96, pension since 2014) I would by default still be in the 'second' pension. I need to do some reading.

Thanks for every bodies help.

[Jasey_]

https://assets.publishing.service.gov.uk/governmen...

I think like most things if you left things to the government and not contracted out they have fked you.

Basically because you only need 30 years NI contribs to get a full state pension if you contracted out you got extra money in the form of pension contributions from the gov into your personal pension.

If you didn' t contract out you keep paying into the governments version.

When the gov version was scrapped you got a higher starting point for the full state pension than someone who contracted out. but provided those that were contracted out made up the years to the 30 they also get the full state pension.

I could have got some of that wrong but it's my understanding of it !

[Tony Angelino]

I'm getting more and more confused here, I have sorted through some old paperwork and found a letter from the Pension Service dated 2006 and it says:

Your state pension forecast

If you retire at State Pension age we estimate your total State Pension will be £165.71 a week at today's prices. This figure includes:

Basic State Pension £84.25
Additional State Pension £81.46

I think I am possibly getting my SERPS, State Second Pension & COPE all mixed up, I appreciate all the assistance, it's just not sinking in at all!I think I'll ring the helpline on Monday, either that or pester Coops!

[CoopsIM]

Tony Angelino said:

I'm getting more and more confused here, I have sorted through some old paperwork and found a letter from the Pension Service dated 2006 and it says:

Your state pension forecast

If you retire at State Pension age we estimate your total State Pension will be £165.71 a week at today's prices. This figure includes:

Basic State Pension £84.25
Additional State Pension £81.46

I think I am possibly getting my SERPS, State Second Pension & COPE all mixed up, I appreciate all the assistance, it's just not sinking in at all!I think I'll ring the helpline on Monday, either that or pester Coops!

Did someone call?

[Tony Angelino]

CoopsIM said:

Tony Angelino said:

I'm getting more and more confused here, I have sorted through some old paperwork and found a letter from the Pension Service dated 2006 and it says:

Your state pension forecast

If you retire at State Pension age we estimate your total State Pension will be £165.71 a week at today's prices. This figure includes:

Basic State Pension £84.25
Additional State Pension £81.46

I think I am possibly getting my SERPS, State Second Pension & COPE all mixed up, I appreciate all the assistance, it's just not sinking in at all!I think I'll ring the helpline on Monday, either that or pester Coops!

Did someone call?

Like a bloodhound! I might drop you an email in the week pal.

Enjoy your weekend in the sun Gents.

[Mr Pointy]

Jasey_ said:

Basically because you only need 30 years NI contribs to get a full state pension if you contracted out you got extra money in the form of pension contributions from the gov into your personal pension.

When the gov version was scrapped you got a higher starting point for the full state pension than someone who contracted out. but provided those that were contracted out made up the years to the 30 they also get the full state pension. (Edited)

That's not correct. I was contracted out & have 42 years of NI contributions & am still one year short of a full SP.

[tighnamara]

One for Nik, but feel free to comment.

I know you can't purchase residential property through your pension but can you purchase property with development potential for change of use to residential property.

Looking at possible options with a site available that looks to have possible potential, site is part of a farm mainly a large steading that would have planning permission for 4 x 3 or 4 bedroom houses.