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State Pension

AsleepInYorkshire
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State Pension

#448810

Postby AsleepInYorkshire » October 8th, 2021, 7:22 pm

My state pension will be approximately £700 per month when I retire at 67. When I get to 67 in 8 years time will it still be £700 per month?

Thank you

AiY

Lootman
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Re: State Pension

#448816

Postby Lootman » October 8th, 2021, 7:30 pm

AsleepInYorkshire wrote:My state pension will be approximately £700 per month when I retire at 67. When I get to 67 in 8 years time will it still be £700 per month?

No, the amount gets uprated each year in line with inflation. You might have seen the term "Triple Lock" used here to describe how that works.

Of course it also depends on your future contributions through work.

My forecast says about £800 a month but it is different for everyone.

monabri
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Re: State Pension

#448822

Postby monabri » October 8th, 2021, 8:14 pm

AsleepInYorkshire wrote:My state pension will be approximately £700 per month when I retire at 67. When I get to 67 in 8 years time will it still be £700 per month?

Thank you

AiY


It will be higher (99.9999% sure)

If I was to hazard a guess, I'd use the triple lock minimum of increasing current projection of £700 by 2.5% per yr for the next 8 yrs.
I assume that the £700 is based on a state projection which assumes you will continue to contribute to your state pension until 67.




See state pensions "Triple Lock"

https://www.bbc.co.uk/news/business-530 ... ple%20lock.

"At present, the state pension is supposed to increase each year in line with whichever of the following three things is highest:

- inflation, as measured by the Consumer Prices Index (CPI)
- the average wage increase
- or 2.5%

This is known as the triple lock.

I can see wage inflation getting out of hand (over 2.5%) but figure on 2.5% increase...assume "dishy rishi" doesn't cancel it!



edit: My state pension forecast indicates that I will not receive the full £179.60 p.w. unless I buy Voluntary Class 3 NI contributions. Current forecast
is £160.48. I am retired so I will not make any more years of NI contributions unless I go down the voluntary class 3 route (which I've started to do).

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Re: State Pension

#448824

Postby Urbandreamer » October 8th, 2021, 8:38 pm

No it will be 10 times more.

In five years time Wolfy will take the government using a tank that he found camping and double the state pension every year.

Seriously it's just as likely as someone else gaining power and abolishing the state pension.

Who knows.

The current policy is the triple lock. There is a move to suggest that it should just rise with inflation. Again, who can tell what will happen?

My bet is on Wolfy and his peoples popular front.

Ps, I think that triple lock should have or see a HUGE rise in pensions due to the rise in average earning because people came off furlough. I think that we might accept that the government has decided that the "triple lock promise" has been suspended, at least for a while.
https://www.ftadviser.com/pensions/2021 ... -one-year/

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Re: State Pension

#448826

Postby Lootman » October 8th, 2021, 8:42 pm

monabri wrote:My state pension forecast indicates that I will not receive the full £179.60 p.w. unless I buy Voluntary Class 3 NI contributions. Current forecast is £160.48. I am retired so I will not make any more years of NI contributions unless I go down the voluntary class 3 route (which I've started to do).

When I did the sums a few years ago the payback period for buying more years of NICs was only about 3 years, which is about as close to a free lunch as most people get. I bought the most that I could at the time. HMRC will send you a statement showing the additional years for which you can retrospectively contribute, which is separate from the pension forecasts that DWP sends out.

Of course you first have to make sure that buying back more years gains you anything, as in some situations it won't.

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Re: State Pension

#448830

Postby mc2fool » October 8th, 2021, 8:55 pm

monabri wrote:edit: My state pension forecast indicates that I will not receive the full £179.60 p.w. unless I buy Voluntary Class 3 NI contributions. Current forecast is £160.48. I am retired so I will not make any more years of NI contributions unless I go down the voluntary class 3 route (which I've started to do).

Declare yourself self employed, doing some minor "business" (mow your neighbours' lawn a couple of times charging some minimal amount, or babysit the grandkids a few times for a nominal fee, or do some ebay "trading", or put up some revenue earning ads on a blog or similar you have, or .... etc, etc, etc), and you can pay voluntary class 2 NICs instead, at a mere £158.60pa vs £800.80 for class 3 (2021/22 costs).

As each additional year gets you (currently) an extra £266.76pa the payback period is a tad over 7 months, which is pretty much a free breakfast, lunch and dinner. :D :D :D

What's more, you can earn up to £1,000 a year from your self-employed "business" totally tax free ... ;)

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Re: State Pension

#448835

Postby monabri » October 8th, 2021, 9:17 pm

mc2fool wrote:
monabri wrote:edit: My state pension forecast indicates that I will not receive the full £179.60 p.w. unless I buy Voluntary Class 3 NI contributions. Current forecast is £160.48. I am retired so I will not make any more years of NI contributions unless I go down the voluntary class 3 route (which I've started to do).

Declare yourself self employed, doing some minor "business" (mow your neighbours' lawn a couple of times charging some minimal amount, or babysit the grandkids a few times for a nominal fee, or do some ebay "trading", or put up some revenue earning ads on a blog or similar you have, or .... etc, etc, etc), and you can pay voluntary class 2 NICs instead, at a mere £158.60pa vs £800.80 for class 3 (2021/22 costs).

As each additional year gets you (currently) an extra £266.76pa the payback period is a tad over 7 months, which is pretty much a free breakfast, lunch and dinner. :D :D :D

What's more, you can earn up to £1,000 a year from your self-employed "business" totally tax free ... ;)



Looks like I'm going to have to invent some grandkids.!


Self-employed people with specific jobs
Some people do not pay Class 2 contributions through Self Assessment, but may want to pay voluntary contributions. These are:

examiners, moderators, invigilators and people who set exam questions
people who run businesses involving land or property
ministers of religion who do not receive a salary or stipend
people who make investments for themselves or others - but not as a business and without getting a fee or commission


Mmmmmm!

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Re: State Pension

#448840

Postby mc2fool » October 8th, 2021, 9:49 pm

monabri wrote:Looks like I'm going to have to invent some grandkids.!

I've heard you can rent them. :D (There's no requirement for your self employed business to make a profit!)

monabri wrote:people who make investments for themselves or others - but not as a business and without getting a fee or commission

You'd think that'd be an obvious one for folks on these boards but I don't recall anyone here saying they'd taken that route. Take a dig through this board to see what others have done.

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Re: State Pension

#448856

Postby swill453 » October 9th, 2021, 12:09 am

I set myself up as an "Internet trader" for a couple of years. Kept records showing I'd bought and sold a couple of hundred pounds worth of stuff on eBay. Made no profit, though nobody asked for the detail.

After paying voluntary class 2 contributions now looking forward to a full state pension.

Scott.

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Re: State Pension

#448859

Postby Lootman » October 9th, 2021, 12:22 am

swill453 wrote:I set myself up as an "Internet trader" for a couple of years. Kept records showing I'd bought and sold a couple of hundred pounds worth of stuff on eBay. Made no profit, though nobody asked for the detail.

After paying voluntary class 2 contributions now looking forward to a full state pension.

Don't gloat too much, or you might spoil it for others.

It has almost become a joke how easy it is to qualify for a full UK state pension. Why work for 30 or 35 years?

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Re: State Pension

#448869

Postby xxd09 » October 9th, 2021, 8:39 am

Keep asking for a State Pension forecast every year or two
This allows you to plan and hopefully discover errors etc
Should be part of your regular financial to do list
xxd09

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Re: State Pension

#448887

Postby monabri » October 9th, 2021, 10:03 am

xxd09 wrote:Keep asking for a State Pension forecast every year or two
This allows you to plan and hopefully discover errors etc
Should be part of your regular financial to do list
xxd09


One can check pension forecasts online via a personal " Government Gateway " account. This displays NI contributions ( full years, missing years), pension details, taxation among other things.

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Re: State Pension

#451735

Postby Bouleversee » October 20th, 2021, 5:30 pm

I should have thought a state pension forecast was pretty useless since the pension changes every year. Here are the latest figures for next year:

https://www.lovemoney.com/news/61140/ho ... e1headline

In short, £141.86 p.w. for the old; £185.17 p.w. for the new.

Being rather ancient, I get the lower rate. I never did understand why older people got less than younger people on retirement (and I think that came into force before the retirement age went up) and should be grateful if anyone could explain. After all, as one gets older and less able, one has to spend a lot of money on help with all the things one used to do oneself, including such things as decorating, assuming one can get the help, which is not always the case, leaving out the cost of personal care when required, which is going to become increasingly expensive. I just don't see the logic.

The article doesn't mention SERPS (Additional Pension). I think I am right in saying that is not increased at the same rate as the basic pension. Why on earth not? SERPS form part of my pension and I don't see why my additional pension should not increase at the same rate as my basic pension when my expenses are subject to inflation in the same way, especially when it ceases on my death, unlike a SIPP which I understand can be passed on to heirs tax free. Perhaps someone could explain that one, too. What a pity my late husband's firm never contracted out.

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Re: State Pension

#451984

Postby ursaminortaur » October 21st, 2021, 1:02 pm

Bouleversee wrote:I should have thought a state pension forecast was pretty useless since the pension changes every year. Here are the latest figures for next year:

https://www.lovemoney.com/news/61140/ho ... e1headline

In short, £141.86 p.w. for the old; £185.17 p.w. for the new.


It is useful since the state pension (and S2P/SERPs) rise by at least inflation hence you know in real terms that you will get at least as much as in the forecast.

Bouleversee wrote:Being rather ancient, I get the lower rate. I never did understand why older people got less than younger people on retirement (and I think that came into force before the retirement age went up) and should be grateful if anyone could explain. After all, as one gets older and less able, one has to spend a lot of money on help with all the things one used to do oneself, including such things as decorating, assuming one can get the help, which is not always the case, leaving out the cost of personal care when required, which is going to become increasingly expensive. I just don't see the logic.


The new "flat rate" pension combines both the old state pension and S2P/SERPs into one as though everyone reaching normal retirement age (NRA) after April 2016 had received a sort of average S2P/SERPs pension. Hence the new "flat rate" SP is perforce larger than the old Basic SP (without any S2P/SERPs). For the purposes of this discussion I'm assuming full sets of contributions and that there was no contracting out of SERPs so that the individual receives the maximum allowed SP.

The calculation for the new "flat rate" SP in 2016 gave a starting amount for the new SP which was the largest of what they were entitled to under the old and new systems so that no-one would be worse of than they would have been under the old system.

Many people had above average S2P/SERPs entitlement because they were contracted into S2P/SERPs and had a relatively high paying job - S2P/SERPs being earnings related - hence many who reached the NRA before April 2016 have a combined basic SP + S2P/SERPs pension larger than the maximum new "flat rate" pension and because of the 2016 starting amount calculation the same applies to some who reached NRA later.

Bouleversee wrote:The article doesn't mention SERPS (Additional Pension). I think I am right in saying that is not increased at the same rate as the basic pension. Why on earth not? SERPS form part of my pension and I don't see why my additional pension should not increase at the same rate as my basic pension when my expenses are subject to inflation in the same way, especially when it ceases on my death, unlike a SIPP which I understand can be passed on to heirs tax free. Perhaps someone could explain that one, too. What a pity my late husband's firm never contracted out.


Although both the basic state pension on the old system and the new "flat rate" state pensiion on the new system rise in line with the triple lock S2P/SERPs rises just with inflation (CPI). This is somewhat unfair on those who reached the NRA before April 2016 as those who retired later get the supposed average S2P/SERPs rolled into their new "flat rate" state pension rising in line with the Triple lock. I think this is down to a combination of two things
1) The government wanting to save money
2) The government wanting the anomaly of those getting more than the maximum new "flat rate" state pension because of their larger than average S2P/SERPs entitlement when calculating the 2016 starting amount to gradually disappear over time. Penalising just them without applying the same rules to earlier retirees with S2P/SERPs payments would itself appear to be unfair.

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Re: State Pension

#451993

Postby Lootman » October 21st, 2021, 1:33 pm

ursaminortaur wrote:Although both the basic state pension on the old system and the new "flat rate" state pensiion on the new system rise in line with the triple lock S2P/SERPs rises just with inflation (CPI). This is somewhat unfair on those who reached the NRA before April 2016 as those who retired later get the supposed average S2P/SERPs rolled into their new "flat rate" state pension rising in line with the Triple lock. I think this is down to a combination of two things
1) The government wanting to save money
2) The government wanting the anomaly of those getting more than the maximum new "flat rate" state pension because of their larger than average S2P/SERPs entitlement when calculating the 2016 starting amount to gradually disappear over time. Penalising just them without applying the same rules to earlier retirees with S2P/SERPs payments would itself appear to be unfair.

The unfairness of that is surely dwarfed by the unfairness of the new system in that how much you earned becomes completely irrelevant. Under the new rules everyone with 35 years of contributions gets the same flat rate pension, whether you earned 10K a year or a million a year. But of course the contributions of the latter are far higher.

The new system is also unfairer because it requires 35 years for the full amount, rather than 30 years.

To me those two factors are far and away the most important reasons why the state pension was massively degraded in 2016, and of course the reason is to save money.

I am in the "after April 2016" group and luckily my 2016 starting pension amount was more than the new flat rate amount. So I am all right Jack but I still think the new system sucks

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Re: State Pension

#452005

Postby mc2fool » October 21st, 2021, 2:00 pm

ursaminortaur wrote:Although both the basic state pension on the old system and the new "flat rate" state pensiion on the new system rise in line with the triple lock S2P/SERPs rises just with inflation (CPI). This is somewhat unfair on those who reached the NRA before April 2016 as those who retired later get the supposed average S2P/SERPs rolled into their new "flat rate" state pension rising in line with the Triple lock.

That's almost but not quite right.

Firstly, it's only the "supposed average* S2P/SERPs rolled into their new "flat rate" state pension" if the post-2016 retiree's "starting amount" is based on their new state pension entitlement at 6-Apr-2016.

If it's based on the old state pension entitlement then it will be their actual Additional State Pension (S2P/SERPS) that will be rolled into their "starting amount", and the whole lot, including that ASP, will be increased by the triple lock ... except ....

... if the "starting amount" is greater than the full new state pension, then only the amount of the full new state pension is increased by the triple lock, and the amount over the full new state pension, which is called the "protected amount", will only be increased by CPI.

* BTW, TBH, I don't think the term "supposed average" here is useful, as while I understand what you mean in regards to it being used to figure how they designed the new state pension system nationwide, there is no "supposed average" number that is rolled into any individual's pension calculation, and we wouldn't want to confuse anyone here into asking what it was for them. ;)

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Re: State Pension

#452014

Postby ursaminortaur » October 21st, 2021, 2:22 pm

Lootman wrote:
ursaminortaur wrote:Although both the basic state pension on the old system and the new "flat rate" state pensiion on the new system rise in line with the triple lock S2P/SERPs rises just with inflation (CPI). This is somewhat unfair on those who reached the NRA before April 2016 as those who retired later get the supposed average S2P/SERPs rolled into their new "flat rate" state pension rising in line with the Triple lock. I think this is down to a combination of two things
1) The government wanting to save money
2) The government wanting the anomaly of those getting more than the maximum new "flat rate" state pension because of their larger than average S2P/SERPs entitlement when calculating the 2016 starting amount to gradually disappear over time. Penalising just them without applying the same rules to earlier retirees with S2P/SERPs payments would itself appear to be unfair.

The unfairness of that is surely dwarfed by the unfairness of the new system in that how much you earned becomes completely irrelevant. Under the new rules everyone with 35 years of contributions gets the same flat rate pension, whether you earned 10K a year or a million a year. But of course the contributions of the latter are far higher.


That is a design feature of the new system which was specifically divorced from earnings so as to boost the amount that lower earners received (In saying it was divorced I'm ignoring the transitional 2016 starting amount calculation which made sure that people didn't lose out by getting less than they would under the old system).

As far as the cost to higher earners the system was odd anyway with the employee NIC rate being a percentage of earnings but that percentage then falling dramatically for those earning above the Upper Earnings Limit.


Lootman wrote:The new system is also unfairer because it requires 35 years for the full amount, rather than 30 years.


Upto, I think 2010, the requirement was for 44 years for a man (and possibly 39 for a woman).

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Re: State Pension

#452015

Postby ursaminortaur » October 21st, 2021, 2:26 pm

mc2fool wrote:
ursaminortaur wrote:Although both the basic state pension on the old system and the new "flat rate" state pensiion on the new system rise in line with the triple lock S2P/SERPs rises just with inflation (CPI). This is somewhat unfair on those who reached the NRA before April 2016 as those who retired later get the supposed average S2P/SERPs rolled into their new "flat rate" state pension rising in line with the Triple lock.

That's almost but not quite right.

Firstly, it's only the "supposed average* S2P/SERPs rolled into their new "flat rate" state pension" if the post-2016 retiree's "starting amount" is based on their new state pension entitlement at 6-Apr-2016.

If it's based on the old state pension entitlement then it will be their actual Additional State Pension (S2P/SERPS) that will be rolled into their "starting amount", and the whole lot, including that ASP, will be increased by the triple lock ... except ....

... if the "starting amount" is greater than the full new state pension, then only the amount of the full new state pension is increased by the triple lock, and the amount over the full new state pension, which is called the "protected amount", will only be increased by CPI.

* BTW, TBH, I don't think the term "supposed average" here is useful, as while I understand what you mean in regards to it being used to figure how they designed the new state pension system nationwide, there is no "supposed average" number that is rolled into any individual's pension calculation, and we wouldn't want to confuse anyone here into asking what it was for them. ;)


Yes, you are correct I just used "supposed average" as a simplification to try to explain things - even with that the complexity was starting to run away from me.

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Re: State Pension

#452017

Postby Bouleversee » October 21st, 2021, 2:48 pm

All that is beyond my comprehension. Although my state pension is paid as a lump sum, the basic pension (old rate) is calculated separately from the SERPS entitlement and they go up at different rates. I don't see why they should and nor do I see why those who didn ' t contract out should be penalised. You would think it would be the other way round, especially as those who contracted out can leave whatever unused benefits which accrued in a pension plan to heirs tax free. The difference between old and new basics is already significsnt and will go on compounding indefinitely. How did the govt. get away with that?

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Re: State Pension

#452019

Postby Lootman » October 21st, 2021, 2:49 pm

ursaminortaur wrote:
Lootman wrote:
ursaminortaur wrote:Although both the basic state pension on the old system and the new "flat rate" state pensiion on the new system rise in line with the triple lock S2P/SERPs rises just with inflation (CPI). This is somewhat unfair on those who reached the NRA before April 2016 as those who retired later get the supposed average S2P/SERPs rolled into their new "flat rate" state pension rising in line with the Triple lock. I think this is down to a combination of two things
1) The government wanting to save money
2) The government wanting the anomaly of those getting more than the maximum new "flat rate" state pension because of their larger than average S2P/SERPs entitlement when calculating the 2016 starting amount to gradually disappear over time. Penalising just them without applying the same rules to earlier retirees with S2P/SERPs payments would itself appear to be unfair.

The unfairness of that is surely dwarfed by the unfairness of the new system in that how much you earned becomes completely irrelevant. Under the new rules everyone with 35 years of contributions gets the same flat rate pension, whether you earned 10K a year or a million a year. But of course the contributions of the latter are far higher.

That is a design feature of the new system which was specifically divorced from earnings so as to boost the amount that lower earners received (In saying it was divorced I'm ignoring the transitional 2016 starting amount calculation which made sure that people didn't lose out by getting less than they would under the old system).

I wasn't suggesting that the change was accidental. But it is unfair on people who earn and contribute more.

If I was embarking on a professional career now, then it would be demotivating to know that over my working life I was going to probably pay in hundreds of thousands of pounds in NICs and then, upon retirement, collect no more than the guy on minimum wage who cleaned the office at night.

I guess nobody would emigrate just for the state pension, and they are always subject to rule changes anyway. But that same young graduate could move to the US where, currently, the state pension is fully earnings-related and where the maximum payout is about £700 a week compared with £180 or so a week here under the new UK rules. That is a stunning difference.


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