State Pension Calculation

[Dicky99]

I wonder if someone can clear up a difference of understanding between myself and a couple of pals regarding the state pension calculation.
We all worked together in the past in local government roles and so were in a contracted out final salary scheme.
I stopped working on the last day of March 2021. The other two had already stopped working 2 years priors to me and 3 years prior respectively. We all have more than 35 years NI contributions, in my case 39 years.
My understanding is that, despite having 39 years contributions, I will be 5 years contributions short of getting the full state pension because I only have 4 years of contributions post the 2016/17 changes.
They will both have less post 2016/17 contributions than me but are both stating with certainty that they will get the full state pension and I'm wondering if they are taking the Gov gateway forecast of their pension amount as certain amount.

[mc2fool]

My understanding is that, despite having 39 years contributions, I will be 5 years contributions short of getting the full state pension because I only have 4 years of contributions post the 2016/17 changes.

It's entirely possible that despite having 39 qualifying years you'll be short of the full new state pension, but it won't be because you only have 4 qualifying years 2016/17 onwards -- although filling any/some 2016/17 onward gaps will help.

The transition to the new state pension system, on 6-Apr-2016, involved calculating a "starting amount" for everyone that had any pre-2016 years (and wasn't already getting a state pension), being the higher of what you'd have got as of that date under the old system (including Additional State Pension) or under the new system if it had always been in existence less a Contracted Out Pension Equivalent (COPE) amount.

Unless you have any 2006-2016 gaps in your record I won't bother to do that calculation for you, as there'll be nothing practical you can do about it, but if you're curious there are a number of such calculations I've done for others on this board; search within it for COPE. It's the differences in the "starting amount" due to different work histories that's likely to make up a good part of the difference between you and your chums.

Assuming that's the case, then the online forecast for your pension tells you what you need to know, although it does confuse some, so if it's not clear then do post the figures (and dates) from it (all of them) here for clarification.

The practical rule 2016/17 onwards is simple: it doesn't matter how many years you've got already, if you're not already (i.e. from your NI record up to 5-Apr-2022) at the full new state pension amount (currently £185.15pw) then each additional 2016/17 onwards qualifying year will get you an extra £5.29pw until either you read the full amount or you reach state pension age, whichever comes first.

[Urbandreamer]

They will both have less post 2016/17 contributions than me but are both stating with certainty that they will get the full state pension and I'm wondering if they are taking the Gov gateway forecast of their pension amount as certain amount.

The Gov gateway calculation is confusing isn't it. I queried it a few years ago with a pension adviser that the firm had provided and was told that if it said XYZ then that was correct. However I'm still unsure and feel that I won't truly know know until I claim.

I too was contracted out, but according to the gateway will receive a full pension. Confusingly it also states how much contracting out has "cost" me. The quotes are because the point of contracting out was that the funds were given to a pension scheme to increase the scheme's payouts/performance.

One thing to remember is that the 35 "full" years required for a "full" state pension are not 35 working or contributing years. Years in education or bringing up a child can count. Hence it is possible that you have more than 39 qualifying years.

The system is absurdly complicated.

Ie, because of my age I was given an extra 3 qualifying years, which you and your friends may also benefit from.

https://www.thisismoney.co.uk/money/pen ... rsity.html

[mc2fool]

One thing to remember is that the 35 "full" years required for a "full" state pension are not 35 working or contributing years. Years in education or bringing up a child can count. Hence it is possible that you have more than 39 qualifying years.

Non-working qualifying year credits are included in the presented total. If it says he has 39 qualifying years that'll be it.

The main thing to remember is that 35 "full" years required for a "full" state pension is only true for folks starting in or after 2016. For folks with any pre-2016 years it's just not true (except by luck) and it's possible to get a full new state pension with less than 35, to need more than 35, or to never get a full one irrespective of how many years they've got.

[AF62]

...and I'm wondering if they are taking the Gov gateway forecast of their pension amount as certain amount.

I strongly suspect that to be the case, or they are just thinking about the '35 year rule' that everyone misunderstands - I have 42 years of full contributions and still need to pay for two more to get the full new state pension amount of £185.15.

My suggestion would be for *all* three of you to go to http://www.gov.uk/check-state-pension and see what it says under the "Estimate based on your National Insurance record up to 5 April 2022" section because that's what you will actually get if you do nothing else.

And then perhaps fill in a BR19 for a 'belt and braces' check as those are prepared manually and occasionally identify mistakes in the automatic online system.

[mc2fool]

Unless you have any 2006-2016 gaps in your record I won't bother to do that calculation for you...

Just to add a little to that, even if you have any 2006-2016 gaps, if you had 35 years or more on 5-Apr-2016 then filling any pre-2016 gaps won't help.

Filling pre-2016 gaps will only definitely help if you had less than 30 years on 5-Apr-2016, and may or may not help if you had 30-34 years then -- and even if filling a 2006-2016 gap would help it may not be worth it (e.g. only raises your pension by a very small amount) or be the best thing to do (filling a post 2016 gap may be better).

The calculations are a bit of a faff which is why I say I'll only do it for you if it could make a practical difference, and that means you having some 2006-2016 gaps and having had less than 35 years on 5-Apr-2016.

[Dicky99]

The transition to the new state pension system, on 6-Apr-2016, involved calculating a "starting amount" for everyone that had any pre-2016 years (and wasn't already getting a state pension), being the higher of what you'd have got as of that date under the old system (including Additional State Pension) or under the new system if it had always been in existence less a Contracted Out Pension Equivalent (COPE) amount.

Between 1980/81 and 2016/17 there are 39 years of which 37 full years and 2 incomplete years which were 84/85 and 85/86 when I was in FT Education.

I've established my COPE amount is £46.35 so under the new system I guess £185.15 less that = £138.80 plus 4 x years @ £5.29 = £159.89
I can't compare to the amount under the old system without a starting amount which I don't know, but I would imagine the final amount would be quite similar.

[y0rkiebar]

I've established my COPE amount is £46.35 so under the new system I guess £185.15 less that = £138.80 plus 4 x years @ £5.29 = £159.89
I can't compare to the amount under the old system without a starting amount which I don't know, but I would imagine the final amount would be quite similar.

It's my understanding that you don't deduct the COPE amount from your state pension forecast. The COPE amount is an indication of additional income you may get from a contracted out scheme.

[mc2fool]

The transition to the new state pension system, on 6-Apr-2016, involved calculating a "starting amount" for everyone that had any pre-2016 years (and wasn't already getting a state pension), being the higher of what you'd have got as of that date under the old system (including Additional State Pension) or under the new system if it had always been in existence less a Contracted Out Pension Equivalent (COPE) amount.

Between 1980/81 and 2016/17 there are 39 years of which 37 full years and 2 incomplete years which were 84/85 and 85/86 when I was in FT Education.

I've established my COPE amount is £46.35 so under the new system I guess £185.15 less that = £138.80 plus 4 x years @ £5.29 = £159.89
I can't compare to the amount under the old system without a starting amount which I don't know, but I would imagine the final amount would be quite similar.

No, that's not the way it works (and is not what I said ). The COPE is used in determining your 2016 starting amount, at 6-Apr-2016, not your pension forecast now. And it's a 2016 figure, whereas the rest of the figures you are using are 2022/23 figures.

As you don't have any fillable pre-2016 years, and hence there is no practical use to doing the starting amount calculation, I'll leave you to do it if you're just curious about what yours is. Here's one that I did recently for another Lemon (in their case their COPE was zero, but you'll stick in your own figures anyway). viewtopic.php?p=572898#p572898

For your case the practical matter is what you (can) do about any 2016/17 onwards (inclusive) gaps and what to do going forwards. So:

a) How much does the online forecast say for "Estimate based on your National Insurance record up to 5 April 2022"?
b) Do you have any missing (not full) years from 2016/17 onwards (inclusive), and if so, which?
c) In which tax year will you reach state pension age?

[Dicky99]

a) How much does the online forecast say for "Estimate based on your National Insurance record up to 5 April 2022"?
b) Do you have any missing (not full) years from 2016/17 onwards (inclusive), and if so, which?
c) In which tax year will you reach state pension age?

a) £185.15
b) stopped working on 31/3/2021 so 2021/22 & 2022/23
c) May 2031

Thanks
D

[mc2fool]

a) How much does the online forecast say for "Estimate based on your National Insurance record up to 5 April 2022"?
b) Do you have any missing (not full) years from 2016/17 onwards (inclusive), and if so, which?
c) In which tax year will you reach state pension age?

a) £185.15
b) stopped working on 31/3/2021 so 2021/22 & 2022/23
c) May 2031

That's already the full new state pension amount, so you can't get any more by adding any more qualifying years, not past (21/22), present (22/23) or future.

That's it. Be happy!

[swill453]

so you can't get any more by adding any more qualifying years

Doesn't it say that, explicitly, on that page anyway?

Scott.

[Dicky99]

Well all this discussion with my pals started on the basis of to what extent the "forecast" amount of state pension shown on the .gov pension website can be taken as a definitive of what we will actually be paid, given that none of us will add any further contributions. Sounds like the answer is that the forecast can be relied upon.

[Dicky99]

so you can't get any more by adding any more qualifying years

Doesn't it say that, explicitly, on that page anyway?

Scott.

Kind of and perhaps I'm trying to read too much into it but it says "you cannot improve your forecast any more". But it also says "39 years full contributions, 9 years to contribute before 5 April 2031". The former would be clearer if it stated "you cannot improve your pension amount any more" and the latter could be read that further years contributions are required to satisfy the forecast

[Lootman]

it says "you cannot improve your forecast any more". But it also says "39 years full contributions, 9 years to contribute before 5 April 2031". The former would be clearer if it stated "you cannot improve your pension amount any more" and the latter could be read that further years contributions are required to satisfy the forecast

But aren't there always two numbers?

1) The most number of extra years that you can contribute and get anything in return in terms of more SP, and

2) The most number of years you can contribute regardless of whether it gets you anything in return or not, i.e. your retirement age minus your current age.

If you are under retirement age and still work, then you have to pay NICs as they are a tax on working, even if you get nothing for it. A good reason, perhaps, to not work more years. But certainly a good reason not to voluntarily buy back extra years. In fact DWP should refuse to let you do that.

[mc2fool]

Well all this discussion with my pals started on the basis of to what extent the "forecast" amount of state pension shown on the .gov pension website can be taken as a definitive of what we will actually be paid, given that none of us will add any further contributions. Sounds like the answer is that the forecast can be relied upon.

Of course it's not definitive of what you will actually be paid! That's why it's just called a forecast, although I agree that they should perhaps put an asterisk after forecast* and have a footnote.

* The amount shown is just a forecast, it is not a commitment, promise, contractual amount, covenant or any kind of guarantee. It is almost certainly not what you will actually receive. If you're lucky it will be more because of general increases in the state pension before you reach state pension age. On the other hand before then the government may decide to reduce, restrict, means test or employ some other way to change the state pension that will screw you over. The amount shown is based on current legislation and numbers, and that's why it's just a forecast.

[Dicky99]

* The amount shown is just a forecast, it is not a commitment, promise, contractual amount, covenant or any kind of guarantee. It is almost certainly not what you will actually receive. If you're lucky it will be more because of general increases in the state pension before you reach state pension age. On the other hand before then the government may decide to reduce, restrict, means test or employ some other way to change the state pension that will screw you over. The amount shown is based on current legislation and numbers, and that's why it's just a forecast.

maybe I should have put my own asterisk stating that my intention in the OP was not to establish today what my payment in pounds, shillings and pence will be in 2031 but to establish, assuming the rules do not change in the interim, whether I will get the full state pension or not get the full state pension