State Pension - penalties for early retirement?

H1954

This might make it simpler:-

Susan worked all her life, paid her contribution but made no payments to a personal pension so she was NOT contacted out.

Jenny worked all her life ( same number of years as Susan ) and paid into an occupational pension scheme so she WAS contacted out.

Susan gets full SP but Jenny gets reduced SP plus her Occupational Pension.

So many people have retired and asked me why their SP is less that their friends, and it's mainly because of the Occupational pension - sorry but we can't have our cake and eat it!

Mary did not work until her youngest child was 16, as her husband earned enough for her to afford to stay at home. She did not contribute NI from leaving to have her first child until the third was 16, 30 years later, and then paid voluntary contributions, (which are much lower than compulsory ones) for a few years until she had enough.

She gets the same pension as Susan, who was never able to afford not to work, and whose NI contributions subsidised the health and education of Mary's children.

Now that is having your cake and eating it.

the changes in the pension rules are a bit tricky. if you look after grandchildren at all, claim the special credits. there is no upper or lower amount of time specified for looking after them. the credits could fill in the years between finishing work and getting your pension.
i managed to squeeze 4 years of credits and i paid for one year. so in total i had 43 years of payments or credits-but still dont quite get a full pension

I was born too long ago to get a full state pension. We’ve all been robbed if born before 1953 I think it is.

You can retire when you choose but...State pension is now only paid when you reach your 66th birthday.

It might help some of you who have retired early to help with grandchildren to know about the Specified Adult Childcare credits you might be able to claim, which can boost your state pension.

You need to be looking after a child who's related to you and is under 12 whilst their parent or main carer is working. The NI credit the working parent would have been entitled to if they weren't working can be transferred to the person doing the childcare, which doesn't have to be full-time. The online form is a pain and the whole thing is complicated if the child's parents don't claim the Child Benefit, but it's worth considering.

www.gov.uk/government/publications/national-insurance-credits-for-adults-who-care-for-a-child-under-12-fact-sheet/specified-adult-childcare-credits-fact-sheet

Susie60g

Am i understanding this right. I am now 61 entitled to full sp at 66 can i retire and claim it now?

No.

You can't claim it early but, if you have made sufficient contributions to receive your pension you can stop working whenever you like and start receiving it at retirement age.

Check your forecast to make sure you have sufficient contributions.

Sheshyshowshum

RustyBear, if what the Pensions Advisory Service told me is correct, you can’t top up your State Pension any more, so please check as you might be paying for something you can’t improve on.

Whether you can improve your pension seems to be an individual thing. I also spoke to the Pensions Advisory Service and they advised me that by paying the extra years I could improve my pension. When I rang to ask about topping up, they asked me whether I had spoken to the PAS, and if so whether they had told me I could improve my pension, because not everyone can. Possibly the difference is in whether you were contracted out or not and for how long.
As I have paid for each missing year I have seen my pension forecast go up.
In my case, I need to survive for 2.5 years after pension age to make back the extra I have paid, after that it will be 'profit'

Thanks Pantglas2. I definitely don’t fall into the high earners category. I wondered if it was related to the fact that I’ve been in receipt of carers allowance for the past 20 years in my role as full time unpaid carer. Although unable to be in paid employment during that time I did receive NI credits.
I’ve never been able to find a clear explanation of it online.

That £6 may be from the old Graduated pension from 1970s or from the later SERPS GrannyNW.

A lot of people (high earners) will get their SERPS on top of their SP for another 5 years when it will be phased out.

I was a teacher who retired at 55 and took an actuarily reduced pension. I was rather appalled to find that, despite paying 36 years' worth of NI contributions, my state pension was going to be reduced because I was in receipt of the teacher's pension.

So I applied to make class three NI voluntary contributions and I pay about £70 a month to have a as-near-as-dammit full pension at 66.

I worked out that if I live to 72 I will be quids in. If I die before then the government wins.

That is as near to gambling as I will ever be!

I’ve been in receipt of my state pension since July. Could I please ask a question some of you knowledgeable G’netters might be able to answer.
I was expecting to receive £175 a week as I had enough qualifying years. But was pleasantly surprised to find I receive an additional £6 “protected payment” To be honest I don’t really understand what it is although I’m grateful to have it.

I took ill-health early retirement at 54, and got a very part-time job to eke out my pension. When I moved I signed on at te job centre, but saw a young man there, after several months, who asked me why I was wasting petrol to do it as I already had enough contributions for a full pension, so I stopped and later received a full pension. Check your contribution status and if you can retire early - do! It's the best thing I ever did.

RustyBear, if what the Pensions Advisory Service told me is correct, you can’t top up your State Pension any more, so please check as you might be paying for something you can’t improve on.

I’m 62 and have 39 full years. I’ve calculated that I’m currently about £25 a week short of the full state pension. I took early retirement at 57; the organisation I worked for was one of those that had contracted out. I do the occasional bit of freelance work and have recently had a bill from HMRC for £156 - Class 2 contributions. I live alone and manage very well on my occupational pension. To be honest, I plan to carry on working occasionally for as long as I can as I enjoy the work.

Ah but you can have your cake and eat it now H1954.

A nursing friend took her NHS pension at 60 in 2016, has continued to work part time since and the NI contributions she currently pays will up her State Pension by £4-5pw for each year she continues.

sorry but we can't have our cake and eat it!

People used to though, didn’t they? Under the old system the contracted out years would still count towards the basic pension, just not to the top up element that used to be SERPS. Who could have known that would change when we were being urged to opt out in the 80s?

For a couple of my contracted out years I paid into a company pension that was embezzled by the trustees. So it’s a bit of a lose/lose situation for me there.

On the other hand I have friends who worked in banking and other areas with non-contributory pension schemes who have got them and the full SP, as they were never contracted out.

This might make it simpler:-

Susan worked all her life, paid her contribution but made no payments to a personal pension so she was NOT contacted out.

Jenny worked all her life ( same number of years as Susan ) and paid into an occupational pension scheme so she WAS contacted out.

Susan gets full SP but Jenny gets reduced SP plus her Occupational Pension.

So many people have retired and asked me why their SP is less that their friends, and it's mainly because of the Occupational pension - sorry but we can't have our cake and eat it!

I retired at 58 and had to wait over 2 years for my state pension as I was born in 1950 ( yes I know, very lucky! ). Because I had enough contributions I got what I was entitled to. I survived for the 2 years on my occupational pension plus savings. Best thing I ever did and still enjoying it all. Swam 36 lengths this morning ??
My pension is £144.29 per week but I have it paid every 4 weeks. I missed out on the increased rate. Work out your sums, outgoings v income. It’s amazing how you can budget.

Going back many years. When my husband had to retire at 57 because of his health he paid voluntary contributions until he met the required number.

I didn't claim my pension for 10 years. Be very very careful when you do, as you could be taxed on it, if you are paying tax already.

I retired at 61 and although I had 40 years of contributions some of those were contracted out so I still have to carry on contributing until April 2022, the last full year before my 66th birthday in order to get a full pension. I’ve been paying each year as it ends, but you can set up a direct debit to pay monthly or weekly. Though I am still waiting for them to update to say how much I need to pay for 2019-20; in previous years it was there by May or June, so they are obviously a bit behind this year.
If you’re checking your entitlement on the gov.uk site, do make sure you look at the actual figure, not the headline in a big green box, which just tells you the maximum you can get if you make full payments. Underneath it will tell you how much you will get if you don’t pay any more, and you can click on a link to see where the gaps are. You can pay for gaps in the last 6 years, but not before that.

Contracted out means that you paid less NI while working for certain employers, as a teacher I was contracted out for over 20 years. You have no choice, it depends on the occupational pension scheme. Technically because you paid less NI, you could have invested that amount for your retirement - but I don't know anyone who did! In fact, I was not aware that I was contracted out until a few years ago.

However, I retired at 60 and have lived on my occupational pension and savings since then. I've got 3 more years until I get my SP but have no regrets about retiring.

I had exactly the same questions as you. I’m 62 with 45 years of NI contributions and had been opted out by my firm due to being in their final salary pension scheme at the time and was concerned that my forecast of the £175 might not be the true figure. I answered all their questions as to Contracted Out Pension Equivalent (COPE). So get your government forecast first and call the “The Pensions Advisory Service (TPAS)” which is a Government-backed organisation 0800 011 3797, and they will tell you what you need to know. I’m so much more relaxed now I know for sure what I will get.

I found this information via “This is Money” in the Daily Mail. I tried calling the pensions department directly, but they won’t even take your call unless you’re a few months of retirement age. Good luck

Most ‘contracted out’ would be if you worked in public services or larger private sector firms although in my case it was a personal pension.

As I took early retirement in 2017 at age 61, I was £10 short (two years) for the full £175.20pw (@ April 2020) so made the decision to buy those years at a total £1450.

I calculated that I would get that sum back in just less than 3 years of SP age in 2021, based on my current good health it was a gamble I willingly paid.

Can someone explain 'contracted out' please?
Is this something one had to do personally or something that just happened?
Thanks in advance