Rise in Pension Age

It certainly isn’t is it Callistemon?

maddyone

It certainly isn’t is it Callistemon?

I could spend a happy morning looking up what it all means but other things beckon

I couldn’t be bothered either Callistemon. Looking it up wouldn’t change anything and would waste a lovely day (I’m putting off making my simnal cake till tomorrow since the weather is so lovely and we’re going out walking this afternoon.)

M0nica

For a long time I do not think contracting in or out was a choice. The scheme our employer was one or the other and so were you. That certainly applied to me.

I lost far more pension by rules saying, in my early working days, that if you changed your job after less than 5 years with a company, your contributions were returnedb to you, because part-timers were not allowed to join pension schemes and that credits for domestic responsibilities only started the year before I retuned to work.

I lost 7 years of state pension and 12 years of occupational pension that way.

This is similar to my story. I worked in the civil service for a few years, left there and had my 'superannuation' returned, then (after studying for a few years) went into FE teaching on term-time contracts. Although I worked the same hours as full-time staff (who didn't work in the holidays either) I was counted as part-time, so couldn't join the pension scheme. I then moved to HE and was finally able to join an occupational pension at the age of 37. At no point was I credited for domestic responsibilities, although of course I had those as well as my work responsibilities.

I was contracted out with a COPE of about £55 a week. I realise that there are those who knew what this meant, and the full implications of how it would impact on their retirement, but I wasn't told - I think the pension scheme had opted out before I joined it, and as I hadn't been in one before I wouldn't know any different. My payslip would show tax, NI and pension contributions as offtakes, and I just accepted that. I'm not sure what I could have done about it if I had known - maybe buy an additional pension - but there is no point in wondering what I would have done, as I was unaware that some of the NI I was paying was being diverted into my pension. By the time I started checking online and could see the impact of being contracted out it was too late - I had assumed that I would have a full state pension on top of my occupational one, as I had paid NI since the age of 16. I have never not worked and contributed. I don't think I was stupid for not knowing, and resent the implication that I was.

I have looked at my state pension forecast. It stated that in 7 years time, I will have my full state pension. I have paid 36 years of NI contributions, no missing years.

But it also stated that I have contracted out with COPE of about £42.06 per week but my state pension forecast is not affected by this???

What exactly does this mean? Will my state pension be less than the full state pension by £42.06 per week?
How do I rectify this problem? Can I pay additional NI contributions?

I have stopped advising anyone on their pension. It is all too complicated.

Some people like myself are self employed. Which further complicates matters.
Even advisors put me through to someone higher up, as they are not qualified in class 2 contributions.
I have to have 38 years contributions. Apparently. I couldnt tell you why.

Doodledog your story is so very similar to mine. I was teaching for three and a half years when I was first qualified and I paid superannuation contributions as well as NI. When I left to have my first baby, as most people did then, the superannuation contributions were repaid to me with the consequence that I lost over three years of contributions on my professional pension when I finally claimed it many years later. When I returned to teaching I worked part time for a year and no superannuation was taken and this then removed a further year of contributions from my final professional pension. Only when I went full time did I start to pay superannuation contributions again. Thus I lost over four years of contributions that would have made my final professional pension bigger.
Additionally I received no information about the fact that I was contracted out when I returned to teaching and I had no idea it was even happening. I finally found out about that shortly before I drew my first state pension aged 63.

SporeRB

I have looked at my state pension forecast. It stated that in 7 years time, I will have my full state pension. I have paid 36 years of NI contributions, no missing years.

But it also stated that I have contracted out with COPE of about £42.06 per week but my state pension forecast is not affected by this???

What exactly does this mean? Will my state pension be less than the full state pension by £42.06 per week?
How do I rectify this problem? Can I pay additional NI contributions?

The COPE (contracted out pension equivalent) is the amount that your state pension has been reduced because that £42 is being paid in your occupational pension. The amount you get in your state pension will be reduced - it's weasel words really. You shouldn't be worse off than you would have been if you had paid into the state scheme instead of the occupational one, as you will get that £42 as part of your OP, but you can (IMO) be forgiven if, like me, you were expecting to get both.

You may be able to pay additional NI contributions, at a rate of £800 a year, but the deadline for buying years before 2016 is fast approaching, so you need to get onto it ASAP. The Pensionline people are very helpful, but unable to give advice. The chances are, though, that if you are able to buy the years back you should, as you will then get both your occupational and state pensions, putting you back in the position you probably thought you were in already. If you ask 'what will my pension be if I buy the years, and what will it be if I don't?' they
can answer that without giving advice and it will be obvious what you should do if you can afford it. You don't have to buy back all the years if it's too expensive - you will get a slightly higher weekly pension for every year you buy.

It's infuriating, particularly as you have made so many contributions, but the system is very unfair, IMO.

Germanshepherdsmum

Contracting out did affect the old sp. I receive the old one but less than the full amount due to having been contracted out.

Maybe you have further information about that because I'm fairly sure contracting out didn't affect the old state pension. I looked into it all in detail when the new state pension was announced. For a very short time, I had expected to receive my occupational pension in addition to my state pension without any deductions, as I have 48 years of NI contributions. Then, when the details of the changes were published, I spotted the clauses about deductions as a result of COPE and had to re-calculate. Nobody seemed that interested at the time. The conservative media were more interested in hyping up the generosity of the new scheme and people on the old state pension wanted to complain that they were being left behind. On the whole, people weren't interested in the facts and details - until they started being affected by it.

BTW younger people won't be affected because they can't pay reduced NICs. NI is currently over 13% of gross income, which means some lower paid workers pay more in NI than income tax. None of us on GN paid anything like that rate of NI and those who rely on unearned income, such as letting property, don't pay NI at all.

I assure you that being contracted out has affected my old sp quite considerably. I would have been better off overall being contracted out if my private pension provider hadn’t gone bust.

growstuff

Germanshepherdsmum

Contracting out did affect the old sp. I receive the old one but less than the full amount due to having been contracted out.

Maybe you have further information about that because I'm fairly sure contracting out didn't affect the old state pension. I looked into it all in detail when the new state pension was announced. For a very short time, I had expected to receive my occupational pension in addition to my state pension without any deductions, as I have 48 years of NI contributions. Then, when the details of the changes were published, I spotted the clauses about deductions as a result of COPE and had to re-calculate. Nobody seemed that interested at the time. The conservative media were more interested in hyping up the generosity of the new scheme and people on the old state pension wanted to complain that they were being left behind. On the whole, people weren't interested in the facts and details - until they started being affected by it.

Here’s the government factsheet covering this.
www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension/the-new-state-pension-transition-and-contracting-out-fact-sheet
20% of people are affected as GSM has been if I read it correctly.

Casdon That's about the new state pension. Contracted out people on the old state pension never did receive SERPs (additional pension), but they did receive the full pension entitlement (depending on the number of full year contributions), no matter whether they were contracted out.

If GSM receives the old state pension, she hasn't been affected by deductions.

Germanshepherdsmum

I assure you that being contracted out has affected my old sp quite considerably. I would have been better off overall being contracted out if my private pension provider hadn’t gone bust.

In that case, contact a pension adviser. It shouldn't have been.

Sorry, this one covers the pre 2016 contracting out arrangements as well as the new pension post 2016. As you said growstuff the basic pension was protected under the old arrangements, but not the additional state pension, so it’s quite possible that people retiring before 2016 who were contracted out receive the lowest rate. If they hadn’t been contracted out, and had paid SERPs from 2002, presumably they would have been able to enhance their basic pension though?

assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1030365/contracting-out-and-the-cope-amount-in-the-online-statement-service.pdf

The point of my being contracted out was that the government made payments into my private pension. So the idea was that despite having a lower sp I would be better off overall due to the enhanced private pension, had EL not gone bust. I wouldn’t expect the contributions to my private pension and a full sp - that would be having your cake and eating it. It’s just my misfortune to have chosen EL, as so many professionals did at the time.

Germanshepherdsmum

The point of my being contracted out was that the government made payments into my private pension. So the idea was that despite having a lower sp I would be better off overall due to the enhanced private pension, had EL not gone bust. I wouldn’t expect the contributions to my private pension and a full sp - that would be having your cake and eating it. It’s just my misfortune to have chosen EL, as so many professionals did at the time.

That does seem unfair I agree.

It is unfortunate, rather than unfair, as if EL had provided excellent returns their investors would have profited. Private pensions are a gamble, which is why the state one needs to be reliable and transparent, so that everyone knows what to expect and when to expect to get it. It is based on a compulsory contribution (from those who work) and we have no say in where or how (or if) the money is invested. The fact that it is basically a ponzi scheme is not the fault of the contributors, and the smug 'there is no pot - you are lucky to get anything at all for your decades of payments' comments, along with 'why should younger people pay for your pension?' and 'families on benefits should come first' are missing the point, and it shouldn't make any difference whether people receiving the state pension have made other provision or not.
People paid in, whether they liked it or not, and did so on the understanding that the government would pay out when the time came, and made plans accordingly.

How the government find the money to do that is not our problem. If it became obvious that there would be a shortfall, it would have been fairer to increase NI, and to increase the government payments so that there would be enough for them to fulfil their obligations. They were happy to take 'payment holidays' from schemes that were deemed to be growing too quickly, so it's only fair that they should have plugged the gaps if the state one slowed down.

I understand what you’re saying Doodledog. It’s the loss of the government’s contributions to a private pension scheme that I thought was unfair on an individual, I do appreciate that private schemes carry a higher risk.

EL pensioners received some compensation, but in my case and probably most, not much. At least I was still working and could transfer what was left elsewhere, and the whole sorry business has led to much tighter regulation, but with the benefit of hindsight I would never invest in a private pension again. My occupational pension for the few years that I worked for very low pay in local government - untransferrable - has performed well. It demonstrates what can be achieved in retirement if you spend your life working 9-5 in local government, as I did for a few years - not a good salary but set hours, flexitime and what would have been a very nice pension. I wouldn’t have gone back to local government though if you’d paid me. The rewards in the private sector - not only financial but freedom of thought and working with clever people who weren’t just treading water until they retired - were far greater than working set hours and a nice early pension.

The argument used why should younger people pay for your pension is so very selfish. The answer surely is because I paid for the pensions of older people than I am because that’s how it’s done.

maddyone

The argument used why should younger people pay for your pension is so very selfish. The answer surely is ^because I paid for the pensions of older people than I am because that’s how it’s done.^

Agreed, maddyone.

GSM, that sounds as though you think that public sector workers are less clever than those in the private sector, and that only private sector workers are capable of independent thought. Surely, that's not what you meant?

Germanshepherdsmum

The point of my being contracted out was that the government made payments into my private pension. So the idea was that despite having a lower sp I would be better off overall due to the enhanced private pension, had EL not gone bust. I wouldn’t expect the contributions to my private pension and a full sp - that would be having your cake and eating it. It’s just my misfortune to have chosen EL, as so many professionals did at the time.

But ... but ... but ... you wouldn't have had a lower state pension under the old system, apart from SERPs. Your basic pension would not have had any deductions from being contracted out. The idea was that people should pay into a private pension in return for paying lower contributions. You were swapping SERPs for a private pension - NOT the basic pension.

When the changes were introduced, SERPs were abolished. The justification for the higher rate was to compensate people for the loss of SERPs, which actually meant some people with low contributions will benefit. It was in the "small print" that people who had contracted out would have deductions from their basic pension because they had not been paying the full NI rate.

BTW SERPs usually pay far less for the amount paid in than a private pension. Additionally, private pension payments aren't taxed whereas NI payments are, which means that higher rate taxpayers (which you've told us you were GSM) effectively had their pension contributions subsidised by the government at a much higher rate than people paying basic rate (or no) income tax.

Doodledog

maddyone

The argument used why should younger people pay for your pension is so very selfish. The answer surely is ^because I paid for the pensions of older people than I am because that’s how it’s done.^

Agreed, maddyone.

GSM, that sounds as though you think that public sector workers are less clever than those in the private sector, and that only private sector workers are capable of independent thought. Surely, that's not what you meant?

Oh, I think it was exactly what she meant.

maddyone

I couldn’t be bothered either Callistemon. Looking it up wouldn’t change anything and would waste a lovely day (I’m putting off making my simnal cake till tomorrow since the weather is so lovely and we’re going out walking this afternoon.)

I agree with you maddyone. Sometimes, I think I could get all bitter and twisted about how my life has turned out. My philosophy is that I can't turn the clock back, I make the best of what I have and try not to waste time and energy on negative emotions. I have limited time left and I'm determined to enjoy it. It's actually quite satisfying to find loads of things I can do for free or very little money.