Petition on Why the old state pension is £200 pm less than the new

The old state pension has two elements. Basic Pension and Additional State Pension. The new state pension is a fixed amount based only on how many full years of NIC you have.

To receive Additional State Pension you had to pay contributions under SERPS and/or the Second State Pension scheme (SP2) which superceded it. SP2 came to an end on 5 April 2016.

If you were contracted out of SERPS or SP2, you paid reduced NIC. You should have received a workplace pension at least equal to the Additional State Pension you would have received had you not been contracted out. This is known as the Guaranteed Minimum Payment (GMP).

It isn’t that simple because of the many and various changes that were made to SERPS and SP2 while they existed. People may have various compensatory adjustments to their pensions as a result.

This paper from Steve Webb, a former pensions minister under the coalition, instigator of the triple lock and now partner at Lane, Clark Peacock, explains the complexities of contracting out and how it affects state pension entitlement under both the old and the new state pension systems. It is a long and complicated read but I urge people to read it to see how it relates to them:

www.lcp.com/media/1150050/why-is-money-being-deducted-from-my-state-pension.pdf

(The title of the URL is misleading as it also covers cases where money is added to the state pension.)

The maximum Additional State Pension someone can have built is £204.68. That is paid on top of the maximum basic pension of £156.20 (if you have enough contribution years). Therefore it is possible for someone with a full record of NIC, including maximum SERPS and SP2, to have a total old state pension of £360.88 per week.

Under the New State Pension scheme it is no longer possible to build an Additional State Pension. The maximum new state pension is £203.85.

There are transitional arrangements for people whose pensionable age means they receive the new state pension but who paid SERPS and SP2 before 6 April 2016. They should not lose out as a result of the changes. A comparision is made to see whether they would have received more under the old system. If they would have been better off under the old system they receive a Protected Payment on top of the new state pension. Here is a very simple example:

Someone with enough contribution years for a full state pension under either system:

Under basic pension rules £156.20
Additional State Pension say £50.00
Total Pension £206.20

Under new state pension rules £203.85
Protected payment £2.35
Total Pension £206.20

Bear in mind that the new system will eventually comprise only people whose entire NIC history will be post 5 April 2016.

There are still many people who are not part of a workplace pension scheme. According to government figures for 2022, 88% of eligible employees were participating in a workplace pension which means that 12% of people were not. One 2022 survey revealed that more than 1 in 5 people have either opted out or are considering opting out of their pension scheme in response to rising inflation. (The DWP’s own figures were more modest, with opt-out rates increasing 10.4% overall but it's a worrying trend. )

In other words. one could argue that the higher rate of the new state pension is and will be a safety net for those who may not have a workplace pension and can no longer build an Additional State Pension - similar to pension credits being used to boost someone's pension.

I don’t believe the equalisation of pension age introduced in the Pensions Act 1995 is a factor in the rate of the new state pension. Men also come within one or other system but are only affected by the increase in pension age introduced in the Pensions Act 2011.

I do not know what actuarial calculations were made to arrive at the new state pension (other than those described in Webb’s paper) but it’s worth noting that until very recently, the rate at which NIC has been levied has increased year on year. By 2022 it was 13.25%. By comparison, the contracted-in rate in 1978 was only 6.5%. Over time, it more than doubled. As wages have risen so have NIC contributions until very recently. Younger pensioners may have contributed far more in NIC than older pensioners and that may have factored into actuarial calculations.

In summary, we know that state pension is a contributory benefit. Under the old system, people were able to contribute to an Additional State Pension or were contracted out and received an equal or better workplace pension under GMP. That is no longer the case.

It is perfectly possible for someone on the old system to receive £157 per week more than someone on the system.

Thanks TinSoldier

I will download that and read later, plus your explanatory post.

We retired at 60 because that was retirement age. For the most part we started full time work at 15 often because of the need to contribute towards the household expenses. There was no question of further or higher education at least not in the area I lived

I was in exactly the same position with unsupportive parents who had no interest in helping me improve my prospects. I had to do it myself by studying part time to achieve professional qualifications.

I retired (from employed work) at 60 and am 80 this year, So I am being screwed over by a rotten system.

Thanks for that very full explanation TinSoldier. I knew that some people in receipt of the old state pension receive considerably more than the "basic", but I wasn't sure of the details.

TBH the new system is more transparent. The old system was an absolute mess, with some people being topped up by pension credit and added benefits anyway and others being left with a pittance.

I have just checked Callistimon. SP for 23/24 is currently £156 for 23/24 do we get a raise to £169 in April. Every little helps.

Yes it’s a mess why am I not surprised. 😳

silverlining48

I have just checked Callistimon. SP for 23/24 is currently £156 for 23/24 do we get a raise to £169 in April. Every little helps.

Yes it’s a mess why am I not surprised. 😳

Yes, that's the starting point, but people who weren't contracted out should receive SERPs/SP2. If they're single and their income is below the amount of the new state pension, they will probably be eligible for pension credit, which is a gateway benefit and opens up some other benefits.

It's really complicated, which is why it's not a simple as saying people should all receive the same pension.

TinSoldier

The old state pension has two elements. Basic Pension and Additional State Pension. The new state pension is a fixed amount based only on how many full years of NIC you have.

To receive Additional State Pension you had to pay contributions under SERPS and/or the Second State Pension scheme (SP2) which superceded it. SP2 came to an end on 5 April 2016.

If you were contracted out of SERPS or SP2, you paid reduced NIC. You should have received a workplace pension at least equal to the Additional State Pension you would have received had you not been contracted out. This is known as the Guaranteed Minimum Payment (GMP).

It isn’t that simple because of the many and various changes that were made to SERPS and SP2 while they existed. People may have various compensatory adjustments to their pensions as a result.

This paper from Steve Webb, a former pensions minister under the coalition, instigator of the triple lock and now partner at Lane, Clark Peacock, explains the complexities of contracting out and how it affects state pension entitlement under both the old and the new state pension systems. It is a long and complicated read but I urge people to read it to see how it relates to them:

www.lcp.com/media/1150050/why-is-money-being-deducted-from-my-state-pension.pdf

(The title of the URL is misleading as it also covers cases where money is added to the state pension.)

The maximum Additional State Pension someone can have built is £204.68. That is paid on top of the maximum basic pension of £156.20 (if you have enough contribution years). Therefore it is possible for someone with a full record of NIC, including maximum SERPS and SP2, to have a total old state pension of £360.88 per week.

Under the New State Pension scheme it is no longer possible to build an Additional State Pension. The maximum new state pension is £203.85.

There are transitional arrangements for people whose pensionable age means they receive the new state pension but who paid SERPS and SP2 before 6 April 2016. They should not lose out as a result of the changes. A comparision is made to see whether they would have received more under the old system. If they would have been better off under the old system they receive a Protected Payment on top of the new state pension. Here is a very simple example:

Someone with enough contribution years for a full state pension under either system:

Under basic pension rules £156.20
Additional State Pension say £50.00
Total Pension £206.20

Under new state pension rules £203.85
Protected payment £2.35
Total Pension £206.20

Bear in mind that the new system will eventually comprise only people whose entire NIC history will be post 5 April 2016.

There are still many people who are not part of a workplace pension scheme. According to government figures for 2022, 88% of eligible employees were participating in a workplace pension which means that 12% of people were not. One 2022 survey revealed that more than 1 in 5 people have either opted out or are considering opting out of their pension scheme in response to rising inflation. (The DWP’s own figures were more modest, with opt-out rates increasing 10.4% overall but it's a worrying trend. )

In other words. one could argue that the higher rate of the new state pension is and will be a safety net for those who may not have a workplace pension and can no longer build an Additional State Pension - similar to pension credits being used to boost someone's pension.

I don’t believe the equalisation of pension age introduced in the Pensions Act 1995 is a factor in the rate of the new state pension. Men also come within one or other system but are only affected by the increase in pension age introduced in the Pensions Act 2011.

I do not know what actuarial calculations were made to arrive at the new state pension (other than those described in Webb’s paper) but it’s worth noting that until very recently, the rate at which NIC has been levied has increased year on year. By 2022 it was 13.25%. By comparison, the contracted-in rate in 1978 was only 6.5%. Over time, it more than doubled. As wages have risen so have NIC contributions until very recently. Younger pensioners may have contributed far more in NIC than older pensioners and that may have factored into actuarial calculations.

In summary, we know that state pension is a contributory benefit. Under the old system, people were able to contribute to an Additional State Pension or were contracted out and received an equal or better workplace pension under GMP. That is no longer the case.

It is perfectly possible for someone on the old system to receive £157 per week more than someone on the system.

Thank you for a very concise explanation!

So SERPs did play a role?

My own Dad had additional state pension, under the old scheme and received over £200 per week. When he died n 2016 his addition SP passed to my mother who then received £900 per month.

I retired at 61 and received my state pension at 60, I felt lucky to be able to retire at that age and accept that my pension payment is lower than those who had to work for longer before being able to claim their pension. I won’t be signing the petition.

Thanks Tinsoldier. It looks complicated but noticed Additional £50 to the old pension. It woukd come in very handy.

Whatever may be deemed 'fair', we have to remember that people make plans depending on what the system is when they make them.

I think it is fair that pensions should depend on what we have paid in as individuals, but I don't blame people who knew that the system at the time meant that they could claim a widow's pension should they outlive their husband for factoring that into their plans. Taking that away now wouldn't be right.

Similarly, much as I think it is unfair to make contributions on behalf of parents who can afford to stay at home when their children are at school and not to those who work, that was what used to happen, so it would be wrong to recalculate pensions with those contributions removed.

People shouldn't be out of pocket simply for doing what they were asked by governments to do, and they shouldn't be penalised if they act on forecasts and plan accordingly. We might all have made different choices if only we'd had crystal balls, but as few of us can see into the future, all we can do is hope that we won't be penalised by the system if and when it changes, and that there will be some sort of 'sisterhood' that will fight for all of us, rather than resenting the fact that we have been systematically shafted over the years.

Therefore it is possible for someone with a full record of NIC, including maximum SERPS and SP2, to have a total old state pension of £360.88 per week.

Under the New State Pension scheme it is no longer possible to build an Additional State Pension. The maximum new state pension is £203.85.

Tin Soldier thank you very much for posting this explanation.
Finally I can see why my Dad (93) receives so much more state pension than I do!
(I get the new pension).

Jane43

I retired at 61 and received my state pension at 60, I felt lucky to be able to retire at that age and accept that my pension payment is lower than those who had to work for longer before being able to claim their pension. I won’t be signing the petition.

I have thought long and hard about this and I will not be signing the petition. I had to work six years longer, paid NI and tax and I found it hard going.
Waspi have fought long and hard as women in a particular cohort were not properly informed of the changes. I have lost 45k in state pension. If we do get any compensation because in my case, I had to work a further six years it will be meagre and the goverment are already saying how expensive this payout will be.
I think if people on the old state pension want it bought up to the same amount they will cause the Goverment to say even more how much this will cost.

I carried on working over 60. I didn't pay NIC but my employer did

rafichagran

Jane43

I retired at 61 and received my state pension at 60, I felt lucky to be able to retire at that age and accept that my pension payment is lower than those who had to work for longer before being able to claim their pension. I won’t be signing the petition.

I have thought long and hard about this and I will not be signing the petition. I had to work six years longer, paid NI and tax and I found it hard going.
Waspi have fought long and hard as women in a particular cohort were not properly informed of the changes. I have lost 45k in state pension. If we do get any compensation because in my case, I had to work a further six years it will be meagre and the goverment are already saying how expensive this payout will be.
I think if people on the old state pension want it bought up to the same amount they will cause the Goverment to say even more how much this will cost.

I agree rafichagran as I said in an earlier post.

Thank you for all the thanks!

Cossy. I’m not sure if you mean your dad received £200 pw in total or £200 additional but, yes, if a man was born on or before 5 October 1937 and his wife on or before 5 October 1942, she could inherit 100% of his Additional State Pension. Chart here:

www.gov.uk/additional-state-pension/inheriting

She may also have inherited some or all of his basic pension to top up her own. Steve Webb again:

www.lcp.com/widows-pensions-are-you-being-paid-the-right-amount

This takes into account that many women did not work outside the home after marriage and did not contribute to either a state or a workplace pension.

That is something else that has changed. Under the new state pension system. Partners can no longer inherit any part of the basic pension and only 50% of any Additional State Pension so again, the actuarial sums may be taking that into account.

Vera I must admit, I am no expert but only became curious about how it all worked when I met a very eldery widow, similar age to your dad, who had a far larger state pension than I do, about £330 per week. She worked outside the home for about 15 years and paid married woman’s stamp for much of that which does not give entitlement to a state pension.

I worked and paid full NIC for 44 years and receive new state pension. My late husband paid 40 years NIC but died before state pension age and after the state widow’s pension had been abolished.

Her state pension of £330 per week is mostly inherited. I inherited £9 - 50% of my husband’s additional state pension.

Of course, what she doesn’t have is much in the way of a workplace pension. She has her own but nothing from her late husband. He worked for a small employer which did not offer a workplace pension hence him paying SERPS. By contrast, I have my own occupational pension built up over 44 years and inherited half of my husband’s occupational pension so I am a lot better off overall.

It’s a lot more complicated than comparing one rate of state pension with another.

We might all have made different choices if only we'd had crystal balls, but as few of us can see into the future, all we can do is hope that we won't be penalised by the system if and when it changes, and that there will be some sort of 'sisterhood' that will fight for all of us, rather than resenting the fact that we have been systematically shafted over the years

Yes, we did what we were advised by successive governments, those governments kept changing the rules and it has resulted in different systems and a complete muddle.

I agree that we shouldn't be fighting, that it is women who seem to have suffered as a result of all these different rule changes.

Another anomaly is that the gap between old and new State Pensions will widen over the years, especially if the triple lock is maintained.

Oopsadaisy1

Chardy

Women born in 1952 lost £20k by having to wait an extra two and a half years to get their state pension, and when they received it, it was at the old rate.

I was born in 1952 and I was just over 64 when I got my pension, so I wasn’t getting my old rate pension 6 years before the others on the new rate.

Sorry Oopsadaisy I can't see why you had to wait until 64 for your state pension. Am I missing something here?

Doodledog

And that the old pension was claimed at 60 (for women) with a right to a widow’s element where appropriate.

The whole pension system is a mess, but I think there are reasons why the old pension is lower than the new. I’ll happily sign the petition though. We need to stick together on this.

But actually no. I’m on the old state pension but I didn’t receive any state pension until I was 63. I’m a WASPI woman, but affected twice. Firstly couldn’t get my pension till I was 63, and secondly because I’m on the old pension despite waiting for three more years.

Surely the old state pension is less because the recipient has been receiving the pension since age 60?

Happygirl79

Surely the old state pension is less because the recipient has been receiving the pension since age 60?

And the recipient of the new state pension would have started receiving their state pension years later than 60?

We are going round in circles now . If people read the thread before adding comments they will see that this has been addressed more than once.

Sorry Doodledog, have read all through the thread now. I admit saw the post and just thought, no that’s not right. Anyway we all are aware now.
I agree, women must stick together. We shouldn’t be fighting and saying you should have known, or I don’t care. I have a professional pension, not huge due to working fewer years due to my own childcare duties, but for that reason I’m not, and never will be at Pension Credit level. As for paying the new State Pension at 76, not only will no government ever agree to that, many women will die before that. There is no fair way for this awful mess to be sorted out and governments will simply wait for us all to die.

Callistemon21

Cossy

Isn’t this because of “contracting out”?

No
And SERPs ??
No

The whole pension system is a mess
Yes, it is.

When I left work to have a family, ten years worth of Local Authority and Local Health Authority pension contributions were returned to me as a 'gratuity'.

It has just been pointed out to me on another thread I lost out on any extra State pension because I would have been contracted out.

No extra State Pension and no public service pension from those 10 years. There must be many other women who have lost out like that.

Callistemon21 has taught me something I never knew. I also missed out on Additional State Pension as I was contracted out in the 70s but got the money I paid in returned to me when I gave up work to have children. I don't think it would have been very much, but it would have helped.

Having received my letter today about the increase in pension payments, I realise that the basic pension is going up by a higher percentage than the additional state pension percentage. I had not read anywhere about this and, as well as giving us less than expected, it makes pensions even more complicated.