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Discussion Starter · #1 ·
Does anyone on here understand the formula for working out your entitlement to the new state pension due to start April 2016 ? I will be 65 February 2017 and have received an estimate of TWO different amounts I can expect to receive each week fig.1 £144.33 fig. 2 £ 68.14 no explanation as which figure I am more likely to receive, I was contracted out of paying the second state pension for 12 years ( serps ) which meant I paid slightly reduced contibutions , yet I am at a loss as to why it would generate the much lower fig. 2 ,so far I have paid N.I. contributions for nearly 45 years , new rules only require 35 years qualifying contributions , my wife will receive her pension July 2016 at age 63 years 3 months,she has received an estimate of £ 106.58 per week based on her contibutions of 5 years paying N.I contributions, and credited with 20 years home protection when she gave up full time working to bring up our 3 children, I am thinking the people at the D.W.P don't understand themselves how the system works.
 

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The new scheme is complicated to say the least (especially if you've been contracted out at any time during your working life) and I don't pretend to understand it. However, I would direct you to this link which may help but unfortunately you may need to talk direct to DWP to get a definitive explanation. Good luck!

https://www.gov.uk/new-state-pension/overview
 

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Discussion Starter · #5 ·
Thanks for the link have used the calculator before, after inputing all you details it advises you to contact d.w.p for a DEFINATIVE estimate ,which generated the two figures i received , after ringing them to explain the two different amounts, they said we cannot give an exact figure yet because you are still making N.I.contibutions. Yet under the new rules I have enough years, any extra over 35 will not generate a higher pension.
The new scheme is complicated to say the least (especially if you've been contracted out at any time during your working life) and I don't pretend to understand it. However, I would direct you to this link which may help but unfortunately you may need to talk direct to DWP to get a definitive explanation. Good luck!

https://www.gov.uk/new-state-pension/overview
 

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Dave - PB Mk2 2009 - 1 Owner ME.
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Pension Flexibility ONLY Applies to Stakeholder Pensions NOT Defined benefit (Final Salary) schemes - Be Warned.

I found this out from the Pensions Advisory service at the 50+ show in July.

@old bloke

There is a better link within the above link use https://www.gov.uk/state-pension-statement

You can request a pension Statement from the DWP using this. I did so for both my Wife 7 I some months ago.

However it seems that you already have done this. In which case personally I would give the Pensions Advisory Service a call, see link lower down

I am in same boat re Contracted out and my wife will have a higher state pension than I will due to this and working less years than I have, but receiving child credits for NI whilst our kids were at school and she was a stay at home mum.

I just hope my company pension continues to make up for the shortfall, as this is now tiers to CPI and not RPI I am unsure.

And in case anyone asks about the changing LifeTime Allowance (LTA) that will come in on Apr 2016 (if voted thorough parliament - which seems certain as It reduces a companies liability), LTA only applies to Final Salary (Defined Benefit) schemes.

A useful LTA FActsheet can be found Here and heres a PDF copy in case they take it down View attachment Lifetime-Allowance-Factsheet.pdf

Much more LTA info can be found using THIS Google search, but just add the year you need also (e.g. 2015/2016) as it can be different.

The calculation to find out ones LTA is 20 times your estimated Pension from your Pension provided (e.g. Company).

Be aware though that you can withdraw up to 25% of the LTA tax free regardless of how much LTA you have build up, it is the difference that is taxed at

25% Tax on the excess if you take it as a Pension payment

75% Tax if you take it as a Lump sum

Also be aware that LTA is only used to established a ceiling in terms of pension savings,.

It does not mean that your are limited to the LTA in your pensionable life.

e.g. Most pensions assume an average lifespan on a pensioner of X years (lets arbitrarily say 15 years) if you life X+50% then that's tough on the pension provider or your old company; but they will also benefit from people who live X -75% due to ill health or some other cause of Death and these average out across the scheme you are in.

(e.g. My wife's granddad had a pension for 35 years from Ford; which was longer than I had even worked for the company by the time he passed at 100 years old + a couple of months).

Worked Example 1:

£50k final Salary Pension x 20 = £1 million pounds which is the new Maximum one can reach without paying Punitive penalties on how you take any pension value above this level, so no additional taxation due.

AND you can take up to £250k tax free, but this will reduce your monthly pension payment, potentially very good if you have family and are ill and unlikely to last more than 10 years.

Worked Example 2:

£65k final salary Pension x 20 = £1.3 Million

Tax Payable on the additional £300k

@ 25% = £75k

@ 75% = £225k

So who really benefits from all this?

IMHO Inland Revenue and the Companies providing the pension for long service or High Value Final Salary pensions, certainly not the person taking the pension.

HOWEVER if you are already over the £1 million or £1.25 Mill currently then you can file with the HMRC for protection against these new higher taxes.

For independent advice only use the "Pensions Advisory Service"

This page is a good one to start at - Pensions basics.

HMRC Pension Protection Links

2014

HMRC info regarding Tax on your Private Pension Guidance - HERE
 

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Discussion Starter · #8 ·
Pension Flexibility ONLY Applies to Stakeholder Pensions NOT Defined benefit (Final Salary) schemes - Be Warned.
I found this out from the Pensions Advisory service at the 50+ show in July.

@old bloke

There is a better link within the above link use https://www.gov.uk/state-pension-statement

You can request a pension Statement from the DWP using this. I did so for both my Wife 7 I some months ago.

However it seems that you already have done this. In which case personally I would give the Pensions Advisory Service a call, see link lower down

I am in same boat re Contracted out and my wife will have a higher state pension than I will due to this and working less years than I have, but receiving child credits for NI whilst our kids were at school and she was a stay at home mum.
I just hope my company pension continues to make up for the shortfall, as this is now tiers to CPI and not RPI I am unsure.

And in case anyone asks about the changing LifeTime Allowance (LTA) that will come in on Apr 2016 (if voted thorough parliament - which seems certain as It reduces a companies liability), LTA only applies to Final Salary (Defined Benefit) schemes.

A useful LTA FActsheet can be found Here and heres a PDF copy in case they take it down
attachicon.gif
Lifetime-Allowance-Factsheet.pdf

Much more LTA info can be found using THIS Google search, but just add the year you need also (e.g. 2015/2016) as it can be different.

The calculation to find out ones LTA is 20 times your estimated Pension from your Pension provided (e.g. Company).

Be aware though that you can withdraw up to 25% of the LTA tax free regardless of how much LTA you have build up, it is the difference that is taxed at

25% Tax on the excess if you take it as a Pension payment

75% Tax if you take it as a Lump sum

Also be aware that LTA is only used to established a ceiling in terms of pension savings,.
It does not mean that your are limited to the LTA in your pensionable life.
e.g. Most pensions assume an average lifespan on a pensioner of X years (lets arbitrarily say 15 years) if you life X+50% then that's tough on the pension provider or your old company; but they will also benefit from people who live X -75% due to ill health or some other cause of Death and these average out across the scheme you are in.
(e.g. My wife's granddad had a pension for 35 years from Ford; which was longer than I had even worked for the company by the time he passed at 100 years old + a couple of months).

Worked Example 1:

£50k final Salary Pension x 20 = £1 million pounds which is the new Maximum one can reach without paying Punitive penalties on how you take any pension value above this level, so no additional taxation due.

AND you can take up to £250k tax free, but this will reduce your monthly pension payment, potentially very good if you have family and are ill and unlikely to last more than 10 years.

Worked Example 2:

£65k final salary Pension x 20 = £1.3 Million

Tax Payable on the additional £300k

@ 25% = £75k

@ 75% = £225k

So who really benefits from all this?
IMHO Inland Revenue and the Companies providing the pension for long service or High Value Final Salary pensions, certainly not the person taking the pension.

HOWEVER if you are already over the £1 million or £1.25 Mill currently then you can file with the HMRC for protection against these new higher taxes.

For independent advice only use the "Pensions Advisory Service"

This page is a good one to start at - Pensions basics.

HMRC Pension Protection Links
2014

HMRC info regarding Tax on your Private Pension Guidance - HERE
Thanks for the info I am at work at the moment will have a look at the links this evening.
 
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