Remember I'm a financial numpty.
1) It looks to me as if to get your basic state pension at retirement age you currently need to have 30 years NI payments.
2) It looks to me as if that will be changing in 2016 to 35 years.
3) If I retire early, as I may do, I will have 33 years payments at that point. Madam, if she does, the same, will have 32 years, as I started work a year earlier. We have both been in fulltime employment ever since.
4) Our state pensions in any event won't kick in until 2029(!)
4) It looks to me as if there is no method for "topping up" and adding two more years - on;y if you "missed" a year in the last six.
5) Does this mean in 2029 I get a state pension of 33/35 of the full amount, or something else, or is there something adrift in the above assumptions?
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Well that was easy. Thanks CG.
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>> Well that was easy. Thanks CG.
>>
>>
Unfortunately I don't think it gives you the answer - it gives me £113.10 pw which is less than the 'proper' forecast I got two years ago which was definitely under the rules for people retiring pre 2016. It appears to be an estimate excluding any 'SERPS' and under the current arrangements.
Actually I can't fathom it which is why I suggested following the route above, though I don't know where that leads...
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Get a pension forecast
www.gov.uk/state-pension-statement
From memory the basic pension for those reaching SPA after April 2016 will be £148 assuming a full minimum contribution record. That could be less on account of missing years, or periods of being contracted out. It could be higher if you have some Second/Additional State Pension (remember SERPS?)
The online system doesn't work for people who will retire after April 2016, and you will be directed to ring them up.
In any event you should not get less under the new scheme than you would have under the old. I'll be 65 in 2018 if spared. I got a forecast a while back under the old system of £123 a week - I have more than 35 years and some SERPS but have been contracted out for long periods. That £123 will also get the annual increases as I understand it.
Now you have reminded me, I might ring them myself.
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Whilst I understand you have to be proactive about all these things, to aid planning, it all seems to get complex enough quickly enough that for me, the services of a professional may be required, or one could wait and see how big the pension is.
I've now discovered (in my innocence) there is some element of choice with the company pension where you can take a lump sum but reduce the pension accordingly. Hmm. Another thing to think about.
EDIT:
Just seen the other pensions thread, sorry. Feel free to merge.
Last edited by: Crankcase on Tue 26 Aug 14 at 10:44
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Not advice, but as mentioned in the other thread it's usually a bad idea to commute defined benefits for a lump sum, though 9/10 people do it.
However - if you are still in a DB scheme and working, you might look into the possibility of making some AVCs. If the AVCs are money purchase, but count as the same scheme, you could potentially take those (with any growth) as a tax free lump sum when you take your pension, if they amount to less than 25% of the total pension value as is very likely.
That would be very convenient if you had had tax relief on the AVC contributions:)
But speak to your pensions manager first. Not all schemes are the same.
Examples -
I worked for 7 years for a company with a DB scheme between 1991 and 1998. I reached NRA for that scheme last year. My DB pension from that scheme is £8000 a year, but I also had £46,000 in the AVC fund. As the total assessed value of pension was c. £164k (including the £46k) I could take £41k tax free, which I did. (The other £5000 bought me a princely annuity of £250 a year, with some RPI link and a 100% spouses continuation.)
The last proper job I had closed its DB scheme to further accruals in 2010. When I left in 2012, I had c £30k in the replacement DC (defined contribution) section. When that pension comes due in 2018 I intend to take the DC value as a tax free lump sum if the rules don't change bwteen now and then, but I will NOT commute any of the DB pension.
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>> Not advice, but as mentioned in the other thread it's usually a bad idea to
>> commute defined benefits for a lump sum, though 9/10 people do it.
Technically its a bad idea to take the lump sum, but its the logical thing to do. Most people retire with some debt, so its makes perfect sense, in fact imperative, to get rid of it. Most people who retire are still fairly active, so could benefit to get out there and tick off the "things to do in life" list. The lump sum allows all this.
Usually it takes 20 years of retirement before the lump sum withdrawal becomes financially a bad idea. By that time you are gaga and selling your home to pay for the care.
That is why 9/10 people do it. In reality it makes the most life sense.
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Very much depends on personal circumstances. If you are going to take the lump sum and simply re-invest it it is probably a bad idea, especially if the pension is index linked and your requirement are income rather than capital. If you have debts to pay off and no savings it is probably a good idea to take the lump sum
You also I need to take into account how well your pension is funded - Most company pensions are under funded so you may not end up with all the pension you think you are going to receive in which case you would have done better taking the cash.
Last edited by: CGNorwich on Tue 26 Aug 14 at 11:36
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>> If you are going to take the lump sum and simply re-invest it it is probably a bad idea,
>>especially if the pension is index linked and your requirement are income rather than capital.
Possibly... but if you put it into the FTSE 100, yielding 3.5%, that's probably more than the annuity will give you, and you still have the capital too.
Moreover, with the new super-ISA rules, you can make most of the future income tax-free in a fairly short period (for somebody with a pension pot of £240k (which is massive compared with the average/mode), who is married, that's only two years' ISA allowances, so it can all be in a tax-free shelter within an average six months).
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>> Technically its a bad idea to take the lump sum, but its the logical thing
>> to do. Most people retire with some debt, so its makes perfect sense, in fact
>> imperative, to get rid of it. Most people who retire are still fairly active, so
>> could benefit to get out there and tick off the "things to do in life"
>> list. The lump sum allows all this.
>>
>> Usually it takes 20 years of retirement before the lump sum withdrawal becomes financially a
>> bad idea. By that time you are gaga and selling your home to pay for
>> the care.
>>
>> That is why 9/10 people do it. In reality it makes the most life sense.
Something in that of course. Not everybody is careful enough to arrive at retirement solvent or has the means to do so. But enough secure income with some inflation protection comes first for me, having forgone enough new cars and expensive holidays to be debt free with some savings (which I am cheerfully spending now that the rainy day has arrived!)
Not getting divorced might have helped too:)
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I used the calculator above, which told me I had enough ordinary contributions to get the minimum pension. It said I can apply for a pension statement, but only if I am within a month of my 65th birthday.
I'm sure I paid an earnings-related supplement for quite a long time, which presumably means I am entitled to more than the basic amount.
Does this mean I will have to make contact outside the on-line system to sort it out before my next birthday?
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See the link in my post at 10.38 and make what you can of it!
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Until ill health forced me to sell my small retail business 6 years ago I had been self employed most of my life. Having paid NI for almost 40 years I did some digging and managed to get a nice refund! Most unexpected.
I think my State Pension will become payable in 2021 but a variety of part time jobs at the moment pays most of my day to day household bills & holidays. My pension pot is around £15k (being relatively low earning and self employed I saw no point in a private pension) I think I might get access to it all as a lump sum when I reach 60, which is next year. Nice, if it is tax free. Instead of paying into a pension I made the 'uninformed' decision to have a larger mortgage instead which is now paid off so if I make it to 60 I am looking forward to downsizing and having a nice tax free lump sum to spend on beer & skiing. And a change of car. Happy days. So far.
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>> My pension pot is around £15k (being relatively low earning and self employed I
>> saw no point in a private pension) I think I might get access to it
>> all as a lump sum when I reach 60, which is next year.
>>
If you had to stop through ill health, you may find that you have access to it sooner.
Possibly.
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Thanks. Will ring the insurers ...on my next day off, of which there are many( the benefits of part time work) but gotta dash to a kettle bell class down the gym with the yummy mummies. Works up a thirst for early doors drinking.
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National Insurance - CGNorwich
