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Can somebody explain state pensions to me.

(11 Posts)
Sixisthemagicnumber Mon 20-Feb-17 13:35:20

I'm currently in the process of looking at DH and my pensions including the state pension.
As I understand it the additional state pension and the SP2 pension no longer exist and were replaced with the new flat rate state pension. DH and I are both well on target to have the qualifying years required to get the full new state pension.
What j am struggling to understand is : some people were contracted out of the additional state pension (DH was for a significant time and I was for a very short time) so our additional state pension payments would have been lower than people who had worked the same number of years but never contracted out. Will those people who didn't contract out get the same amount of state pension as those who did contract out as long as they meet the minimum 30 year contribution requirement? It doesn't seem right to me so I think must be missing something. Those who contracted out will have the benefit of contracting out reflected in their private pensions but where is the benefit for those who didn't contract out?
Both DH and I pension forecast acknowledges that we were contracted out for some time but still shows we are on target to get the full rate of the new state pension. I had expected DH to be down on the required number of years.
Google Isn't helping me and I am Convinced I have missed something obvious or surely people would be up in arms about the unfairness of it all if they have never contracted out?

Sunseed Mon 20-Feb-17 14:08:40

35 qualifying years needed to get full basic rate pension.

In addition, those who were contracted in will get additional pension related to those contracted in years, based on the level of their contributions. Those who were contracted out will receive the benefits provided by their personal pension where the contracted out National Insurance contributions were paid in to.

Sixisthemagicnumber Mon 20-Feb-17 15:26:57

Yes, sorry 35 years, not 30. But I still don't understand why my husbands pension forecast is showing as the full new state pension amount when he was contracted out for a significant number of years.

Sixisthemagicnumber Mon 20-Feb-17 16:47:59

Having looked at this a bit more j am assuming that either my husbands state pension forecast is incorrect or he was not contracted out on one of his workplace pensions which he paid into for 12 years. Unfortunately my husband is scatty with his paperwork and I can't find anything relating to this pension. I don't even know if his address is up to date on the pension providers records as we have received no paperwork in many years. Tomorrows task is to write to the pension provider asking for a forecast and some info and ensuring that they have the correct address.

ChessieFL Mon 20-Feb-17 19:15:01

There will be a deduction from the flat rate state pension in respect of any periods of contracted out service. There is currently a big project where all pension schemes have to reconcile their contracted out data with HMRC's. Towards the end of 2018 HMRC will write to everyone who has been contracted out with the details.

OverTheHill50 Tue 21-Feb-17 16:50:49

Not much to add, other than to say I read a headline in the Money section of the Sunday Times this weekend saying that a lot of the state pension forecasts are WRONG, and have been miscalculated, so this is something to check / be aware of too!
www.thetimes.co.uk/edition/money/is-your-state-pension-forecast-wrong-hmz3ms9d8

Sixisthemagicnumber Tue 21-Feb-17 22:44:44

I did wonder if my husbands was incorrect overthehill. If both of his pensions were contracted out he would be short of around 10 years conttibutions at state retirement age. He started that pension prior to 1988 and apparently pensions started before then which were not defined benefit schemes were not allowed to contract out. I don't know if my husbands scheme was a defined benefit scheme as we can't find the paperwork. We have a form to send off and will hopefully be able to get some details.
If he is going to be short we will see if we can buy back the missing years but the state pension forecast isn't giving that option as it says he is on target to get the full state pension. So confusing confused

ChessieFL Wed 22-Feb-17 03:21:21

Contracting out is nothing to do with whether you have the minimum qualifying years. Even if he was contracted out, those years still count towards the qualifying years for the full state pension (assuming he paid enough NI during those years). As I said above, what then happens is that there is a deduction from the full state pension to reflect the period he was contracted out for.

Sixisthemagicnumber Wed 22-Feb-17 07:52:31

But it isn't showing any deductions on his pension forecast.

Sunseed Wed 22-Feb-17 14:55:36

How old is he now? He could very easily accrue the requisite 35 years across his lifetime even with a long stint of being contracted out.

ChessieFL Wed 22-Feb-17 21:07:49

Six - see what I said above about the reconciliation project. HMRC will be writing to everyone towards the end of 2018 to confirm their contracted out rights.

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