Page 2 | Why is my state pension forecast reduced when it says have 40 years full contributions

morelippy · 2023-05-10T02:49:52+00:00

So confused. Google says I need 35 years. I have 40 full years according to my gateway. My pension forecast is reduced and it says I have to pay more. Stopped work at 55 I'm now 58 If I have 40 full years is this right?

PinkFrogss · 10/05/2023 07:18

If DH is earning enough to support you now when you’re not working, and you say your private pension is not much due to working part time then surely his private pension will be good? He must be a fairly high earner and won’t have had the same drop in income as you.

Your combined private and state pensions might not be too bad, why don’t you look at them as a combined amount rather than individually?

tommika · 10/05/2023 07:25

FirstnameSuesecondnamePerb · 10/05/2023 07:04

Can anyone answer my burning question? I am 55 and have 36 years of contributions into the state scheme. 20 of those years were opted out.
A) how can I found out what actual impact that will have?
B) if I keep on working/pay for extra years nearer retirement, does that offset some of those years. If I keep on until retirement age at 67, I will have 48 years contributions. Which years do they use?

Pension advice really needs someone who understands the systems plus the specifics of the individual concerned

For A there are complex calculations depending on specific timings. If there is a pension calculator for the scheme(s) covering your pensions then that could help

For B - yes. The longer you work the more of an offset you will get.
In my case I only heard of the contracted out element impact on my state pension, and if I retired now (early) then when my state pension pays out I won’t fully qualify for the higher state pension. But if I continue for (off the top of my head) a couple more years then I will have made up the balance without any extra top up.
I don’t lose out overall as my contracted out NI reduction went to my civil service pension, so my state pension could be at the lower rate but resulting in a higher CS pension

There’s an overview here, but it highlights the various timings to point to the different rules and impact of specific timing:

https://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

The new State Pension transition and contracting-out: fact sheet

https://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

User1685409 · 10/05/2023 07:33

Morph22010 · 10/05/2023 07:10

I contacted out from around 1998 when a started my pension to when it ended in 2016. Looking at my pension forecast it says I have another 5 years contributions to get the state pension amount of £203.85. Why am I not showing any adjustment for contracting out? However then in a seperate bit you click on about contracting out it has something about cope estimate £32.03 not being paid by government, does this effectively mean my state pension is reduced by this amount?

That is how I understood it, I shall find out early next year when I draw my state pension, it's not very clear. I'm not sure that paying extra NI contributions always is the best thing to do, I looked at mine and it looked like paying quite a large sum would only see me break even in my 80s so decided not too. Everyone needs to check there own circumstances regarding this

CheeseDreamsTonight · 10/05/2023 07:38

It drops based on the most recent years. So if you stopped work it goes on those non working years and you need to top it up. It charged in I think 2018

ReeseWitherfork · 10/05/2023 07:39

ChickenMacaroni · 10/05/2023 07:08

https://www.gov.uk/check-state-pension will show you. If you keep working, earning at least the lower earnings limit, for another 12 years then you'll have 28 years of full contributions. You need 35 as things stand to qualify for the full state pension. Were you claiming child benefit for any children under 12 during any of your 20 opted out years? If so, that should "top up" that year.

Thanks for sharing this, I didn’t know it existed, really useful

Dillya · 10/05/2023 07:48

loislovesstewie · 10/05/2023 06:19

Many people who worked in the public sector were 'contracted out' for the purposes of the state pension. They paid reduced amounts of NI but, by being in the pension scheme with their employer are often much better off than those who had no private provision or less generous work pension schemes. I worked in local government, I paid into that scheme and my employer also made contributions. I'm now retired, I am better off than those on an equivalent salary who either relied on only the state pension or who paid into another scheme. Do you have a forecast for your works pension, as we were provided a forecast every year?

This.

38 years in the NHS will not have led to a “tiny” pension as it’s one of the best pensions going. Was the pension reduced because you started drawing it at 55, perhaps?

Yogateacherherehello · 10/05/2023 07:48

I discovered something which is good to know... It's much, much cheaper to buy missing NI years if you're self employed.

I was in the same position - missing years because of being contracted out.

I'm now self employed as a yoga teacher and my accountant advised me to check my state pension forecast and buy back missing years as it was good value for self employed people - something like £158 a year compared with over £800.

So, if you can do some sort of self employed work, even if it's just for one year, and buy back the years, it could be worth it.

QuintanaRoo · 10/05/2023 07:53

I had about 8 years of being opted out in the nhs which I didn't realise at the time. Thankfully dd was under 11yo for most of that and therefore claiming child benefit means that for those years I should still have full credit (I think).

ArcticSkewer · 10/05/2023 08:01

If you are an unpaid carer for someone, even if you don't get paid a carers allowance, you can claim credits towards your pension.

Many people go part time or retire in order to help with elderly parents or a sick spouse, so it's worth looking into in that case.

gogohmm · 10/05/2023 08:06

Most company /workplace schemes were contracted out. The amount in your nhs scheme is far more than the shortfall.

Morph22010 · 10/05/2023 08:08

CheeseDreamsTonight · 10/05/2023 07:38

It drops based on the most recent years. So if you stopped work it goes on those non working years and you need to top it up. It charged in I think 2018

I’ve got 30 years contributions so far and another 18 years left to retirement age, I’m showing £32 a week where I click on contacted out, so for every year I work and pay full ni should that adjustment go down? Ie it will be possible to get back to the full state pension. Paying extra doesn’t seem to be an option for me as every year since age 16 except for 3 uni years is showing as full

Morph22010 · 10/05/2023 08:09

ArcticSkewer · 10/05/2023 08:01

If you are an unpaid carer for someone, even if you don't get paid a carers allowance, you can claim credits towards your pension.

Many people go part time or retire in order to help with elderly parents or a sick spouse, so it's worth looking into in that case.

Will it depend on the person being in receipt of certain benefits themselves though?

Original poster

morelippy · 10/05/2023 08:31

Thanks for all the helpful replies. To those who are under the illusion my pension is 'golden'.. I wish it was.

When my children were young there were no wrap around clubs, no after school clubs and nursery places were like gold dust... and expensive. Like most nurses of my time we worked nights or weekend shifts on low grades to supplement our husbands wages or had to give up altogether. For many years therefore you're not accruing full years service.

Our normal pension age for our scheme was 55. Lucky me. Like firemen, policemen etc it was rightly deemed unlikely we would be physically fit enough to continue.

Whilst I am eternally grateful for having it now it was bloody hard to get and I paid tax all those years too. It wasn't paid for me.

I have never been able to financially support myself and I never will.

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Yogateacherherehello · 10/05/2023 09:30

@morelippy So, is doing some work an option for you now? Even if it's part-time?

That's a good way to make up NI shortfalls as well as boost income if course, and with a background in nursing, you have a lot of transferable skills or could retrain.

With labour shortages there is plenty of work available and as you know, a push to get people in their 50's and 60's back into the labour market.

Or, as I said upthread, self-employment gives you a cheaper way to buy back missing state pension years.

ArseInTheCoOpWindow · 10/05/2023 09:34

Soontobe60 · 10/05/2023 06:31

I am similar to you. As a teacher, I was contracted out. That meant we paid slightly less for our NI and therefore slightly more for a better occupational pension. I will have to have 44 years of contributions to receive a full pension.
OP, by deciding to stop work at 55, you’ve ended up with a smaller occupational pension plus a smaller state pension. You’re 58 now, won’t get your state pension for another 9 years so have plenty of time to get in a few more years NI contributions. You don’t have to work full time, as long as you earn over £242 a week.
Im afraid it’s no use complaining about the pension you’ll receive when it’s your choices that have led you to this position.

I’m was a teacher. I’ve paid 38 years nhs and I’m predicted a full state pension. I’ve checked it several times.

sashh · 10/05/2023 11:49

FirstnameSuesecondnamePerb · 10/05/2023 07:04

Can anyone answer my burning question? I am 55 and have 36 years of contributions into the state scheme. 20 of those years were opted out.
A) how can I found out what actual impact that will have?
B) if I keep on working/pay for extra years nearer retirement, does that offset some of those years. If I keep on until retirement age at 67, I will have 48 years contributions. Which years do they use?

Follow the link @ChickenMacaroni put in their post, you need to register to get a government gateway log on but then you can see every year and the contributions you have made.

I have 3 years with partial payment, but as I am getting NI credit for the next 10 years it will not make a difference.

It's not about which years they use it is simply 'have you got enough years?'.

The pension has changed, it used to be everyone got a basic pension but if you worked you paid NI to get the 'second state pension', now what used to happen was that you 'contracted out' of the second pension with the idea that a private or work place pension would pay you more than the second state pension.

Original poster

morelippy · 10/05/2023 11:52

@Yogateacherherehello I will have to work if circumstances change. At the moment my husbands income means we can live a relatively simple life which is better than working

I do realise I am fortunate to be able to stop working.

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sashh · 10/05/2023 12:09

morelippy · 10/05/2023 11:52

@Yogateacherherehello I will have to work if circumstances change. At the moment my husbands income means we can live a relatively simple life which is better than working

I do realise I am fortunate to be able to stop working.

I'm not sure you understand how this works.

Imagine there are three pension schemes A B and C.

Everyone pays into A, this is the state pension. As long as you have paid in for 10 years you will get something.

B is the state second pension / SERPS / many other names

C is the private or NHS or other pension.

Contracting out meant you paid into A and C but not B, therefore you get a pension from A and C.

People who were not contracted out paid into A and B and get their pension from A and B.

Now in 2016 the rules changed so at that point A and B were merged and you started to pay more NI.

So now your state pension is made up of A before 2016 and A + B after 2016.

But you still get to claim a pension from C. Also C is required to pay you a COPE - the difference between your reduced pension and the full new pension.

OP

If you have retired due to ill health you can apply for your NHS pension now.

Original poster

morelippy · 10/05/2023 12:18

@sashh I had no idea all those years of working and having deductions weren't leading to a full pension. My fault. I may not have had no choice but I was also blissfully unaware.

Doesn't mean I'm not disappointed nearly 4 decades of continuous work wasn't enough

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Original poster

morelippy · 10/05/2023 12:18

Sorry that should be A choice

OP posts:

Throwncrumbs · 10/05/2023 12:27

mycoffeecup · 10/05/2023 06:25

Why did you retire so young?

Because she said she’s worked 38 years in the NHS and is worn out, long shifts, nights, weekends .. I did the same and had to retire due to ill health….nursing is bloody hard!

Original poster

morelippy · 10/05/2023 12:47

Incidentally there's another thread about a cleaner increasing her rates from £15 to £20 an hour.

I may do that rather than the £14.50 I'd get as a staff nurse.

I'd be self employed too.

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Mossstitch · 10/05/2023 13:39

Dillya · 10/05/2023 07:48

This.

38 years in the NHS will not have led to a “tiny” pension as it’s one of the best pensions going. Was the pension reduced because you started drawing it at 55, perhaps?

Show quote history

Yes, it gets reduced for each year early you take it by approx 5% per year.

Yogateacherherehello · 10/05/2023 15:25

morelippy · 10/05/2023 12:47

Incidentally there's another thread about a cleaner increasing her rates from £15 to £20 an hour.

I may do that rather than the £14.50 I'd get as a staff nurse.

I'd be self employed too.

Bear in mind with self employment, there's no sick pay or paid holidays.

She would need insurance and would have other costs, e.g fuel to go between different workplaces. Paying into a pension would help bring her tax liability down as it would for an employee, but she has no employer's contribution.

So, even, on £20/hour, the cleaner is worse off than someone earning £14.50 an hour with PAYE.

Original poster

morelippy · 10/05/2023 17:13

My pension wasn't taken early and it wasn't reduced

OP posts: