New UK Pensions

Does anyone understand the new UK State Pension rules due to take effect next month? I think I read that those on existing pensions will stay at the same level, but those who claim after April will be eligible for a much higher flat rate. Am I right............... it just seems so odd that the Government are actually raising pensions by a decent sum but it will only affect certain people........so I am probably wrong.

There's so much information out there about this, best just to Google it. Whichever way you look at it, though, pensions are frustratingly complicated. I only have a very rudimentary understanding of it, but for what it's worth:

If you reach pensionable age before April and have 30 years or more worth of NI contributions, you will qualify for the existing full basic state pension of around £120 per week. If you reach pensionable age after April (6th I think) and have 35 years NI contributions, you will qualify for the new flat rate of around £150. So, if you only have 30 years worth, you will get (150/35) x30, which you will see works out much the same anyway. If you have 35 or more years contributions, the new flat rate appears to be a better deal. But you have to remember that anyone without a proverbial pot to urinate in, or without sufficient NI contributions, currently would probably qualify for pension credits, adding to the £120 per week, which seems unfair to those who have saved and planned for their future. Under the new system, pension credits will be scrapped and everyone (with 35 years contributions) will get the flat rate, regardless of whether they've saved or not. 

I think that's more or less it, but will be more than happy to be corrected by anyone with a better understanding of the topic.

www.gov.uk/new-state-pension

Thanks for that Heph - So there are going to be two different pensions:

£115.95 p/w if you are of a pensionable age prior to April 5th 2016

and

£155.65 p/w if you are of a pensionable age after April 25th 2016

Seems quite fair to me!

Depends on how many qualifying years you have, and if you're eligible for Pension Credits, so it's not that straightforward

And the 'new' flat rate pension will also be reduced if you have been 'contracted out' .

My pension due date is 2021, I currently have 37 years NI, but projected payment is £127 per week.

I think you'll find those figures quite confusing. It looks like the older ones get 40 quid a week less than those becoming 65 after April this year. The basic £115.95 (going up to £119.31 in April) is just that, the basic pension. That's what you'll get if, for example, you were contracted out. If not, you will get the SERPS bit added for the number of years you were in it which brings up to the same as the £155.

I was contracted out for many years so receive just the basic but I paid less NI contribution (although I did pay them for over 40 years) and paid into a private pension (2 actually).

Now there is no SERPS or whatever. If you are in UK you can claim pension credits (you can't living in Spain) which gives you the minimum payment guarantee of around £223 a week (something like that) depending on how much savings or other pensions you have and if you are single etc.

Lots of differences depending on your circumstances. For example, I claim mine and my wife claims hers as a separate payment rather than as a couple (used to work out well for tax purposes but now the new transfer to partner allowance is in it doesn't make much of a difference).

I don't find the figures in the official government web site at all confusing, I suppose it's horses for courses.

Thanks for clearing that up for me Boba - now you have me even more confused than ever - I have been self employed, as a consultant, and a sub-contractor and also normal employment over the years and never been unemployed so I paid all my contributions one way or the other but I haven't a clue what contributions I have made, or if they all count. No doubt the Government will decide on my behalf then divide it by 23.43% or something!

 Just request a forecast Woodbug.

As Hep says, request a forecast. Mine was confusing when it came through as it had basic pension, contracted out rate, a certain amount for contracted in rate, a certain amount for contributions between certain dates, contributions before certain dates and so on. Some of them were a few quid, others about 80p a week or whatever.

Cant see why anyone would think a basic pension would even pay the grocery  bill let alone the cost of running cars and holidays/travel.

Invest in the market.

Thanks for that Rossetti. 

Thanks Boba - I was totally bloody confused before I posted this issue so if you were confused when you got your forecast, what chance have I got? Thank you all who have pointed me to the forecast option - but I think I will pass on that one as I will probably get more sense from a ****** weather forecast. I will let you know what the content of the brown envelope reveals when it arrives. I did invest in the market last week Rosse and the shoes were good value but half the grapes I bought were soft.

Wrong market woodie. For shoes try church.

Invest as most pension co do.

For me its Pharm, but I have an interest having spent my Univercity days and working life in the industry.

Forget about government pensions they at best cover basic bills. You cant live a life on them.

Everything has it's place Rossetti, our joint state pensions amount to £18K p/a (I wouldn't leave that on the bar), we also have private pensions and other investments, the guy is just asking a question, why the Alan Sugar impression?

One little fact I discovered is that you can defer you state pension if you don't need it and earn a healthy rate of interest - 4%.  This seems to close the disparity a bit between those who retire before and after April 2016.

I'm still working so that it suits me, as it keeps the tax down and levels out earnings a bit.

I calculated that if you defer the state pension by 10 years it would be worth double, which is a bit more meaningful.  Assuming of couse that they haven't changed the rules again by then.

That's always assuming that you live long enough to benefit from a deferred state pension acer. 

If you reach pension age from 6 April 2016 the rules for deferring your state pension are far less generous. You get an extra 1% added to your pension for each nine weeks you defer, rather than five weeks. So each year’s delay enhances your pension by a shade under 5.8%. A one year delay will increase a £120 a week pension to £127 and a five year delay to less than £155 – much lower amounts than people get under the old rules. The new rules do not allow you to take a lump-sum.

During those years of deferring you do not get your pension. If you defer a year and give up £120 a week you will have lost £6,240 in pension you did not draw. So you will have to live quite a while to get that amount back from the higher pension – in fact under the old rules it is about 11 years to show a profit. But as life expectancy at 65 is around 20 years most people will gain from deferring for a year. Women retire at a younger age and live a couple of years longer than men so it is even more worthwhile for them.