ezzie

I've obviously been out of the country too long, but I was reading a Daily Fail article a week or so ago and it compared what some Brits would be retiring on...no one seemed to be on the gov't basic pension, they all had industry or public service pensions. Can anyone explain these, who gets them and do they work like the superannuation scheme here?

asprilla

These schemes are the same in principle as superannuation. You and your employer pay into a fund and then when you retire you get income from the fund.

Hope this helps!

Celtic Princess

In theory it works like this. Your pension in the UK is made up of 2 parts.

1. The state pension, which should (in theory) be 1 third of your final salary. It is made up of 2 parts, the basic state pension and the state earnings related pension.

2. Your occupational pension, which should (in theory) be 2 thirds of your final salary.

When you retire you have (in theory) the same income as when you were working (assuming you have worked your whole working life). For most people this never happens. Many people have no, or very small, occupational pensions and rely solely on the state pension, which isn't enough. The government has brought in many ways to overcome this problem over the years, such as private pensions and stakeholder pensions but the people who really need the help can't afford to pay into these.

ezzie

Thanks for that great answer - I've just paid backdated UK pension payments from here in Oz. I'm presuming this would only be the basic state pension then as I guess it couldn't include the state earnings related componant....so I'll be retiring on 1/6th of a theoretical pension!

Chrissywissy100

Before I left the UK (only a year ago) The powers that be sent me a letter asking if I wanted to pay them for my 6 months of missing NI contribution from 6 years previous.

They were kind enough to tell me that if I did, upon my state retirement age (which was estimated to be 67 at the time, 40 years away) I would be entitled to a state pension of a whopping 40quid a week! Whoop-de-do! Lol! Better than a kick in the teeth I suppose. I might be able to buy a packet of supernoodles with that by then!

ezzie

Man cannot live on supernoodles alone...you need a mars bar for pud!

So, do NI contributions cover the pension or do they cover other things too?

Chrissywissy100

I could be wrong but I think money also goes to the NHS, Police, Fire service etc. But obviously thats not money you get back in your hand at any point.. just services if you are ever unfortunate enough to need to use them.

And Yes of course a mars bar for pud, but I rekon Ill only have 3quid left a week after I've bought the supernoodles!

ahappychappy

I have just done the same as you. The tax office gave me the rates detailed below to fill in the missing years. This will allow me to bring my NI record up from 15 years to 27 (if I pay all the years as listed). I have just paid class 3 NIC's to cover the years 1996 -2004 at the appropriate rates charged at the time:

1997 £ 314.60
1998 £ 325.60
1999 £ 335.40
2000 £ 340.60
2001 £ 351.00
2002 £ 421.20
2003 £ 421.20
2004 £ 421.20


TOTAL £ 2,930.80


I can then pay the following years below when they become due. The tax office will continue to freeze the rate for two years after it is due. The payments would be as follows:

2005 £382.20 Special rate 7.35 P/W Capped rate up until 06\04\2012
2006 £392.60 Capped rate up until 06/04/2013
2007 £405.60 Capped rate up until 06/04/2010
2008 £421.20 Capped rate up until 06/04/2011
2009 Not Due yet Capped rate up until 06/04/2012

For each full year you pay will entitle you to 1/30th of a full basic state pension. Reason being they have changed the qualifying years from 44 down to 30. You mentioned 1/6th of a state pension which means you must have only paid 5 years full NIC'S, is that correct? Also the State Pension is increased each April in line with inflation. From 2012, it will increase in line with earnings. From my understanding if you are drawing the pension while living in Oz for example then you will not be entitled to the annual increases beyond when you start to draw your basic state pension. The UK goverment have proposed another scheme where by the employer/employee/goverment each pay a % contribution. It is due to start in 2012 I believe.

Cheers.

Fleaflyfloflum

I cant see it being worth the outlay for a measely £40!

ahappychappy

In 2008-2009, the full basic State Pension is £90.70 a week for a single person and £145.05 a week for a couple, but your individual circumstances may affect the amount you get. A State Pension forecast will tell you the current value of your State Pension and the amount you may get at State Pension age. Each paid year will entitle you to 1/30 (currently this would work out to be 3.03 per week or 157.73 per annum at the above rate) of the basis state pension at the time you retire and throughout your retirement years. The rate paid to you will have increased of course over time and will be at the applicable rate when you retire.

Bear in mind that this will rise year on year as a rule up until retirement age (if in OZ). And will continue to rise if living in Europe during retirement. There is also a 2,000.00 GBP (not much I know) one off bereavement payment if you or your partner dies before retirement age (If you have both paid a full years NIC).

It will probably be particularly beneficial for those retiring before April next year as the old rules still apply (44 years for men and 39 for women).

Fleaflyfloflum

We will have to take a deeper look at all this when we arrive. I am not sure how we stand as OH is a New Zealander who has only just got his spouse visa. He intends to get UK citizenship, but i cant see him being entititled to very much. But will investigate

ahappychappy

If I retired tomorrow for me paying 2930.80GBP would entitle me to an extra 1260.48GBP (at current pension rate) per annum. So after 2.4 years I would have got my money back. However I am 46 years old so will not be eligable for approx another 20 years. By then the pension would have increased in line with earnings (under the new rules) so my outlay of 2930.80GBP now would (hopefully!) have been an even better investment over the long term.

The benefits of these changes naturally depend on your current age and how many years you have of NI. Also bear in mind that the UK Goverment are increasing the cost of filling in missing years via NIC 3.

Fleaflyfloflum

Thanks for that.

Funnily enough I am 46 today!! So we are the same age. I will delve into the pros and cons for myself at least.

Chrissywissy100

Happy Birthday Flea!!

Fleaflyfloflum

Thanks Chrissy