The pension is not reducing if you are contracted out. Another benefit for public sector workers that has been quietly ignored.

From the BBC link it seems anyone that has been contracted out will have a deduction made from the single tier pension to cover the fact that they have been contracted out of SERP's. Those that already have SERP's will get them credited to the pension. Swings and roundabouts I suppose.

Copied from BBC link


The effective abolition of the separate state second pension, and its incorporation into the new enhanced single-tier version, will end the complicated system of so-called "contracting out".


Shadow Pensions Minister Gregg McClymont warned of ''heavy losers'' if the proposals go ahead
In this, members of final-salary pension schemes, in both the private and public sector, pay reduced National Insurance (NI) contributions, but receive no state second pension.

From April 2017, employees in those schemes will have to pay more NI, amounting to a further 1.4% of the relevant earnings on which NI is levied.

To reflect their lower NI contributions made prior to April 2017, these workers will initially be eligible only to receive a reduced version of the single-tier pension when they eventually retire.

Are you sure?

If you assume that I have 35 years of NI contributions plus SERPS equal to £40 per week, then I would still only get the full pension of £144 and the SERPS figure of £40 would be 'lost'.

This is according to a gentleman from the Pension Advisory Service. Has he advised me wrongly?

According to the Government fact sheet on the new pension proposals, it seems he may have. Click on the link on page 4 of the fact sheet re exploding myths about the single tier pension (which it seems will be anything but single tier when all the differences regarding people who have been contracted out, paid SERPS, etc) are taken into account) - the one entitled "No one will be able to receive more than £144 a week ..."

https://www.gov.uk/government/upload...fact-sheet.pdf

I am not certain and initially I though the same as you (doesn't apply to me as my pensions are Government police and RAF) However reading the link from the BBC it states those with current Serps will get them credited, below is taken from that link:

Mr Webb told MPs that he wanted to see a review of the state pension age every five years, starting in the next Parliament.

He also said that all current workers' accrued second state pension rights will be recognised, so they will be paid a top-up to the new, merged, flat-rate payment.

Lynn - do you have another link as the one you mention is now just a place holder.

Thanks

I may be wrong but my understanding is that the serps/sp2 will be honoured over and above the new flat rate pension and not in addition to the new flat rate pension, so those that have paid serps/sp2 will have paid for something that is being given to those that are contracted out apart from the over and above element .

I am just going from the BBC link which says those contracted out will receive a slight reduction to cover for the fact that you paid contracted out NI i.e. 10.6% rather than 12%. Whether that means you get £144 minus 1.4% (which would not be much) I have no idea. Also per the link Mr Webb the Lib/Dem works and pensions shadow minister says workers with accrued serps will get a top up on their single tier pension. Mind as it has not actually been implemented yet who knows.
To be honest I think the main concern is as it is proposed to come in in 2016 that those concerned expats or intending to be expats have no way currently of being certain they will have the 35 years required to claim, as if you get a pension forecast or use the pension calculator currently all it will tell you is you have the required 30 years, not that you may need to contribute say another 2 years to get full pension. Yet they say plan for retirement which is very difficult for some currently.

This link seems to concur with what Johnnyone says re Serp's and contracted out, if you can get your head around it?

http://citywire.co.uk/money/state-pe...eceive/a654833

You can seemingly as well as getting a pension forecast request a check of your National Insurance Record which should give you full details of contributions and qualifying years/credits if unemployed etc.
http://www.hmrc.gov.uk/ni/intro/check-record.htm#3

Sorry about that, I swear it was OK when I posted it. This one, however, seems to bear out the assertion that anyone who would have qualified for a higher state pension because of their SERPS contributions will still be able to receive more than £144 as a "protected payment".



http://www.professionalpensions.com/...-pensions-bill

I deduce from that that someone who still has many years of their working life in front of them will be able to make up the difference from the period they may have spent being contracted out before 2016, by paying the full rate of NI from then on. Someone who is already close to retirement, however, will not be able to do that and their pension will be correspondingly lower than the £144 per week.

Yes, that is my understanding too - I have posted elsewhere about the potential impact of being contracted out.

Here is the fact sheet (mentioned earlier in the thread) that has the 'mythbuster' info, including a comment that not everyone with 35 qualifying years will receive the full rate of £144..

https://www.gov.uk/government/upload...fact-sheet.pdf

I think you are mis-reading this.
If you are contracted out but have sufficient years of contributions, then you shall receive the full pension.
The losers are the ones contracted in, having paid for something that the contracted out are getting for nothing.
The only benefit in being contracted in is if your serps/sp2 exceed the new pension and you only get the difference and not what has been fully paid for.

So those in final salary schemes ( primarily public sector) benefit as they have not contributed to serps/sp2.

Similarly, many people in money purchase schemes were advised by the Government/pension advisers some years ago to contract back into serps/sp2 as the returns were guaranteed.

That's not how it now looks and has cost a lot of people money by contracting back in.
If they had remained contracted out they would not only receive the new pension but would also have the benefit of a larger fund in their money purchase pot.

That does not seem to be what the government fact sheet is saying...

You need to have 35 qualifying years to get the full amount.

35 years which were all contracted out would not get you 35 qualifying years (see the examples in the factsheet for details).

What I do not know is the formula for converting contracted out years into qualifying years ... so yes, it should be possible to have been contracted out and still get the full amount, but I do not know how many years you would have to have worked to get those 35 qualifying years.