m2btj
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Post by m2btj on Jul 20, 2023 10:04:31 GMT
I had 5 incomplete NIC years & my pension forecast was something like £175.00 per week. HMRC confirmed that the years in question would fall under Class 2 NIC, currently £3.45 per week. I made a voluntary contribution of £881.85 to plug the gaps & bring my pension up to the full £203.85 per week. I will achieve payback within 31 weeks. However, I currently have a p/t job which would see me pay tax on my state pension. I have therefore deferred the pension until I am no longer working. For each 9 weeks of deferral, my pension accrues at a rate of 1%. Just got to stay alive long enough to draw the pension at a future date.
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Post by bracknellboy on Jul 20, 2023 10:09:51 GMT
I had 5 incomplete NIC years & my pension forecast was something like £175.00 per week. HMRC confirmed that the years in question would fall under Class 2 NIC, currently £3.45 per week. I made a voluntary contribution of £881.85 to plug the gaps & bring my pension up to the full £203.85 per week. I will achieve payback within 31 weeks. However, I currently have a p/t job which would see me pay tax on my state pension. I have therefore deferred the pension until I am no longer working. For each 9 weeks of deferral, my pension accrues at a rate of 1%. Just got to stay alive long enough to draw the pension at a future date. I'm grateful that back when I was a lad, you were given full year NI credits while you were in further education (but not higher education). Not that it currently would change much: I have 38 full years and IIRC the max out is at 35. But I had wondered whether something was wrong about that record i.e. why i had those years as full until I went and did some digging.
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iano
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Post by iano on Jul 20, 2023 10:25:13 GMT
Most importantly, that contains the following: "One key point (which confuses many people) is that the COPE figure on the statement is just for information – you don’t have to do any maths or deduct it from any of the figures on the statement, as all of that has already been done." I take that to mean what I had already inferred: namely that the figure given to you on the Check my state pension link is the amount you will be paid in your State Pension. No adjustment for COPE needed as it does not include the contracted out element. Which frankly is the most obvious way of doing this, but then this is public body so obvious and clarity are not necessarily going to be the prevailing considerations. That's my understanding as well, also based on the other quotes: "With every passing year, more and more people will simply get a full state pension, regardless of past contracting out." "This is because each extra year since April 2016 is another opportunity to ‘wipe out’ the deduction for contracting out by adding another £5 to your pension" So the final number is after you've 'caught-up' with the effect of contracting out.
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keitha
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2024, hopefully the year I get out of P2P
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Post by keitha on Jul 20, 2023 10:35:09 GMT
I had 5 incomplete NIC years & my pension forecast was something like £175.00 per week. HMRC confirmed that the years in question would fall under Class 2 NIC, currently £3.45 per week. I made a voluntary contribution of £881.85 to plug the gaps & bring my pension up to the full £203.85 per week. I will achieve payback within 31 weeks. However, I currently have a p/t job which would see me pay tax on my state pension. I have therefore deferred the pension until I am no longer working. For each 9 weeks of deferral, my pension accrues at a rate of 1%. Just got to stay alive long enough to draw the pension at a future date. having been contracted out I was in the same position I have nearly 47 years of full contributions but they give a lower level I'm paying class 2 on my self employment at the massive £3.45 a week rate If I pay 2 more years I will be £1.01 a week short of a full pension, however the 2 years I need to pay at £3.45 a week ( £6.90 a week or £358.80 ) will get me £11.65 a week extra pension £606.80 a year I too get a payback within 31 weeks ! Show me another investment where for every £10 you put in you get £16.88 back every year for life. I'd urge anyone with gaps and self employment to look at paying voluntary class 2 looking back I can see a gap early on in my record it appears that from leaving school to starting work which was a matter of 4 weeks ( and I didn't Sign on ) has created a gap in that year. I have friends who worked in industries "prone" to industrial action and they have numerous gaps ( which I believe they could have chosen to fill at the time but didn't ) and this is adversely affecting their state pension, however in a couple of cases it reduces it to a level where pension credit kicks in.
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agent69
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Post by agent69 on Jul 20, 2023 10:37:42 GMT
Well I have to say that is all about as clear as the proverbial mud - and no I'm not suggesting that is your fault. The "check your state pension" site for me gives a value of £213, and tells me I cannot improve that. It states taht as being my "State Pension". Like you, I have the "you were contracted out of state pension...." blurb with link. That link states that my COPE is £40. But that page does contain the words: "The amount of additional State Pension you would have been paid if you had not been contracted out is known as the Contracted Out Pension Equivalent (COPE)."
Your COPE estimate is £40.28 a week
This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government."I would suggest that the normal meaning of the words as put up on the web site is that the amount quoted on the Check My state pension link IS the amount that the govt. will pay you. It is NOT an amount which INCLUDES the COPE. The COPE element is additional, (is incorporated in the relevant private pension). And if you had NOT been contracted out, then the first value on the Check my pension would be as is PLUS the COPE element. And therefore the first value is correct. Am I missing something ? It would not be the first time..... Probably - The system is very simple
Rewind about 40 years to when I was a young lad and there were 2 elements to the pension money that the government paid to you:
- the normal pension, and
- the top up (which in my day was called SERPS)
If you were in a company pension scheme you had the option of leaving the top up money in your government pot (contracted in) or have the extra money paid by the government into your private scheme (contracted out). The COPE figure shown on the gov website is for information only, and is already taken into account in the headline pension figure. It only applies to people who have been contracted out, and it is a measure of how much bigger your government pension would have been, if you had never been contracted out.
In an ideal world your private pension statement would identify how much of that pension was atributable to the government top up payments, so you could compare it with the COPE value.
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Post by overthehill on Jul 20, 2023 11:01:46 GMT
Well I have to say that is all about as clear as the proverbial mud - and no I'm not suggesting that is your fault. I must say that I am heartened that you are not holding me personally responsible for the dire state of UK government technology  Personally I've never had a single issue with the government gateway website for personal tax, VAT, NI or corporation tax services although I didn't need to use it that much.
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Post by bracknellboy on Jul 20, 2023 11:45:33 GMT
Well I have to say that is all about as clear as the proverbial mud - and no I'm not suggesting that is your fault. The "check your state pension" site for me gives a value of £213, and tells me I cannot improve that. It states taht as being my "State Pension". Like you, I have the "you were contracted out of state pension...." blurb with link. That link states that my COPE is £40. But that page does contain the words: "The amount of additional State Pension you would have been paid if you had not been contracted out is known as the Contracted Out Pension Equivalent (COPE)."
Your COPE estimate is £40.28 a week
This will not affect your State Pension forecast. The COPE amount is paid as part of your other pension schemes, not by the government."I would suggest that the normal meaning of the words as put up on the web site is that the amount quoted on the Check My state pension link IS the amount that the govt. will pay you. It is NOT an amount which INCLUDES the COPE. The COPE element is additional, (is incorporated in the relevant private pension). And if you had NOT been contracted out, then the first value on the Check my pension would be as is PLUS the COPE element. And therefore the first value is correct. Am I missing something ? It would not be the first time..... Probably - The system is very simple
Rewind about 40 years to when I was a young lad and there were 2 elements to the pension money that the government paid to you:
- the normal pension, and
- the top up (which in my day was called SERPS)
If you were in a company pension scheme you had the option of leaving the top up money in your government pot (contracted in) or have the extra money paid by the government into your private scheme (contracted out). The COPE figure shown on the gov website is for information only, and is already taken into account in the headline pension figure. It only applies to people who have been contracted out, and it is a measure of how much bigger your government pension would have been, if you had never been contracted out.
In an ideal world your private pension statement would identify how much of that pension was atributable to the government top up payments, so you could compare it with the COPE value.
Yes ,I understand all of that. However I thought that higher up this thread the poster was stating that in the case of contracting out of SERPS, the pension figure stated on the standard pension website was an incorrect figure i.e. was not what you would actually receive as a state pension because it did not take account of reduction due to COPE. Having reviewed the links my assertion was that the pensions website does have the correct data and the link which gives you the COPE element is effectively for info only and no further adjustment need be made. Unless I was missing something.
I think we are in violent agreement that I have not missed something. 
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Post by bracknellboy on Jul 20, 2023 11:58:24 GMT
I must say that I am heartened that you are not holding me personally responsible for the dire state of UK government technology Personally I've never had a single issue with the government gateway website for personal tax, VAT, NI or corporation tax services although I didn't need to use it that much. to be fair, much of the Govt. gateway stuff is actually pretty good. Sometimes wording can be a bit ambiguous, or perhaps simply lacking clarity/certainty. But given the amount of stuff that has to be covered, it isn't bad.
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agent69
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Post by agent69 on Jul 20, 2023 12:14:04 GMT
Yes ,I understand all of that. However I thought that higher up this thread the poster was stating that in the case of contracting out of SERPS, the pension figure stated on the standard pension website was an incorrect figure i.e. was not what you would actually receive as a state pension because it did not take account of reduction due to COPE. I don't know why the government publishes a COPE figure, as it just causes confusion. However, I am drawing my state pension and can confirm that I received the headline rate from the website, without any adjustment for the stated COPE figure.
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keitha
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Post by keitha on Jul 20, 2023 12:15:26 GMT
simple answer and I wonder why I didn't think of it before
for anyone over state pension age the tax free allowance is set to the state pension plus £1,000 meaning those on a state pension plus some small savings or a small works pension pay no tax. It removes the need to inconvenience then doing a tax return and also makes less work for HMRC.
Many years ago when I started work with a local authority enrollment into the LGPS was compulsory years later it was made optional and we had people opt out, some of those people wanted to join 10-20 years later and were absolutely astounded at how much they would need to pay to get the same pension as someone who had paid in for those 10 or 20 years.
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agent69
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Post by agent69 on Jul 20, 2023 12:36:40 GMT
simple answer and I wonder why I didn't think of it before for anyone over state pension age the tax free allowance is set to the state pension plus £1,000 meaning those on a state pension plus some small savings or a small works pension pay no tax. It removes the need to inconvenience then doing a tax return and also makes less work for HMRC. Many years ago when I started work with a local authority enrollment into the LGPS was compulsory years later it was made optional and we had people opt out, some of those people wanted to join 10-20 years later and were absolutely astounded at how much they would need to pay to get the same pension as someone who had paid in for those 10 or 20 years. You don't need to do a tax return. All of your income details are on the government website, so all you need to do is check that they are correct.
I have 3 pensions and when the DB one started paying out the goverment and the pension provider got together to sort out how much tax I needed to pay. When I started regular payments from my SIPP it was a nightmare trying to get the government to tax it. The details were on the website and clearly stated as not having been taxed, but gov.uk showed no interest. I wrote to them pointing out that it should be taxed but that got me nowhere. After about 3 attempts I managed to speak to somebody, and they sorted it out in about 30 seconds.
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Post by bracknellboy on Jul 20, 2023 12:48:14 GMT
simple answer and I wonder why I didn't think of it before for anyone over state pension age the tax free allowance is set to the state pension plus £1,000 meaning those on a state pension plus some small savings or a small works pension pay no tax. It removes the need to inconvenience then doing a tax return and also makes less work for HMRC. Many years ago when I started work with a local authority enrollment into the LGPS was compulsory years later it was made optional and we had people opt out, some of those people wanted to join 10-20 years later and were absolutely astounded at how much they would need to pay to get the same pension as someone who had paid in for those 10 or 20 years. That was my thinking, as in my view making the SP "tax free" is not a viable nor logical option. However, I would suggest one nuance to this: that possibly the tax free allowance linked to (maximum) state pension is age related i.e. only kicks in once you reach the age at which you are eligible to draw it. That leaves open the potential for having a lower IT threshold for others if it was deemed desirable.
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Post by bernythedolt on Jul 20, 2023 13:12:11 GMT
I had 5 incomplete NIC years & my pension forecast was something like £175.00 per week. HMRC confirmed that the years in question would fall under Class 2 NIC, currently £3.45 per week. I made a voluntary contribution of £881.85 to plug the gaps & bring my pension up to the full £203.85 per week. I will achieve payback within 31 weeks. However, I currently have a p/t job which would see me pay tax on my state pension. I have therefore deferred the pension until I am no longer working. For each 9 weeks of deferral, my pension accrues at a rate of 1%. Just got to stay alive long enough to draw the pension at a future date. having been contracted out I was in the same position I have nearly 47 years of full contributions but they give a lower level I'm paying class 2 on my self employment at the massive £3.45 a week rate If I pay 2 more years I will be £1.01 a week short of a full pension, however the 2 years I need to pay at £3.45 a week ( £6.90 a week or £358.80 ) will get me £11.65 a week extra pension £606.80 a year I too get a payback within 31 weeks ! Show me another investment where for every £10 you put in you get £16.88 back every year for life. I'd urge anyone with gaps and self employment to look at paying voluntary class 2looking back I can see a gap early on in my record it appears that from leaving school to starting work which was a matter of 4 weeks ( and I didn't Sign on ) has created a gap in that year. I have friends who worked in industries "prone" to industrial action and they have numerous gaps ( which I believe they could have chosen to fill at the time but didn't ) and this is adversely affecting their state pension, however in a couple of cases it reduces it to a level where pension credit kicks in. You can also contribute voluntary Class 3 if you aren't self employed, as I did. You do have to be careful about which gaps you fill. They will allow you to buy 'gap years' even when they'll make no difference to your final state pension, so tread carefully! I know of somebody who fell foul of this trap and he could not get his money back. Despite both having well over the 35 years 'maximum' threshold, my wife and I contributed over £6k between us to voluntarily purchase all the years we could post-2016 when the system changed. Buying those years did improve our SP, although we were also invited to purchase previous gaps which would have made no difference, since we already exceeded the 35 year threshold. I have c.46 years NI contributions, my wife 37 years or so. Like the majority, we were both contracted out. Yet her state pension is higher than mine! The reason? She is a year younger than me. How can someone contributing full-time for 46 years wind up with less state pension than someone part-time for most of their 37 years who contributed a whole lot less? The transition to the new scheme stinks and I have to say I feel conned.
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agent69
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Post by agent69 on Jul 20, 2023 13:18:35 GMT
having been contracted out I was in the same position I have nearly 47 years of full contributions but they give a lower level I'm paying class 2 on my self employment at the massive £3.45 a week rate If I pay 2 more years I will be £1.01 a week short of a full pension, however the 2 years I need to pay at £3.45 a week ( £6.90 a week or £358.80 ) will get me £11.65 a week extra pension £606.80 a year I too get a payback within 31 weeks ! Show me another investment where for every £10 you put in you get £16.88 back every year for life. I'd urge anyone with gaps and self employment to look at paying voluntary class 2looking back I can see a gap early on in my record it appears that from leaving school to starting work which was a matter of 4 weeks ( and I didn't Sign on ) has created a gap in that year. I have friends who worked in industries "prone" to industrial action and they have numerous gaps ( which I believe they could have chosen to fill at the time but didn't ) and this is adversely affecting their state pension, however in a couple of cases it reduces it to a level where pension credit kicks in. You can also contribute voluntary Class 3 if you aren't self employed, as I did. You do have to be careful about which gaps you fill. They will allow you to buy 'gap years' even when they'll make no difference to your final state pension, so tread carefully! I know of somebody who fell foul of this trap and he could not get his money back. Despite both having well over the 35 years 'maximum' threshold, my wife and I contributed over £6k between us to voluntarily purchase all the years we could post-2016 when the system changed. Buying those years did improve our SP, although we were also invited to purchase previous gaps which would have made no difference, since we already exceeded the 35 year threshold. I have c.46 years NI contributions, my wife 37 years or so. Like the majority, we were both contracted out. Yet her state pension is higher than mine! The reason? She is a year younger than me.
How can someone contributing full-time for 46 years wind up with less state pension than someone part-time for most of their 37 years who contributed a whole lot less? The transition to the new scheme stinks and I have to say I feel conned. If you have both contributed for the maximum qualifying period (35 years?), then I assume you were contracted out for a longer period than she was.
As a matter of interest, say you have 3 people who started and finished work at the same time:
- one was 100% contracted out
- one was 100% contracted in
- one was a 50 / 50 split
If you were to add their pension to their cope, would all three come to the same value?
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Post by bernythedolt on Jul 20, 2023 13:35:02 GMT
You can also contribute voluntary Class 3 if you aren't self employed, as I did. You do have to be careful about which gaps you fill. They will allow you to buy 'gap years' even when they'll make no difference to your final state pension, so tread carefully! I know of somebody who fell foul of this trap and he could not get his money back. Despite both having well over the 35 years 'maximum' threshold, my wife and I contributed over £6k between us to voluntarily purchase all the years we could post-2016 when the system changed. Buying those years did improve our SP, although we were also invited to purchase previous gaps which would have made no difference, since we already exceeded the 35 year threshold. I have c.46 years NI contributions, my wife 37 years or so. Like the majority, we were both contracted out. Yet her state pension is higher than mine! The reason? She is a year younger than me.
How can someone contributing full-time for 46 years wind up with less state pension than someone part-time for most of their 37 years who contributed a whole lot less? The transition to the new scheme stinks and I have to say I feel conned. If you have both contributed for the maximum qualifying period (35 years?), then I assume you were contracted out for a longer period than she was.
As a matter of interest, say you have 3 people who started and finished work at the same time:
- one was 100% contracted out
- one was 100% contracted in
- one was a 50 / 50 split
If you were to add their pension to their cope, would all three come to the same value?
Thanks, perhaps different COPE values might be the explanation. I'll have to explore further. I think it's more likely our age difference which allowed her more scope to improve her pension than I was allowed. But maybe I won't kick her out after all...
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