Q for those post military retirement:

[Spot 4]

Is there any truth in the rumour that when in receipt of state pension, your MoD pension is reduced by the same value and therefore on paper you are receiving a state pension when in reality there is no increase in a joint MoD+State pension?

I ask because:
I went online for a state pension forecast yesterday and am told by HMRC that my maximum state pension is £155.65pw (£676.80 pm £8,121.59pa)

But as things stand, I will get £119.30pw - unless I make voluntary contributions to National Insurance between now and 2025, including about £750 'arrears' that I did not pay in FY2015/16.

It would appear that if you believe that longevity is a given, then topping up your NI (for which I/you have no obligation) could be worthwhile. Short term pain v long term gain.

In summary it appears that NI is expected up to your 66th birthday and if you do not contribute post retirement then you will get less - Not that it matters if the rumour in line 1 is true.

[Sandy Parts]

suspect AlR wil give you chapter and verse but from memory, yes, your State Pension gets adjusted down due to your Service Pension. All to do with SERPS and part of your Sate Pension being 'topped-up'. Lots of threads about it already on this forum. Some from recent months.

Edit - just re-read your post - think it is the state Pension that is reduced, not the Mil pension.

[Spot 4]

Thank you for the reply:
Edit - just re-read your post - think it is the state Pension that is reduced, not the Mil pension.

That being the case - do the figures quoted suggest that HMRC online have already taken this into account? I have no idea what a 'normal' state pension is.

[Pontius Navigator]

Your State pension is technically tax free. HMRC reduce your tax free allowance by the amount of the State pension which of course transfers the tax to any other pension. Smoke and mirrors.

To give a simplifed example. SP 20k, allowance 10k, State 5k.

Allowance is 10k-5k=5k. SP 20k-allowance=15k therefore tax is 3k.

If your State Pension was added to SP = £25k - 10k = £15k therefore tax would be £3k.

There is however another gotcha. For every £ over £24.5k, of thereabouts, your tax free allowance is reduced by £2 in other words you pay tax of 40% on income over that £24.5k. These are from memory and may have changed.

[Voxpop]

There is an article about NI Mods on page 10 the Pathfinder linked:

https://cloud.3dissue.com/6374/7271/15135/PFSept15/index.html?utm_source=Pathfinder&utm_campaign=af83245d22-Pathfinder_September_11082015&utm_medium=email&utm_term=0_d2675f606f-af83245d22-412194985

[radar101]

I think you have bits of 2 or 3 things rolled up together:


1. Your Max State Pension would be £155 or whatever if you had paid full NI for your whole career. Because we had a pension scheme which was contracted out we get less than those that paid the full stamp - so I suppose if you pay a full stamp for another 10 years it would boost your State Pension - you need to get a quote from them as to how much you pay in and how much you will get in 2025 and do the sums.


2. RE your RAF (or other Public Sector Pension) being reduced when you start to receive the State Pension - see the thread "Service Pension Reduction" This will explain about the GMP - it hit me last year when I started receiving my State Pension.


whatever, retirement is still good!!

[99 Change Hands]

Yep, contracting out reduces your state pension, my wife (30 years civil servant) is in a worse position than me.

I am busy fighting HMRC over my 'stamp' not being paid due to incorrect advice from one of their officers at the moment; however, having left at 38, it looks like I need 22 years of 'normal' NI contributions to get up to the full £155. Their website shows me 6 years short and standing at £133 currently.

[JAVELINBOY]

If you think you will be drawing it for a good few years and not being hit by a bus best would be to pay the shortfall you have.

[obnoxio f*ckwit]

A brief question that I cannot find the answer to on the HMRC website:

My pension forecast is the full £155.65.
The basic state pension is £119.30

The HMRC calculator estimates my COPE amount at £48.50, which is greater than the difference between basic and full pension. I understand how/why the additional state pension is abated to allow for the AFPS (75 in my case), but the £48.50 COPE amount seems to indicate that there will also be an abatement of the basic part as well? Didn't think that was possible, so what am I misreading?

[Onceapilot]

Ladies and Gentlemen, This little thread illustrates just how poor the information from UKGov really is. What should be a simple question of how a Senior Citizen is taxed when in reciept of a Service and State pension is totally beyond most of us.:sad: BTW, when considering the future of the State pension, bear in mind that the future rules are not guaranteed!:oh:

OAP

[charliegolf]

Obno...

The HMRC calculator estimates my COPE amount at £48.50, which is greater than the difference between basic and full pension. I understand how/why the additional state pension is abated to allow for the AFPS (75 in my case), but the £48.50 COPE amount seems to indicate that there will also be an abatement of the basic part as well? Didn't think that was possible, so what am I misreading?

Substitute 'service pension' for 'teachers pension', and £48.50 for £78, and I asked DWP the exact same question by phone a couple of weeks ago. Your £43 is what you would have had as an additional state pension had you been contracted in. As you saw, the website says something like, 'paid by others', which worried me I'd have my COPE knocked off my £155. I won't. I will get my £78 from the teachers pensions scheme. It's 'in' there because I was contracted out. I'm getting £153 at 66.

My ex-Major next door neighbour had a similar response.

CG

agreed: their site is shoite.

[obnoxio f*ckwit]

I understand what the £43 and COPE are, but the maximum additional state pension appears to be £155.65 (full pension) - £119.30 (basic pension) = £36.35? How then can my COPE amount be higher than that?

Not sure this isn't actually 2 different arguments entirely, as I won't get it for another 18 years, so the new rules apply. I wonder if the £43 is merely an adjustment to the 'starting amount' instead?

[teeteringhead]

I think it's a tax thing, as there is nowhere on a self-assessment form for the State Pension - nor does one get any equivalent of a P60, unlike other pensions.

As most of us think in terms of monthly pay - and occupational pensions are (usually) paid monthly, it's worth remembering that the State Pension is paid 4-weekly, so you get 13 per year (one month you get two payments!).

This can skew the understanding of the figures. Mine - dunno why - is £121.60 per week, or £486.40 paid 4-weekly. Spreading the extra one evenly, that equates to an average of £526.93 pcm.

Another point worth noting: I worked for 2 years beyond State Pension age, and chose to receive the State Pension. I know deferring it increases the amount, but once it is being paid, one no longer pays NI, which was a pretty healthy pay rise at the time!

[Pontius Navigator]

Teeters et Al, if you look at page TR3 on the SA100 2016, box 8, you need to enter State Pension - the amount you were entitled to receive in the year, not the weekly or 4-weekly amount.

Regarding the lack of a P60, unlike pay or other pensions, the State Pension is notified at the start of the year and will usually remain fixed unless you die in which case you will lose interest anyway :)

[Background Noise]

How then can my COPE amount be higher than that?


Isn't that the point of contracting out?

Pre Apr 16, the state pension was made up of a basic pension (£119pw) and an additional state pension - which is the bit that takes it up to £155pw. We were contracted out of that additional bit and the money went instead into our workplace pensions - the rationale being that it would make more in our workplace pensions than the additional state pension. Your COPE should therefore be more than the difference between the basic and the full state pensions - otherwise it would not have been worthwhile contracting out.

What I dislike about the pension forecast site is that it forecasts me getting the full state pension - but then says 'but only if you contribute for the next 9 years' - which I won't.

There is guidance on COPE in here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/512799/your-state-pension-statement-explained-dwp042.pdf

[Tocsin]

What I dislike about the pension forecast site is that it forecasts me getting the full state pension - but then says 'but only if you contribute for the next 9 years' - which I won't.


Agree with all that the scheme(s) and site are badly described/ thought out, or maybe the whole thing is just too complicated.

Just to say, Background Noise (and others) that you could pay Class 3 NI contributions to start totting up the non-contracted out years, but it's a calculation each individual needs to make - cost now vs. life expectancy :)

[obnoxio f*ckwit]

I'm still missing something (of course I could just get off my arse and go and speak to my pensions adviser...)

From the above link:

How does this affect the amount of State Pension you get?

It is important to note that if you have been contracted out you paid
lower NI contributions or some of your NI was paid to your private
pension scheme instead, so you gave up some State Pension in return.
This means that the estimated amount of State Pension shown on
page 1 of your statement will be lower than that for people with
similar circumstances who were not contracted out.
However, the pension you get from your workplace or personal pension
scheme for the periods you were contracted out, should include an
amount that, in most cases, will be the equivalent of the additional
State Pension you would have got if you had not been contracted out.

The Contracted Out Pension Equivalent (COPE)

We will not know the exact amount your scheme will pay you as
a result of contracting out, as it will depend on the actual rules of
your private scheme. However, we have included an estimate of this
amount on page 1 of your statement and it is called the Contracted
Out Pension Equivalent (COPE). This estimate is based on the
information we have from your NI contribution record.

It appears that the maximum amount of Additional Pension (AP) is £155 - £119 = £36pw. However, as I was contracted out into AFPS, that amount is reduced, but AFPS includes "an amount that, in most cases, will be the equivalent of the additional State Pension you would have got if you had not been contracted out".

As I understand it that is called COPE:

"..we have included an estimate of this amount on page 1 of your statement and it is called the Contracted Out Pension Equivalent (COPE)."

So if the maximum amount of AP that can be earned is £36pw, surely the maximum COPE should be £36pw? How come mine is £48pw? (not 43, I misread it)

Complicating matters are the last 8 years of paying uncontracted-out NI contributions....

[Background Noise]

By contracting that bit out, effectively you put it into a better 'scheme', which will realise more money at maturity than it would have done if it stayed in the state 'scheme'.

[OmegaV6]

COPE = If your contracted out payments had been put in an average performing pension fund the amount they should give you in a pension. It has nowt to do with the difference in what you get/might have got on State Pension.

As your military pension is WAY, WAY above this COPE amount, you have not "lost out" in any manner whatsoever.