Just a quick reminder, contracting out of AFPS ends next month.

[PARALLEL TRACK]

ALCON

If one serves as a serviceman from age 18 to 60 paying lower rate NICs for the majority of that time (say 35 years plus) and does not work from age 60 to 67 will he get a greatly reduced state pension? Yes or no?

Regards

//trk

[Al R]

It's not that simple alas. But in principle, for most people, the time and the specific years that you spent contracted out and what the legislation was at the time, won't count towards your state pension. Henry is one of, if not the most credible commentators on state pension provision.

http://henrytapper.com/2016/04/04/the-new-state-pension-winners-and-losers/

[Voxpop]

DWP are going to write to you telling you your 'foundation amount' as at 6 April 2016 - so that is what you have built up so far in the old arrangement - then the higher rate NICs will build on that 'foundation amount'.

[Army Mover]

@//trk

A ex-colleague of mine in those circumstances had his State Pension reduced to £75 p/week.

[November4]

I have over 35 years NI contributions but 28 of those years were contracted out. I have 15 years left until I can claim the state pension so should be able to build up 20 years of non-contributed out NI. From what I can see, my projected state pension (at today's rate) will be going from the current £115 per week to £89 from tomorrow.

A loss of over £1,300 per year from my pension plans.

Editted as I was wrong

[F.O.D]

As I understand it, the DWP will compare what one has accrued under the old state pension scheme with the new single tier pension (which will be lower for Service personnel because of the Contracted Out reduction). The higher of the two figures will be the basis for future pension rights (was called the "foundation amount"). From today, every extra year one pays the full NI rate equates to an increase of £4.40 approx additional pension per week(not including any indexing) on top of the foundation amount. Someone who has 30 years of contributions, even contracted out, will have accrued approx £119 on the old scheme. If they work an additional 10 years from 2016, they should therefore be eligible for the full single tier pension. The govt pension service is running a state pension forecast "beta" service which will calculate your current and projected pension entitlement under the new state pension scheme.

[F.O.D]

The internet address for the new state pension forecast is: www.gov.uk/check-state-pension

There are a series of security hoops to jump through but you can get an immediate forecast online.

[November4]

Thanks FOD - so not as bad as I feared then. I used pension forecast site and it told me that I will get the full amount of the new pension because of my 35 years of contributions. What it doesn't take into account is contracting out in it's calculations. I rang the telephone number (0345 3000 1681) for a forecast and explained that I was ex-Forces. The response was that they will only be able to tell me the same as the online forecast but did agree that it was wrong due to the contracting out.

It's about time the Government sent out accurate forecasts to everyone - every year, they tell me how my taxes are spent so should be able to tell me what my NI contributions will give me as a pension.

[F.O.D]

I understood that the gov.uk pension site did take the contracting out into account - I think it did with my forecast today. Someone with 35 years of NI (contracted out) will get £119 on the old system which is more that the £70 or less one would be entitled to under the new scheme. These two figures are then compared and the higher figure is the starting amount. I got the terminology wrong earlier as the higher of the two calculations is called the pension "Starting Amount" and not the "foundation Amount" as it was previously known as. Any additional years of NI accrued in future under the new scheme get added to the "starting amount" at a rate of about £4.40 per week per year of NI paid.

One thing is sure, the new scheme is going to be fiendishly complicated for a few years. I have yet to meet a politician who understands it fully.

[November4]

Thanks again FOD - I understand it now. I misunderstood what contracting out meant and how it added to the SERPS / S2P rather than the basic state pension.

Orignal posts editted as I was wrong.

[WK622]

Does anyone know when the MOD contracted us out?

Also, am I right that service before age 18 i.e. apprentice training, counts for nothing from a pension perspective?

[m0nkfish]

My simple pilot brain is struggling to understand how the state pension works. I've run through the calculator and its saying that I will get the full 155.65 in about 30 years time when I eventually hit retirement age (assuming I haven't died of liver failure). The amount is made up of state pension and something called COPE. But it seems that when the COPE, which appears to be the private contribution towards your pension from your contracted out scheme, goes up then the state pension amount goes down. In simple terms, I always assumed (maybe wrongly) that when I hit retirement age I would get my Armed Forces pension (amounts as per the estimate on the AFPS online calculator) plus a state pension (based on NI contributions) but the GOV.UK estimate site seems to suggest they will wind back my state pension if the AFPS amount is big enough. Is this correct or am I misunderstanding this?

[Al R]

AFPS is only 'big enough' or rather, it's only the size that it is, because of the contracted out element. The argument goes that in the past it has only been as generous as it was because you were contracted out, and that, in theory, if you weren't contracted out then you would get a larger basic state pension provision and subsequently, a smaller occupational one. I assume that's what you're referring to in your final point and not means testing. But that's another topic..


COPE - pages 10-14 refer: https://www.gov.uk/government/upload...ned-dwp042.pdf

[Onceapilot]

Hi Al!

Am I correct to say that Service personel are financially injured by this retrospective change in state pension law and, that personel had no choice in the way that their NI was charged during their service? If so, is this not a breach of the "Military covenant" that DC should correct?

OAP

[4everAD]

Originally Posted by egdg

I don't think you'd have a blade of grass to stand on, on that one. I've always known I've paid less NI for having a military pension accruing.

I think you are probably in the minority there as no one I have spoken to was even aware of what "contracted out" was until this raised it's head (including me).

[Al R]

Originally Posted by Onceapilot

Hi Al!

Am I correct to say that Service personel are financially injured by this retrospective change in state pension law and, that personel had no choice in the way that their NI was charged during their service? If so, is this not a breach of the "Military covenant" that DC should correct?

OAP

The state will suggest that by paying less NIC SP were advantaged. It'd be a difficult sell, nigh on impossible, to suggest that levelling the playing field is a bad thing. Similar examples of unfairness might be the raising of the VAT level.. annoyingly sickening in itself, but it might be said it disproportionately benefited those who have to spend a bigger proportion of their income on zero rated goods (childrens clothes etc). Ultimately, skewing, rather than unfairness, happens all the time. Hopefully, in the wash, it all comes out ok.

On another note, this revised guidance is useful for everyone serving overseas, and who has a co-located partner. Thanks to Navy Phil for bringing it to my attention.

https://www.gov.uk/government/publications/national-insurance-credits-for-partners-of-armed-forces-personnel-overseas-after-6-april-1975

[Al R]

Originally Posted by 4everAD

I think you are probably in the minority there as no one I have spoken to was even aware of what "contracted out" was until this raised it's head (including me).

Sorry. Ignorance can be bliss!

[F.O.D]

Thanks Al,

I had an e-mail from Steve Webb about 4 years ago assuring me that they would change the system to allow wives of Service personnel posted overseas to claim NI credits. It all went quiet, but I have today claimed Class 3 NI credits for Mrs F.O.D for several years in the 80s and 2000s when we were in RAF Germany and Belgium. Hurrah - It will all help to maximise the New State Pension entitlement. It would appear that you can apply on-line as far back as 1975. Hope that helps for other old timers like me!

[Onceapilot]

Thanks for your thoughts Al! Beware though, you might be falling for some of the revisionist political tripe, if you believe the "it all comes out in the wash" cobblers. TBH, I cannot honestly ever remember being given any choice whatsoever about my NIC when in the Service? Can that be correct? Did I have any choice? And, if I had a choice, I was not informed! So, now that I am to be penalised retrospectively, I call again for, "The Military Covenant" to be invoked! Speak up, DC.............

OAP

[Onceapilot]

Hi FOD,
Yes, those changes are a bonus, but one that was promised. Bear in mind though that Mrs FOD is probably delayed in her right to a state pension by 7, or so, years from what she might have expected and, the qualifying years for a full state pension have risen from 30 to 35. Overall, this will probably have cost her around £50,000.

OAP