Questions re state pension

Hi-

firstly I'm nowhere near retiring, but just wondering how much capital I need to have in order to provide a certain annuity to provide as a pension for my wife and me.

I haven't taken the State pension into consideration so far, and was wondering if someone could advise me as to whether we'd be eligible and what we could expect to get- I've been to the pension service site, but was not able to find out an online estimate- just a page where you can download a form, print it out, and send it back to them in the post, then wait for them to process it and send it back to you (I'm assuming) in the post again. Talk about old-fashioned inefficiency!

Anyway, questions are:

1. just to confirm, am I right in thinking there is no means testing to the State pension? If we put in the required NI contribs and also have a sizeable capital when we retire (to provide for our annuity), we will still get the basic pension (ie £127 for us as a couple)? Assume that the capital we have will be above any means-tested assistance/bonuses.

1. If my wife and I decided to retire early, say at 55, we would both be below our required NI contrib qualifying years. The pensions site says men need 44 by age 65 and women need 39 by 60. The site also says that: 'If you do not have the full number of Qualifying years, you

*may* still get a percentage of the full basic State Pension depending on the number of Qualifying years you have.'

So, if retiring at age 55, I have 34 years contribs (34/44 = 77%) and my wife has 34/39 = 87%.

Does that mean that we would eventually get, say 77% of the couples State pension (ie 77%x£127) = £97.79 per week?

1. Assuming I am right on questions 2 and we retired at 55, would this mean that: a) we would receive no money for the first 5 years, then b) 5 years later my wife would receive 87% of a single person's pension for the subsequent 5 years until c) from 10 years after retirement, we would together then start receiving 77% of the couples' State Pension?

Thanks for any advice.

Hi-

firstly I'm nowhere near retiring, but just wondering how much capital I need to have in order to provide a certain annuity to provide as a pension for my wife and me.

I haven't taken the State pension into consideration so far, and was wondering if someone could advise me as to whether we'd be eligible and what we could expect to get- I've been to the pension service site, but was not able to find out an online estimate- just a page where you can download a form, print it out, and send it back to them in the post, then wait for them to process it and send it back to you (I'm assuming) in the post again. Talk about old-fashioned inefficiency!

Anyway, questions are:

1. just to confirm, am I right in thinking there is no means testing to the State pension? If we put in the required NI contribs and also have a sizeable capital when we retire (to provide for our annuity), we will still get the basic pension (ie £127 for us as a couple)? Assume that the capital we have will be above any means-tested assistance/bonuses.

1. If my wife and I decided to retire early, say at 55, we would both be below our required NI contrib qualifying years. The pensions site says men need 44 by age 65 and women need 39 by 60. The site also says that: 'If you do not have the full number of Qualifying years, you

*may* still get a percentage of the full basic State Pension depending on the number of Qualifying years you have.'

So, if retiring at age 55, I have 34 years contribs (34/44 = 77%) and my wife has 34/39 = 87%.

Does that mean that we would eventually get, say 77% of the couples State pension (ie 77%x£127) = £97.79 per week?

1. Assuming I am right on questions 2 and we retired at 55, would this mean that: a) we would receive no money for the first 5 years, then b) 5 years later my wife would receive 87% of a single person's pension for the subsequent 5 years until c) from 10 years after retirement, we would together then start receiving 77% of the couples' State Pension?

Thanks for any advice.

You may think that the form filling and posting is inefficient but it is fast and, most importantly, it is personal to you. When the form is returned to you it will include such things as graduated pension and SERPS both of which you will quite likely have contributed to in the past. It will also include projections of pension if you are considering retiring before 65.

an level annuity for a single person pays about 8% pa. dunno what a joint life one pays.

Currently no. Don't be suprised if there is in 25 years time

You are entitled to have payments credited for the final 5 years of your working life if you are not employed so you'll get 5 years more than this.

Sorry dunno, how it works for a couple.

sounds about right

hth

tim

In message of Tue, 17 Aug 2004, Jim writes

If you have both paid contributions then you will both be entitled to the single person's pension. It wouldn't be worth your wife claiming on your contributions as a pension in her own right would be more. (Only applies if she has sufficient contributions of her own).

So if both have full contributions then you will each receive £79.60 (at today's basic rates) when 65/60 (unless your wife was born after 5th April 1950 when the woman's state retirement is being phased to coincide with men at 65 by 5th April 2020).

DF

Firstly, apologies for the triple posting. I used google to enter it, and remember thinking there were problems with the submit button...

Secondly thanks for the advice/comments. And in order...

1. Robert - you're right, I shouldn't have been so derogatory about the mailing service - it does sound comprehensive, but in this day and age, I was hoping there'd be some kind of online calculator (however I can also see the viewpoint that in complex and important systems like this, a 'dumbed down' calculator could be a very dangerous thing to base ones forecasts on).

1. Tim - could you please expand on the NI contribs for the final 5 years? "entitled to have payments credited for the final 5 years of your working life if you are not employed... ". Is this via voluntary Class 3 Contributions?

Would it be possible for us to each pay 10 years worth of Class 3 contributions (for age 55-65 - my wife is the same wage as me) and then be allowed to draw the full State pension?

Bitstring , from the wonderful person Jim said

I fill in and post off the form every couple of years. Takes 2 minutes, reply back usually within 2 weeks. Calculating basic state pension is fairly easy .. calculating SERPS, especially if you have been contracted out, requires a Cray, and some black magic fudge factors.

Yes, and applies to males only, if they are not working.

Yes, but the male member doesn't need to pay the last 5 (see above). You need to 'pay as you go' since there is a limited period of 'carryback' (making up historical gaps) allowed .. 7Yrs, iirc. If you fill in the form and sent it to Newcastle you will get all the right answers and suggestions of what you can do to fill in any gaps.

You have a six year time limit in which to buy. Therefore it would follow that you are unlikely to be allowed to pay for ten years. Again this is something that you are advised on when you receive your pension forecast after completing the form (sorry to mention the form again :) )

Jim,

As an older person who has experienced some of these issues I find some of your questions are easy to answer but others not quite so easy particularly as I am divorced and don't have a spouse to consider. However, I do have some information to hand so will try and work through some of the issues. All figures are based on current rates.

You do not make it clear whether you will both qualify for separate (Class A) pensions or whether the claim will be based on just one partner's contributions. If it is based only on your own contribution record then it seems you would get up to 79.60 per week at age 65, which would not be means tested. You could also then claim up to 47.65 for an adult dependent (which could be your wife) but this would be means tested.

However, it seems your wife could be entitled to a (Class B) pension based solely on your contribution record. This would amount to (up to) 47.65 and would not be means tested. However, this is only payable when both partners are over pension age.

If your wife claims a pension based on her own contributions record then it seems that she will get up to 79.60 (non means-tested) when she reaches retirement age, just as you will when you reach retirement age.

From age 60 to 65 a male gets automatically credited with NI contributions, if unemployed, (provided they are not out of the UK for six months or longer in the year) although is still liable to pay Class 1 or Class 2 contributions if working or self-employed. When the state pension age is equalized, women will also become eligible for these credits. You are not required to sign on as unemployed during this period.

.

At present if you retire at age 55 then you can pay voluntary Class 3 contributions for any years that you need to make up so you can get a full pension. In your case, if you retire at 55 and you say you can count on 34 years contributions, add to this the five years you will be credited with from age 60 to 65, making a total of 39 years. So if you pay voluntary Class

3 contributions to cover period from age 55 to 60 then that will make up a full pension (for you). Currently, I believe that Class 3 contributions are 7.15 per week. The opportunity to pay voluntary contributions (arrears) is time limited so be aware of that. You could, if you wish, sign on as unemployed and be credited with NI contributions between the age or 55 and 60.

The way I see it there are two possible scenarios. Firstly, both you and your wife have separate entitlements to a retirement pension and have paid voluntary Class 3 contributions to make up a full pension. When your wife reaches retirement age she will receive a pension of 79.60. When you reach retirement age you will also receive a pension of 79.60. These pensions are non-means tested (although subject to income tax).

In the second scenario your wife does not have a separate entitlement to a retirement pension based on her own contributions. Therefore, when you are aged 65 you claim a retirement pension of 79.60 and your wife claims a Class B pension of 47.65 per week. These pensions are also non means tested, although subject to income tax.

I believe this information to be correct. Hopefully, some one will correct me if I have got anything wrong.

Regards

Ellis

IMO - don't assume you will get a state pension when you retire at all. Given the fact that pensioners are living longer and less people are contributing to the NI pot the system is due to collapse anyway

Build your own pension/investment portfolio and assume the government will give you nothing. that way, if by some miracle you DO get a state pension, it will be a nice suprise.

MC

It won't collapse but they may well means test it, so unless you are practically in the gutter, you won't get it despite having your NICs all paid up.

"John-Smith" wrote

So, the only people that will get it are those who were prosperous enough while working to have paid-up all NICs, but "un-prosperous" enough in retirement to be "practically in the gutter" ...

A friend of mine was a casual worker and frequently unemployed and he had a full contribution record because he was always credited with NI contributions when he signed on. I myself lost three years contributions whilst doing a college course and another couple of years because I could not be bothered signing on after taking early retirement, (I had a modest occupational pension). So, I would guess that a lot of "un-prosperous" people who are frequently unemployed, will actually have good contribution records.

But if people are "practically in the gutter" when they retire then they will receive the Minimum Income Guarantee anyway. The M.I.G.is currently

105.45 for a single person. So for someone who has no income at retirement, the retirement pension is largely irrelevant because they will have their income topped up to the MIG, however much pension they receive.

The retirement pension is now only of interest to those people (like the OP) who plan to have personal pensions and other assets that will disqualify them from receiving the MIG when they retire. They will still receive the retirement pension which is not means tested.

It seems to me that the retirement pension has now lost its function as the primary "safety net" for most people when they retire. The MIG makes the retirement pension irrelevant to those without income. Although it is perhaps a welcome supplement for those on modest personal pensions, for many others who have generous personal and occupational pensions the retirement pension is simply a bonus that they could well live without.

One can easily envisage a government wanting to scrap the retirement pension.but I would guess they cannot just arbitrarily scrap the scheme without an act of parliament. They would surely have to comepensate individuals who have made contributions on the premise that they will receive a pension. And of course it would be a phased withdrawal over a long period of time, not affecting those currently retired, or those retiring within the next decade or so.

Ellis

Thanks for your information Ellis.