Pensions does anyone understand

Pensions

Does anyone understand what is going on, I think not.

But here I will try to explain as I see it...

Currently we have DWP scheme for pre-april 2016 and and a new one for post-april 2016..

Pre-April 2016

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Currently

Pension = £115.95

+ any additional state pension......

+ any benefits you may be entitled to

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Many of us would have been contracted out at some time in our life. This benefited yourself, more pay and your employer less NI.

The idea was the money saved was paid into a private pension scheme, but this was not always the case, some did not for various reasons, and you may have not understood this at the time.

You often had no choice but to contract out as this was how the company operated. At the time seemed a good idea more money in your pocket. But no saving for your retirement.

Now there is SERPS

The State Earnings Related Pension Scheme (SERPS) was a UK Government pension arrangement, to which employees and employers contributed between 6 April 1978 and 5 April 2002, when it was replaced by the State Second Pension.

In order to receive your full pension you need the following qualiying years

Men born before 6 April 1945 usually need 44 qualifying years.

Women born before 6 April 1950 usually need 39 qualifying years.

Men born on or after 6 April 1945 need 30 qualifying years.

Women born on or after 6 April 1950 need 30 qualifying years.

The amount of SERPS pension you received was based on:

• your National Insurance contributions

• how much you earned

Note this ends when new pension begins

Post-April 2016 - now it gets complicated if it wasnt already

Now we have a standard flat rate pension now that sounds good, but for each year contracted out you will lose a qualifing year.....

You’ll need 35 qualifying years to get the full new State Pension. So if you have been in work for 40 years and contracted out for 5 you will still get full pension, but if contracted out for 10 you will only have 30 qualify years....

Each qualifying year on your National Insurance record after 5 April 2016 will add about £4.44 a week (which is £155.65 divided by 35) to your new State Pension.

So for 30 qualify years you will get £132.20

But if you get a statement from DWP it may state more in fact more than the £155 this is because of COPE (contracted out pension equivalent)

To explain this from DWP

Because you were contracted out In the past you have been part of a contracted out private pension scheme(s), such as a workplace or personal pension scheme(s). When you were contracted out, you and your employer(s) paid lower rate National Insurance (NI) contributions or some of your NI contributions were paid into your private pension scheme(s) instead. Your workplace or personal pension scheme(s) should include an amount of pension for the periods you were contracted out. We call this amount your Contracted Out Pension Equivalent (COPE). It is the amount of pension your contracted out private pension scheme should normally pay you for the time you were opted out of the additional State Pension and built a private pension instead. Contracted Out Pension Equivalent (COPE) This will be paid as part of your workplace or personal pension scheme(s). It will be paid by your workplace or personal pension scheme(s), in addition to your State Pension (see above). We estimate that your COPE amount is If you add your State Pension and COPE amount together the total is The COPE amount is paid as part of your private pension(s), not by the Government.

But theres more the pensions companies say this is paid for by the government or not at all depends on your specific pension arrangements...... CONFUSED

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New

Pension = £155.65

- any contracted out years......

+ COPE

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Also if you have already received a pension statement remember this was an illustration at the time, especially with new scheme its content may have changed... Get a new one.....

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Plus did you know under the existing scheme if you delay your pension for 1 year you get 10.4% interest

But after April with the new this reduces to 5.8%

Bare in mind if you delay for 1 year you lose 1 years pension. Under the existing scheme at 10.4% you will regain that money in about 12 years, but with new scheme this will take 23 years....

So worth doing if on existing scheme...... not so if going to be on new....

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Update on COPE.

It would seem pension companies do pay COPE, but not the pension company that pays or could pay your pension this is farmed off to a 3rd party....

There so easy, feel free to comment below......