How much am I really going to receive? This can seem straight forward question however its not the case, National insurance record can vary greatly depending on if they were members of a pension scheme that contracted them out of the state system to benefit from national insurance rebates for the schemes in question.
So where does this leave you when the new scheme comes in to force in April 2016.
Under the old scheme you had to have 30 qualifying year at the full rate (not contracted out) from April 2016 the qualifying years move to 35 years and an adjustment is taken into consideration if you had been contracted out, which means the new flat rate scheme amount £155.65 may not be paid.
We advise that clients due to the complexity to apply for a pension forecast using the form BR19 or BR20 (if been divorced) however this is not worth doing until after April 16 as the DWP can not work out what you will be entitled to until the flat rate scheme goes live.
If retiring after April 2015 you will continue to build up additional years under the new scheme, so prior to retiring its vital to check your number of years as even paying a small amount may mean a higher pension.
The Department for Work and Pensions (DWP) has been trying to improve the forecasts, so as to provide accurate information prior to retirement however this is still a work in progress as I have seen various values for the same client and the information can be very confusing.
Topping up state pension
One key question we receive is whether the state pension top-up system is worth considering. We tell our clients this system is a sound investment.
It makes sense to filter cash into this system and it is good value too.
If you compare it against any form of annuity purchased on the open market you would not find anything else like it, so we advise people to go down that route.
The only circumstances that make it unsuitable are poor health or impaired life expectancy.
If we have a full projection of that income we will use it, but if not we will work using the older basic state pension figure.
We do this because there seemed to be a ‘blackout’ period where it was difficult to obtain information about the new system at present.
No client will be upset if you estimate conservatively and they end up receiving more money than they expected, and it is arguably a waste of our time and the client’s time if the information you have about the new system is inaccurate, or it leaves you guessing.
There has been criticism of the new state pension but there is a lot of useful information on the government website.
You just have to commit to sitting down and going through it, rather than trying to understand everything in a few minutes.
It is worth having a good grasp of statutory law when you do this because much of the government’s information is linked to parliamentary documents and statutes, which explain entitlement in legalistic terms. However, it is not rocket science.
With all our client we run through all the forms and send off for the detail to held guide then through the process.