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crashmonitor

Cake And Eating It..........contracting Out Of State Pension

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Well I have just had my new universal state pension forecast. Under the old system I was due to £120...that is the old state pension plus serps minus contracting out contributions.

My new state pension is £144.33 this is the full universal state pension for 35 years contributions minus c £11 for contracting out to a private scheme.

The private scheme is worth about 15k. However, I can make up the shortfall of universal state pension with just just three years voluntary class 3 costing £2,100 at current rates or less if I remain self employed.

Points to note, I am a winner because......

(1) I have had long periods of self employment so my serps fund is tiny (about £20 per week)

(2) I am nearly 52 so have time to pay the cake and eating class 3 premiums before I receive state pension in 2031 or where ever the goalposts finish.

(3) The 15k will be available at age 55 as a drawdown or lump sum.

Edited by crashmonitor

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Well I have just had my new universal state pension forecast. Under the old system I was due to £120...that is the old state pension plus serps minus contracting out contributions.

My new state pension is £144.33 this is the full universal state pension for 35 years contributions minus c £11 for contracting out to a private scheme.

The private scheme is worth about 15k. however, I can make up the shortfall of universal state pension with just just three years voluntary class 3 costing £2,100 at current rates or less if I remain self employed.

Points to note, I am a winner because......

(1) I have had long periods of self employment so my serps fund is tiny (about £20)

(2) I am nearly 52 so have time to pay the cake and eating class 3 premiums before I retire in 2031 or where ever the goalposts finish.

(3) The 15k will be available at age 55 as a drawdown or lump sum.

With everything that everyone here should already know by know about the viability of the welfare state, pensions, etc. it makes me smirk when I see people still post such wishful thinking optimistc forecasts for so far in to the future.

You don't honestly really believe that this forecast will remain valid and be honoured all the way out till 2031 ??? Do you really think that your statutory retirement age will still be in 2031 (i.e. the goalposts won't be moved again) ?

Personally, because there is a practical limit to high you can raise the retirement age, I am expecting to see some sort of sneaky/crafty arrangement that achieves the same result of increased retirement age and lowered pension payouts in a different way.

One idea, for example, could be something along the lines of lowering the initial pension payouts at retirement age BUT promising to generously incrementally increase the pension progressively with age (i.e. 'jam tomorrow'). Of course people will merely lick their lips at the thought of being paid a £300 pension (or whatever) at, say 77 years of age - and be completely unrealistic about their odds of living that long.

You can be sure that any such scheme will be carefully calculated based on actuarial and demographic research as to life expectancies in such a way as to ensure that, overall, HMG will pay out even less.

Edited by anonguest

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If I were a betting man i would say for me born 1964 I reckon 2032 is the most likely...and a movement of 67 to 68 and that's from a glass half empty Bear.

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....not only is it about when able to draw state pension, more about what the figure quoted today will buy you when you get to draw it...if still alive to receive it. ;)

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Well it's supposed to be tripled locked ie. it's in today's money then inflated by the triple lock. Yes I know it's madness by the Exchequer. Unless, of course, you are some millionaire Pension Tsar that got hers at 60 and feels especially entitled with special dispensation from God.

I guess at the end of the day the boomer's vote counts before financial sense.

Edited by crashmonitor

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Well it's supposed to be tripled locked ie. it's in today's money then inflated by the triple lock. Yes I know it's madness by the Exchequer. Unless, of course, you are some millionaire Pension Tsar that got hers at 60 and feels especially entitled with special dispensation from God.

I guess at the end of the day the boomer's vote counts before financial sense.

And I'll wager, to protect themselves from ending up swinging from lamposts, MPs will have downgraded their political importance quite some time before 2030!

Edited by anonguest

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And I'll wager, to protect themselves from ending up swinging from lamposts, MPs will have downgraded their political importance quite some time before 2030!

I should think many of them will have died by then taking their old style quality pensions with them.......when most of the following behind population will be earning less in real terms, have higher sums of debt and/or lifetime rents to pay , insurances and living costs to be paid over a longer working life time, with a growing population earning low wages for longer, no working ladder of such that will make a difference........therefore whatever most people get is what they can spend, all in this together....unless the government is prepared to bail out most of the population to enable growth......helicopter debt style? ;)

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I should think many of them will have died by then taking their old style quality pensions with them.......when most of the following behind population will be earning less in real terms, have higher sums of debt and/or lifetime rents to pay , insurances and living costs to be paid over a longer working life time, with a growing population earning low wages for longer, no working ladder of such that will make a difference........therefore whatever most people get is what they can spend, all in this together....unless the government is prepared to bail out most of the population to enable growth......helicopter debt style? ;)

Today's pensioners have a higher net household income than a working household, control more than half the Nation's wealth...I guess it's going to be hard to justify the benefits (most especially the triple lock) going forward. In the meantime today's pensioners will probably carry their benefits through til death and be unaware of the debt and chaos left in its wake.

We have moved from a Society where wages used to be the main source of lifetime income to a Society where it makes up a fraction because of inherited wealth, capital gains and a generous welfare system most especially retirement benefits.

Simple solution...inheritance tax and pay back ....but the majority of the population are against this.

Edited by crashmonitor

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Aren't Greece constantly negotiating pension reductions?...

Err no. germany is constantly telling them whats good for them.

Moral of the story is never enter a political/financial alliance with germany.

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Today's pensioners have a higher net household income than a working household, control more than half the Nation's wealth...I guess it's going to be hard to justify the benefits (most especially the triple lock) going forward. In the meantime today's pensioners will probably carry their benefits through til death and be unaware of the debt and chaos left in its wake.

We have moved from a Society where wages used to be the main source of lifetime income to a Society where it makes up a fraction because of inherited wealth, capital gains and a generous welfare syatem most especially retirement benefits.

Simple solution...inheritance tax and pay back ....but the majority of the population are against this.

Yes......even the large numbers of young are against it because very many of them are relying on their house price inheritance to pay for their own retirement and debt......wealth should be taxed more than income and expenditure imo........we ought to step back to when who you are and how hard you worked created the best opportunities and best life chances..... when now the best opportunities depend on who you were born to and/or what you are given by others......then you wonder why people even bother when everything is stacked up against them....born into wealth and everyday is a party without lifting a finger.....happy days. ;)

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Err no. germany is constantly telling them whats good for them.

Moral of the story is never enter a political/financial alliance with germany.

Unlike the Neoclassical/New Keynesian hoons at the IMF, World Bank, WTO etc?

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Unlike the Neoclassical/New Keynesian hoons at the IMF, World Bank, WTO etc?

Tedious troll.......

Fact is boomers have been drawin their pensions for the last 5 years, world hasnt ended & they werent "inflated away".

In fact they are a helpful source of demand. State pensioners spend their income.

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(3) The 15k will be available at age 55 as a drawdown or lump sum.

I "think" (i.e. I might be wrong) that once you draw down any money from your pension pot, you can no longer get tax relief on any new pension savings. So unless you have finished adding to your pension, you shouldn't draw down until you retire.

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In fact they are a helpful source of demand. State pensioners spend their income.

The idea that gifting people money benefits the economy is a variation of the broken window fallacy.

When the gov pays someone to do nothing, the economy incurs an opportunity cost of using the same money to pay someone to do something of value (doing nothing == fixing the deliberately broken window).

Edited by goldbug9999

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Lol your not nearly old enough to bother with calculations on this.

I've got another 35+ years of working until I reach the current age.

Given the triple lock and compounding increases I look forward to having a million each month :D

Then again I decded to never again pay income tax, what happens if everyone does this?

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Lol your not nearly old enough to bother with calculations on this.

I've got another 35+ years of working until I reach the current age.

Given the triple lock and compounding increases I look forward to having a million each month :D

Then again I decded to never again pay income tax, what happens if everyone does this?

Some who can choose to because they can........others do not have that choice the work they have been offered pays below the personal tax allowance threshold.....but they still pay taxes. ;)

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Today's pensioners have a higher net household income than a working household, control more than half the Nation's wealth...I guess it's going to be hard to justify the benefits (most especially the triple lock) going forward. In the meantime today's pensioners will probably carry their benefits through til death and be unaware of the debt and chaos left in its wake.

I will tell my Mum that as she gets £118 a week

The reality is that some of todays pensioners earn more than working household while others do not

Ditto the new State pension. It creates both winners (particularly the self employed) and losers (married women without full contribution records).

The new State Pension is the equivalent of pay of £3.87 an hour for a 40 hour week so to claim that someone on it is earning more than someone on minimum wage working the same hours is pushing it to put it mildly. Only working under 18 year olds get a minimum wage that low.

https://www.gov.uk/national-minimum-wage-rates

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The idea that gifting people money benefits the economy is a variation of the broken window fallacy.

When the gov pays someone to do nothing, the economy incurs an opportunity cost of using the same money to pay someone to do something of value (doing nothing == fixing the deliberately broken window).

Usual claptrap.

Its not a "gift" its a redistribution. Nobody has broken any windows. Where do goldbugs get this drivel from

Presumably you mean using the same money to dig up a lump of metal and bury it in your back garden? Something of value like that?

Edited by R K

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You are absolutely wrong there for those coming up to retirement. Things have changed so much down the years that it is extremely difficult to keep track and no one, that means no one should rely on off the cuff comments from people on the internet.

From what I know is that Brown made child rearing applicable for a contribution record. This seems to be borne out by a look at my wife's record (with her) that shows she has an almost complete contribution record because of all the years spent at home.

Home Responsibility Protection was introduced in 1978 for those caring for children or someone sick or disabled. It reduced the number of qualifying years required to get the full basic state pension, but only to a minimum of 20 years. It was replaced by National Insurance Credits in 2010. More here https://www.gov.uk/home-responsibilities-protection-hrp/overview

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