With all this talk of changes to state pensions I thought I would look into how it would effect me as I will receive state pensions from two different countries and intend to live in neither of these countries when I retire. Also my contributions of 36 years (because of reciprocal agreements) exceed the 30 year requirement of either country to receive a state pension.
I am interested to find out how I will benefit from the extra 20 years (6 years already paid and 14 to go) of "stamps" I will need to pay before I reach retirement age given the proposed single tier pension system proposed by the current government.
If these additional years will mean I receive nothing extra in the state pension am I able to transfer these contributions, to a high interest () pension scheme or to the scheme you see advertised on the tele by those that don't need a state pension. These are just a couple of thoughts. With the way the pound and the baht are at the moment every penny counts.
Just thought I would share as I go along, in case it helps somebody else.
This is how things stand at the moment:
State pension: everything you need to know
The state pension is a paid weekly by the UK government to all citizens of state pension age, regardless of where they live. However, how much you receive depends on a range of factors including age, marital status, work history and where in the world you live.
State pension age
The state pension age has been updated to reflect changes in longevity and lifestyles. While women used to reach state pension age at 60 and men at 65, that is being phased out so that by 2018 both will qualify for a state pension at age 65. If you are a woman born between April 1950 and 6 December 1953 and unsure what your state retirement age will be, use the government's calculator to find out.
State pension age will rise to 66 from 2020 and to 67 from 2026, and further rises are in the pipeline.
How much you will get
If you are set to reach state retirement age before April 2017 you will be able to claim the basic state pension. This is worth up to £107.45 a week in the 2012/13 tax year and £110.15 from April 2013.
Married couples and civil partners receive a joint pension worth up to £171.85 a week (£176.15 from April 2013) if only one of them qualifies for the full basic state pension.
How much you get depends on how many years of national insurance contributions you have made over your working lifetime. To qualify for the full amount you need to have made 30 years' contributions – either by working, being credited while caring for a family, or voluntarily paying to make up missed years.
The value of the basic state pension rises every April. This rise is guarded by a "triple-lock", which means it goes up by whichever is the highest out of these three things:
• The average percentage growth in wages in Great Britain
• Inflation as measured by CPI for the previous September
On top of the basic state pension you might qualify for some additional pension – either the second state pension (S2P) or the state earnings related pension (Serps).
Whether you qualify, and how much for, again depend on your national insurance contributions. It also depends on whether you "contracted out" at any point – this was an option that allowed you to pay NI contributions into a private pension scheme rather than using them to build up state pension entitlement.
If you are set to reach state pension age after 2017 you will qualify for the new single tier pension. This will begin at a flat rate of £144 in today's money. Some people may receive more in the short term as additional state pension entitlements that have already been earned will be paid out.
Some, however, will receive less: to qualify for the full amount you need to have made NI contributions for 35 years. If you have fewer years under your belt, your pension will be adjusted accordingly – 26 years of contributions, for example, will entitle you to 26/35 of the full amount.
All pension payments are taxable.
The state pension you receive will depend on how many qualifying years of NI contributions you have made. You can start building up qualifying years at the start of the tax year in which you turn 16, and you finish at the end of the tax year before you reach state pension age.
In some circumstances you may be credited with "qualifying years" even if you weren't working. This might occur if you are, or were, incapable of working due to illness, caring for children or someone sick, or in receipt of certain benefits.
You can opt to make up for a shortfall in your contributions to make sure you get a full state pension.
This is a non-contributory pension for people aged over 80 who are not entitled to a full state pension. To qualify you must live in England, Scotland or Wales and have done so for at least 10 years.
If you do not receive a/any state pension the over-80s portion is worth £64.40 a week in the 2012/13 tax year; if you receive some state pension the over-80 pension will make up the difference.
Checking your entitlement
If you are coming up to retirement in the next few years, the best way to check your entitlement is to get a state pension forecast – this is available online at the Pension Service's website.
The forecast will tell you the amount of basic pension you have already accrued, and what you can expect at retirement taking into account what you might build up before you retire. It will also tell you if there is anything you can do to improve your pension.
The government introduced pension credits in 2003 to combat pensioner poverty, replacing a similar benefit called the minimum income guarantee.
It is a means-tested benefit that guarantees a minimum weekly income of £142.70 for single pensioners (rising to £145.40 from April 2013) and £217.90 for couples (rising to £222.05 in April 2013).
Collecting your pension
Your state pension, and any pension credits to which you are entitled, will be paid directly into your bank or building society account.
You don't have to claim it as soon as you reach state pension age, and may choose not to if you are still at work or have enough other income to live on. If you choose to defer your pension you will be entitled to a higher weekly amount later on, or a one-off lump sum payment.
UK citizens can still claim a UK pension if they retire while living abroad or move there after finishing work. How much you receive will depend on the country you move to. The UK has arrangements with some countries which mean you will have your payments increased every year just as if you had stayed at home. However, if you move to a country outside this group your pension will be frozen at the level it was set at when you moved if you were already retired, or when you made your first claim.
There is more to come. After speaking to the DWP, they informed me that the 35 years and the 2016 date has not gone through parliament yet so they cannot give any advise. Nobody knows what is happening for sure. It could stay the same unlikely but it could.
Some parts of what is written below overlap another thread but I thought it appropriate to keep it in the one thread.
The Government’s attack on foreigners who receive a British state pension while living abroad could also affect people who have lived here all their lives.
This highly publicised move of stopping pensioners in Thailand, Belgium or Brazil getting a weekly cheque from Whitehall is in my opinion is a smoke screen as it will have exactly the same effect on their counterparts living in Bournemouth or Birmingham – if, that is, those pensioners are relying on their spouse’s National Insurance contributions.
This move is actually just one of a range of changes that are part of a revolution in Britain’s state pension system – the introduction of a “single tier” payment to replace the current basic state pension and its various top-ups.
The changes will affect tens of millions of pensioners. While the flagship measure – a flat-rate weekly pension of about £145 paid to everyone will a full record of National Insurance contributions – has received plenty of publicity, some of the detail in the small print could spring some nasty surprises on certain pensioners.
Here are some of the less well-known effects of the changes.
I get my state pension thanks to my husband’s NI contributions. Am I about to lose it?
The key thing to remember about the changes – including those to pensions paid to foreigners living abroad by virtue of their spouse’s NI contributions – is that nothing will change until 2016, and that anyone who reaches the state pension age before then will be unaffected.
So if you already get a state pension based on your husband or wife’s NI record because your own contributions were insufficient, you are safe. This pension is paid at a rate of 60pc of your spouse’s.
But what if I live abroad?
It makes no difference. People who live overseas and receive a state pension solely as a result of a spouse’s NI record will not lose that pension, as long as they reach state pension age before April 6 2016.
Why all the fuss then?
Nothing has changed in the Government’s intentions since the White Paper on the single-tier pension was published in January. All that has happened over the past few weeks is that the Government has drawn attention to the fact that some people who live abroad and have never paid tax or NI in Britain are entitled to a state pension, and that the number of such people is rising, whereas the numbers in this country are falling. As I said a smoke screen to reduce or stop payments to people here without losing critical votes.
I’m due to retire after 2016 and was expecting to get a ‘spouse’s pension’. Will the new law mean I don’t get it?
In most cases, yes. Under the reforms, the vast majority of people who reach state pension age after the single-tier pension comes in will get a pension based solely on their own contributions. They will no longer be entitled to a state pension by virtue of their spouse’s NI record.
Transitional rules will apply to certain married women and widows who had at any time in the 35 years leading up to state pension age elected to pay reduced-rate National Insurance contributions – the so-called “married woman’s stamp”. “They will continue to be allowed to claim a spouse’s pension if necessary, as now, of up to 60pc of the full basic state pension or, if widowed or divorced, the full rate of their partner’s pension,”
The change will affect people who live in Britain, as well as the overseas residents highlighted by the Government. Some spouses – mostly women, who historically have had worse NI records because of time spent away from full-time work – will be about £1,600 a year worse off.
A couple in which the man had a full basic state pension and his wife had no record of making NI contributions currently got about £176 a week in state pension. This consists of the man’s pension of £110.15 a week, plus his wife’s entitlement to 60pc of that figure
But when this entitlement is scrapped following the introduction of the single-tier pension, the man will receive the flat rate of £145 a week and his wife will get nothing, so their combined income will fall to £145. This is £31 a week or £1,612 a year less than they would get under the current system – a fall of 18pc.
I am a widow and my state pension is due to my husband’s contributions. Is my pension safe?
Currently, widows can inherit their husband’s basic state pension, plus half of his entitlement to top-ups such as the state second pension and Serps, if her own NI contributions would give her less.
If you have already reached state pension age or will do so before the April 2016 cut-off date, the widow’s pension is safe. But, apart from the exception mentioned above for the married woman’s stamp, those who reach state pension age after that date will not be entitled to a widow’s pension; instead their state pension will depend on their own contributions.
I have a divorcee’s pension. Is it safe?
The same applies to divorcees, who can use their former husband’s NI record, for the period of the marriage, if it is better than their own.
I’ve read that people who have little or no NI record get 60pc of the state pension when they turn 80. Will this continue?
No, the age 80 pension will be scrapped in April 2016, as will the 25p a week age increase that is currently paid at that age.
Should I buy back missed NI years?
If you missed making NI payments in any of the past six years, you can “buy back” that year at a one-off cost of about £700. The Government is likely to make buying back years easier in the run-up to 2016. But be careful about rushing to buy them now.
“If you haven’t got a full NI record I would always consider buying extra years. Each year will buy you a 30th of the annual state pension for each year from state pension age until you die – it can be a good deal for £700. But you could also find any gains wiped out by means-tested benefits.”
Any other changes?
Previously you would get some state pension even with a single year’s NI contributions. Under the new system you will need a minimum of seven to 10 years (the Government has yet to decide), below which no state pension will be paid.
The right to a lump sum if you delay taking your state pension is to be scrapped. While delaying can still get you a better income, the improvement is to be halved – previously your state pension would rise by 10.4pc for a year’s delay but the rise under the new rules will be 5.2pc.
You get the basic pension regardless, you are then means tested and if you are poor enough they give you credits to make the total amount £145.40 for a single person. If you have enough other income you don't get the top up. It is strange if you need that amount to live then why isn't that the pension amount.
A few years ago a large charity I worked for went down the tubes. I must have paid my first tax and NI as a 16 y/o with a Saturday job. I claimed benefits. An interesting experience and I had some interesting chats with the Job Centre folk about what they thought of it all. The Govt thought I could live on a lot less than £145.40. I think it was in the region of £62 I got. I never quite worked out how I was suppose to pay a mortgage and live on that.
If you were unemployed on say £62 a week does your income then shoot to £145 when you hit the pension age?
Basically unless you have a pension that will pay out over approx £100 per week it seems better never to have taken it out and payed in and just rely on the pension credit,
Money.....mattress......bag marked......swag.......a three legged dog at the 5.15 at Catford seem a sensible option
It takes courage to grow up and turn out to be who you really are
Under the present system today the £62 is now £71 and counts towards your state pension. When you reach pension your benefit would change to the state pension and you would most likely get pension credits. Your income would then go from £71 to £145.
Under the new system you will get the maximum amount £145 so having a pension you voluntarily paid into would be better as there is no means testing.
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The benefit system is a strange beast.
The govt says you need £71 to live on if you are under 65. However people can't live on it and apply for crisis loans which they get.
You need to pay the crisis loan back, at say £6 per week leaving you £65 per week to live on , which is less than the govt says you can live on.
Then there is the situation where your benefit is sanctioned and stopped and you get nothing to live on, but that is below the amount the govt says you need. Then you apply for a hardship allowance and you will be awarded £49 per week, again below what the govt says you can live on, then they say tough.
I believe that started when those signing on as unemployed, whose earnings related supplement expired after 6 months - contribution based dole was then paid for 12 months before being reduced (a novel concept now) - then went to claim what was called Supplementary benefit and were enraged to learn that they actually qualified for more than what they were previously getting with contribution based dole + their earnings supplement, which they kind of viewed as being something other than an anomaly!
Up the workers (literally) - circa 1980 I believe!
The Office for National Statistics says a man reaching state retirement age in March 2013 will need a pension pot worth £152,800 to buy an annuity paying out £5,000 for the rest of his life
That's approximately £96 a week which will be added to your state pension, currently £110. Of course, if you are currently on the £110 you would get topped up to £142.70 so your first £32.70 of your £96 would be lost. You may lose other means tested benefits as well. This means your saving £152,800 would give you an extra £63.30 a week. If you expect to live a fairly independent life until aged 85 that's 20 years x 52 x 63.30 = approx. £66,000. If you go into a nursing home you will wipe out £1,000s a month and might as well have not had any savings at all unless you are extremely rich. If you drop dead at 66 they keep the whole pot (some exceptions available for first 5 years at the cost of lower pension).
The government complain about people not saving for their future but forget to mention that the first £100,000 you save is basically written off. At least you can defer buying an annuity now, but there is no way I see it as value for money.
I have had word from the DWP that my 36 years of contributions is enough and will stand should the proposed change come into effect even if I have moved to Thailand.
My next mission is to find out what happens to the contributions over and above the 30 or 35 year mark should I remain in the UK.
If the government plans to allow you to purchase a years work of pension £700 then my extra 20 years is worth a fair bit when you compound the interest.
I have no idea what this means in practice
There is a bloke here that charges English Teachers and Pensioners in Thailand 11,000 Baht per hour for tax advice ( Come in Shrek whenever you are ready )
It takes courage to grow up and turn out to be who you really are
have I got this right, somebody retirering in jan 2017 gets 107 pounds but another in April gets 144 pounds a week? Will the former ever get the 144 quid, if not it's not very fair.
People who calculate their NI contributions might be in for a shock as the records do not always add up. I was sure I had at least 37 years but they say only 34, ask for a forecast if in doubt.
The person retiring in Jan may get pension credits bringing it up to £144. New claiments will get £144 if the bill is passed through parliament successfully.
You can call for a pension forecast on 0191 213 5000 don't use the pay phone number.
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I haven’t been able to get any further information about the extra 20 years state pension contributions I will pay between now and retirement day. However I have found about where we stand at present.
If you or I decide to retire in Thailand or one of 172 other countries, your basic state pension won't increase annually, as happens in the UK. It will be permanently frozen at the date you retire or when you arrived in that country, and it will never increase, no matter how rich or poor you are, or how much you've paid in national insurance contributions.
However, if you move to an EU country, the US, or one of a seemingly random list of other countries including Israel and the Philippines, your state pension will increase in line with inflation.
There are around over 555,000 "frozen" pensioners around the world 41,000 retirees live in Thailand, but I don’t know have fiqures on how many are 65+), almost half of the world total live in Australia.
Some of the very oldest, who qualified for their state pensions in the 1970s, have had their payouts frozen at as little as £6 a week, yet, they would be getting up to £110.15 a week if living in Florida or on the Costa del Sol plus pension credits if applicable to them.
This information came from a newspaper and may be misleading as my father is retired living in New Zealand. Through a reciprocal agreement, (which doesn't exist) he now receives the full New Zealand state pension and any increases that come with it, but nothing from the UK.
He has in the passed received a UK pension without increases and a smaller New Zealand pension. Those people in Australia may receive a pension from Australia as well as the UK and as we know newspapers never let the truth get in the way of a good headline.)
Those with frozen pensions have long argued that these rules, imposed by the UK government, are discriminatory and unfair, resulting in financial hardship for British citizens around the world. These rules also prevent some older Brits from moving abroad to join children and grandchildren living in countries such as Canada as they fear becoming a financial burden to their family as the value of their UK pension dwindles. The human rights arguement to a "right to a family life" doesn't seem to apply if you are over 65 and British.
Eleven years ago pensioners launched an ultimately fruitless legal challenge, which kicked off in the high court and went all the way to the European court of human rights. Ministers concede the rules are "illogical", but argue it would be too expensive to up rate pensions for everyone. They say the priority should be targeting money at the poorest pensioners living at home.
So just how much does this policy cost people?
Freezing pensioners' entitlements means they can lose out on up to £24,000 of income over 20 years of retirement, according to a report published by the Runnymede Trust, a leading race equality think tank.
One British couple featured on Pension Justice, Geoff and Doris Dancer, who live in Ottawa, Canada, reckon that between them they have been denied around £40,000 of pension over the past 20 years.
On reaching 65 in 1986, Geoff Dancer, who served in the RAF from 1939 to 1948, qualified for a 100% state pension of £38.30 a week – the same amount he receives today.
While some people argue there is no reason why UK taxpayers should have to fund people who live abroad and are now contributing nothing to the British economy. These people as have others, have paid there contributions over 30 years for their retirement years, it would be hard to argue there is any logic to the system.
British pensioners in Jamaica and Barbados, for example, get the increases, but those in Trinidad and Tobago, St Lucia and Antigua don't.
Similarly, Mauritius is up rated, while its Indian Ocean neighbour the Seychelles isn't.
Even the Falkland Islands don't get special treatment. The British pensioners living there have had their pensions frozen – but, oddly, it's a different story for their counterparts in Bermuda, thousands of miles to the north, who enjoy up rated payouts.
This isn't just an issue for the traditionally white British expats moving to the "old Commonwealth" countries. It also affects many black and Asian people who came to Britain during the 50s, 60s and 70s, have lived and worked here for decades, paying their taxes and NI contributions, and are now looking to retire to their country of birth in the Caribbean, Africa or south Asia.
The Runnymede Trust report, says: "It is clearly unfair that the people who were encouraged to rebuild the UK after the Second World War for example working for the NHS should risk losing their entitlements if they return to the Caribbean or elsewhere."
Those people who quit Britain for a retirement overseas are arguably saving UK taxpayers money because they are not using services such as the NHS. A study in March 2011 by Oxford Economics claimed that each pensioner who moves abroad saves the UK taxpayer about £7,700 a year(2010 figures, therefore more now) in healthcare, pension and age-related costs.
Who's in, who's out?
British pensioners who live in any of the 30 countries that make up the European Economic Area – or Switzerland – get annual increases to their basic state pension.
These so-called "up ratings" are also paid to pensioners living in 16 countries or territories with which the UK has a reciprocal social security agreement requiring increases to be paid: Barbados, Bermuda, Bosnia-Herzegovina, Croatia, Guernsey, Isle of Man, Israel, Jamaica, Jersey, Mauritius, Montenegro, the Philippines, Serbia, Turkey, the US and Macedonia. No other countries get the increases.
The Foreign and Commonwealth Office says:
"Our position on this issue has been endorsed by the European court of human rights. (Well doesn’t that open up a completely new argument, given some of the human rights cases we have seen in the courts lately?) We do not apply living increases to the pensions of those living in [countries such as] Australia. Our policy in this area has remained the same since 1955, and we believe it is the fairest system possible for those who live and pay tax in the UK."
In 1955 UK state pensions became payable worldwide. But the agreements signed with countries such as Australia, Canada and New Zealand during the 1950s didn't include up ratings.
The International Consortium of British Pensioners says: "The UK government could choose to unfreeze pensions unilaterally at any time through a simple change in policy."
Last edited by jimmbo60; 25th May 2013 at 11:19.
Good, interesting stuff Jimmbo.
Can,t ever see it affecting me though as I can,t ever see me living in thailand permanently.Plus seeing a 3 year old through her schooling years i,ll be tied to the Uk for at least the next 15/16 yrs.When shes 18 I.ll be 65...maybes then..if I,m still around!
You sound like you are in the same boat as me, well minus the baby
Now got the information I need
Currently those with 30 years of National Insurance contributions qualify for a full basic state pension of £110.15-a-week.
Which can then be topped up by the Second State Pension (S2P), which replaced the State Earnings-Related Pension scheme (SERPs) in 2002.
Someone who has already built up S2P, therefore entitling them to a state pension income greater than £144-a-week, will be allowed to keep this.
They will not be allowed to build up any extra post-2016. You cannot buy years in S2P like the basic pension.
When the flat-rate pension comes into force, to get the full £144-a-week you will have to have earned above the National Insurance lower earnings threshold (currently £5,564) for 35 years.
HOW THE S2P IS CALCULATED
Anyone entitled to S2P gets at least £1.75-a-week (£91-a-year) for each year spent in the scheme, with this amount rising depending upon how much you earn between £15,000 and £40,000.
So someone who works for 45 years, accruing the minimum £1.75-a-week, would build up an S2P entitlement worth £4,090-a-year, or £78.75-a-week.
This, when added to the basic state pension, would see them receive £188.90-a-week in retirement.
Anyone who earns between the lower National Insurance threshold of £5,568 and £15,000 are treated as if they are earning £15,000 for S2P purposes, thanks to a Labour Government change to ensure the lowest-earners can build up S2P.
Someone who earns £40,000-or-above meanwhile will be able to build up the maximum amount of S2P for those years they are earning at that level.
How much you accrue in S2P is linked to how much you earn and for how many years you have been paying National Insurance.
The amount you get depends where you are on the scale of earnings between £15,000 and £40,000, so someone on a salary of £35,000 would build up more S2P than someone on £20,000.
Unlike the basic state pension, you can't make extra contributions to build up S2P.
So the only way you can earn larger S2P entitlements prior to 2016 would be by getting a pay rise (provided you earn below £40,000, which is when you start accruing the maximum amount of S2P).
The DWP says that currently, the average amount built up in S2P is worth £28-a-week of state pension, so the average state pension would be £138.15-a-week. And all this can have means tested pension credits up to £144
Possibly. I,ve already got 34 yrs in...another 15/16/17 yrs ahead of paying stamp for nothing.Where does the extra contributions go? If I could give it to my wife it wouldn,t be so unfair.
As I see it for me, should the government plans go ahead, after 2016 no matter how much "stamp" I pay in, my pension will not increase in real terms passed the amount I would get if I retired in 2016.
I will be asking if you can opt out once you have reached the 35 year mark as I would receive the exact same amount if I left the country and contributed nothing further.
You can buy "years" if you are short of the 35 year mark at a cost of £700. 15 years at £700 invested earning some interest would suit me far better (20 would be better) than a pension that returns me nothing extra.
I think the a fair solution would be to allow you to pay that portion(£700?) into the work place pension scheme that is being promoted at the moment. That way the money stays in the government coffers and costs the government nothing extra as the employer pays in.
I admit I am being biased and perhaps selfish in my thinking, but why should I pay more than Joe Bloggs to receive the same payment.