State Pension and Protected Payment

I’m not sure if this is correct but this is what makes sense to me.

If you reached state pension age before 6 April 2016, you come within the old rules - what's called the basic state pension.

If you paid into the Additional State Pension before 2016 and would have got more state pension under the old rules, you’ll get a ‘protected payment’. This is paid on top of the full rate of new state pension.

Currently, the basic state pension is £156.20 and the new state pension is £203.85.

If you are receiving an extra £12 taking you to £215.85 that’s £59.65 more than the basic pension.

The triple lock rise in 2023 was 10.1%, 2022 it was 3.1%, 2021 2.5% and so on … see chart.

If you start with a base of £48 and add the percentage increases from whenever you started to receive your pension does that get you near to £59.65?

This is something I posted on another discussion about contracted out adjustments. Long but worth a read to try to understand the very complex adjustments that have to be made for people who contracted out:

www.lcp.com/media/1150050/why-is-money-being-deducted-from-my-state-pension.pdf

TinSoldier

I’m not sure if this is correct but this is what makes sense to me.

If you reached state pension age before 6 April 2016, you come within the old rules - what's called the basic state pension.

If you paid into the Additional State Pension before 2016 and would have got more state pension under the old rules, you’ll get a ‘protected payment’. This is paid on top of the full rate of new state pension.

Currently, the basic state pension is £156.20 and the new state pension is £203.85.

If you are receiving an extra £12 taking you to £215.85 that’s £59.65 more than the basic pension.

The triple lock rise in 2023 was 10.1%, 2022 it was 3.1%, 2021 2.5% and so on … see chart.

If you start with a base of £48 and add the percentage increases from whenever you started to receive your pension does that get you near to £59.65?

This is something I posted on another discussion about contracted out adjustments. Long but worth a read to try to understand the very complex adjustments that have to be made for people who contracted out:

www.lcp.com/media/1150050/why-is-money-being-deducted-from-my-state-pension.pdf

Hello Tin Soldier, thank you for your input, I actually come under the new State Pension rules (became entitled in 2021), so where the other thread is asking why they get less than the full SP, I am trying to work out why I get more than the full, well how the amount is worked out (I know when rules changed in 2016 there was a calculation done so that you wouldn't be worse off under the new rules). Clear as mud, sorry, but perhaps you know how its calculated now Ive given more info, thank you though.

Having only retired in June last year I can tell you the whole pension mallarkey is a complete nightmare. I am not so nearly well off as I thought I would be after 50 years of working life and a state and a work place pension.
I am at the very bottom of what is considered necessary for a decent standard of living and I have no idea why.
I know this hasn't answered your question but it gave me the chance to have a good moan!

Ah! I see.

According to Moneyhelper:

www.moneyhelper.org.uk/en/pensions-and-retirement/state-pension/how-does-the-state-pension-work-and-how-much-might-you-get

For every unit of graduated pension you have, you get 16.43 pence in pension in the tax year 2023/24.

For every £7.50 contributed by a man or £9 contributed by a woman, the individual became entitled to one unit of graduated pension.

From 1978 to 2002 you could built up an entitlement to SERPS if you were paying Class 1 National Insurance Contributions on earnings greater than the annual lower earnings limit. The same applies to the Second State Pension scheme that ran from 2002 to 2016.

According to this:

www.profilepensions.co.uk/blogs/what-is-serps

When SERPS was originally introduced, the maximum benefit under the scheme was 25% of your earnings. In 1988 the benefit calculations changed, and the maximum benefit was reduced to 20% of average earnings.

It seems entirely plausible that over a long record of employment contracted in, you could build up a decent additional pension.

Pension forecasts are always given in weekly amounts so if you saw a projection of £48 then I think you should ask the DWP to explain why you are only receiving £12 but before you do …

You say I paid ‘full’ stamp all my working life. How long was that? I’m assuming you have the necessary 35 qualifying years that you would need to get £203.85. Could you be short on that? It’s effectively £5.82 per week for each full year of contributions. What does your Gateway account show?

www.moneysavingexpert.com/savings/state-pensions/#boost

If you had say 30 years you’d get £175 plus the £48* (which the forecast said you may get) making £222 (* then adjusted for April increases).

The address to write to if you want to query your pension is:

The Pension Service
Post Handling Site A
Wolverhampton
WV98 1AF

Thanks again Tin, yes I had more than the required qualifying years, and receive the full New SP + the protected amount. It does seem bonkers that there isn't a breakdown explanation in Gateway, on Gov.uk or on SP updates etc.

I agree. If everyone's Gateway account is similar to mine, the SP forecast disappears once you reach SP age.

Gateway accounts show what NIC has been paid each year and whether it's a full 52 week record. By finding the historical lower (and upper) earnings limits for each year and what percentage NIC was charged for people contracted in, it should be possible to calculate what you earned and therefore what the graduated element, SERPS and SPS max was. Even so, years up to 1975 don't show what contributions were paid at all, just x number of full years.

(I'm assuming you don't have a stack of P60s somewhere).

But that's a lot of work and must be something that DWP have software to do. Let's hope it wasn't written by Fujitsu.

I'm a widow, also reached pension age in 2021 and receive a small addition to my own full new state pension based on my late husband's graduated and SERPS which he paid for twelve years before contracting out with a new employer. The DWP never explained how this sum was calculated. I just assumed it was correct but I've written to them recently to ask how it was arrived at and await their response.

I don't think you have anything to lose in writing to the DWP.

Good luck then Tin, hope you get some answer from your query. You are exactly right about my situation, I can see all my years NI but I dont still have all my P60’s. I am hesitant to query it with them in case I end up worse off lol. Thank you for your in-depth answers to my query, its appreciated.

keepingquiet

Having only retired in June last year I can tell you the whole pension mallarkey is a complete nightmare. I am not so nearly well off as I thought I would be after 50 years of working life and a state and a work place pension.
I am at the very bottom of what is considered necessary for a decent standard of living and I have no idea why.
I know this hasn't answered your question but it gave me the chance to have a good moan!

If you have the required number of qualifying years of full NI payments and have retired so recently you are receiving the new SP, which is far more than the old one. Did you pay the ‘married women’s stamp’? Were you contracted out of SERPS (which will decrease your SP but enhance your occupational or private pension)?

I receive full SP. I don't think I paid married woman's stamp but not really sure what this is? I did contract out of Serps but then went back in. I do have a work pension too. Maybe it is the cost of living but finding things a challenge to be honest. I wanted to use my modest lump sum to renovate my bathroom but this is proving very expensive and rising. My living standards have certainly taken a dive.