Chapter 9 - State Schemes Flashcards
SPA pre 04/16 - entitled to what, BSP is what and payable to who and full BSP amount.
Category A BSP - how qualify for full BSP and proportioned if not, how does it increase each year. If reaching SPA pre 04/10 needed to have what (men and women) and needed what % to receive anything at all?
Category B Pension - what is it, full rate and only paid when, how reduced and possible now?
Get Basic State Pension and any Additional State Pension. BSP is non-means tested payable to those with sufficient NICs - full BSP £134.25.
Category A BSP - 04/10-04/16 - qualified for fully BSP if 30 years of NICs and if less get a proportion (e.g. 134.25*25/30). BSP increases each year in line with triple lock.
Those that reached SPA pre 04/10 needed to have qualifying years equalling 90% of working life to get full BSP (49 years man and 44 years female). Needed 25% of these years to receive anything at all.
Cat B Pension - dependant who reached SPA without 18 qualifying years could claim additional income. Full rate is £80.45 and only paid if spouse had full NIC record and if not cat B income reduced accordingly. (E.g. if only 90% of cat A = 90% x £80.45). No longer possible unless reached SPA pre 04/16.
SPA reached pre 04/16 - Additional State Pension - consisted of (3, dates and eligibility), not available to who, paid in addition to what, how did payments increase, contracting out for DB and DC.
ASP consisted of;
- Graduated Retirement Benefit (04/61 - 04/75) - eligibility based on class one NICs.
- SERPS (78-02) - as above
- S2P (02-16) - as above + credits for class 1 NICs received via certain benefits.
None available to self-employed. Paid in addition to any BSP entitlement and payments increase based on CPI. While contracted for DB out no ASP was accrued and paid lower Class 1 NIC rates. DC - received rebate from Gov which was paid into private DC plan.
SPA reached post 04/16 - New State Pension rules (min amount of years to receive any, full rate and how increases, how to get full amount, when higher ben payable and classes of NICs accrual)
If not reached SPA by 04/16 have what calc’d and higher of what, full rate of NSP for 16/17, what is protected payment and three characteristics (how paid, increases and any extra NICs)
New State Pension - rules that apply from 04/16 as follows;
- need minimum of ten qualifying years to receive any SP.
- full rate is £175.20 per week and increases in line with triple lock.
- need 35 years of NICs or credits to get full amount.
- higher pen may be payable if entitled to ASP accrued pre 04/16.
- Class 1, 2 & 3 NICs accrue NSP at same rate.
Individuals who had not reached SPA by 04/16 have starting amount calculated as at 04/16 which is the higher of pre 04/16 bens or NSP (latter calc’d as if NSP in place at start of working life). Post 04/16 bens cannot be greater than £155.65 as this was full rate of NSP on 16/17.
If individuals starting amount is higher for pre than £155.65 (max NSP 16/17), the difference between SA and NSP is called protected payment and;
- when reaching SPA, PP paid on top of NSP
- PP increases in line with increases in CPI.
- in this case, any qualifying years post 04/16 will not be added to SP entitlement.
Establishing Starting Amount;
SA equal to full NSP - likely to be who who have (2), receive what and full BSP at 16/17
SA < full NSP - are those who… (2) and can build SA how
SA > full NSP - are those who (2), receive what? And additional years?
SP benefit statements - Useful to understand what would benefit them and what adjustment
SA equal to full level of NSP are likely to be older workers who have;
- been low earners or self employed for most of working life.
- significant periods receiving NI credits.
These will receive full NSP. Full BSP at 16/17 = £119.30
SA < full NSP are those who are many years from SPA or older people who have significant periods contracted-out of the ASP. Can build up SA by adding qualifying years.
SA > full NSP are older workers who have spent majority of lives in work and less likely to contract out for significant period. These receive full NSP + protected payment amount. Cannot gain any additional qualifying years.
SP benefit statements - Gov now issuing these and useful for those who need to understand if paying Class 3 NICs would benefit them and for those that have been contracted out to understand adjustment made for this.
National Insurance Contributions - how funded, how is NSP accrued via NICs and not, why pay C3 conts?, get what for what state bens (4)
C3 - time limit on when to pay what, post SPA payments, current rate and when paid and if making up shortfall less than 2 years ago pay what rate and extended time limits apply between when and if (SPA & payment by…)
Funded on pay as you go basis and no underlying fund with NICs of current working population paying SP. NSP accrued via 52 weeks of C1 & C2 (self employed) NICs but not C4. Can pay voluntary C3 to cover gaps in NIC record.
Can get credits towards C1 & C3 when receiving certain state bens such as Carer’s allowance, ESA, maternity and receiving child benefit.
C3 - if wanting to pay these should ensure they are paid within 6 years of tax year of shortfall. Payment can be made after SPA but only for missing payment pre SPA. Rate is currently £15.30 and is paid for those payments making up shortfall more than 2 years ago whilst if within two years, pay the rate for that tax year.
Extended time limits between 06/07 - 15/16 apply if;
- reaches SPA post 04/16
- make payment by 2023
Class 3A NICs - available when?, how increased, provides what?, how taxed, taken into account when applying for what and included in what order and different types of pension purchase via these (increases what and can buy higher level of what)
Increases in payment to SP - what is triple lock, changes in earnings and prices measured when and what is increased using this and how are ASP increased
Available between 10/15 - 04/17. Income purchased using these increase in line with CPI and provides 50% surviving spouse pension on death.
Taxed as pension income same as SP. Taken into account if means-tested bens applied for and can be included in pension sharing order.
They purchase different types of pensions;
- increase number of qualifying years thus getting higher NSP or BSP if pre 16
- allowed individual to buy higher level of ASP.
Increases in payment to SP - NSP & BSP are increased by higher of earnings, prices and 2.5% (triple lock). Change in earnings measured yearly ending previous July and prices same but September. Increases to ASP done via change to CPI.
Deferring SP - can defer what bens, when can they defer (2), how many times, only stop receiving what if what and cannot build up what when.
Deferral & SPA reached pre 04/16 - defer for how long to receive what and rate, if delayed more than 12 months can choose what, if they choose latter then what is payment based on and if die during.
Post 04/16 - defer for how long and rate, options and death
Deferral;
- both pre and post 16
- can occur when becomes payable or when in payment at any point
- can only defer once
- can only stop receiving SP in payment if reside in UK or EEA
- cannot build up extra SP during deferral if receiving certain state bens.
SPA reached pre 04/16
- if deferring SP for at least 5 weeks can receive a higher weekly pension in return.
- SP will increase 1% for every 5 weeks of deferral.
- if delayed more than 12 months can choose higher weekly rate or lump sum.
- if lump sum, payment amount based on payments deferred plus compound interest of 2% above BoE base rate.
- if die, spouse will inherit deferred bens
SPA Post 04/16
- need to defer at least 9 weeks to receive increase in payments
- reduced to 1% per 9 weeks
- no lump sum option
- no death inheritance although can claim up to three months arrears.
Tax treatment of SP - taxed how and collected how (3, if receiving income from another pen, if still working and neither). If take lump sum taxed how and brackets.
SP and living abroad and annual increases
Taxed as income and collected in one of 3 ways;
- if receiving income from another pension then tax taken from this by adjusting tax code.
- if still working and not receiving another pension then taken via employers PAYE scheme.
- if non of the above then tax collected via self assessment.
If take lump sum after deferral, taxed as same rate as other income and does not push them into higher tax bracket.
UK SP can be paid to someone even though they live abroad and if permanent then annual increases will depend on where they live.
SPA and proposed changes - SPA now and increase to 67 when and 68 when.
Pensions Act 2014 - says what and can… and how many years notice
SPA now 66 and increase to 67 between 2026 and 2028. 67 to 68 2044 and 2046.
Pensions Act 2014 - review of SPA should be undertaken in every parliament and can bring forward changes to SPA if deemed appropriate. Try to give at least ten years notice.
Stare Death Benefits - entitled to what if (2, deceased paid what and survivor has not reached what), higher rate and why they get this and standard rate.
Add info - claim time period, if outside this time period, receiving initial payment if outside period (2), does not cease if and taxation + affect on state bens
Possible to inherit what
If die post 04/16 then may be able to receive Bereavement Support Payment if the following is met;
- deceased must have paid at least 26 weeks worth or C1 or C3 in any tax year prior to death or death due to job.
- survivor must not be SPA.
Higher rate = £3.5k initial payment and £350 per month for 18 months - per to pregnant or receiving child benefit
Standard = £2.5k initial payment and £100 per month for 18 months
In addition;
- payments made if claim is made within 3 months of death.
- if claim made after this time can be backdated no more than 3 months.
- if claim made more than 3 months but less than twelve will still receive initial payment and if not wont.
- right to receive benefit does not cease if remarries
- tax free and does not affect other state bens
Possible to inherit some or all of SERPS or S2P (max 50% for this)
Pension credit framework - designed to do what, doesn’t depend on what and tax.
Guarantee credit - reached what to claim, thresholds for single and couple, how establish if it can be paid and if below threshold then…
Savings credit - not available for who, rewards who and rate for single and couple
PCF designed to give min level of income in retirement. Not dependant on NICs and no tax payable.
Guarantee credit - must have reached SPA to claim. £173.75 for single and £265.20 for a couple. To establish if can be paid, must calc income and capital. If total is below the threshold then guarantee credit makes up the difference.
Savings credit - not available if reached SPA post 16. Savings credit is to reward those who made additional provision for retirement via savings or private pension. £13.97 for single and £15.62 for couple (per week).
