From: "Andy Pandy" 
Newsgroups: uk.finance
Subject: Re: Pension calculation mistake?
Date: Sun, 22 Apr 2007 10:40:51 +0100


 wrote in message
news:1177224062.782179.264650@o5g2000hsb.googlegroups.com...
> Further to my query posted on the 6th April (Deceased husband/
> surviving wife's pension arrangements), I have now seen the documents
> that my mother received and I am convinced that there must be some
> mistake. I wonder if anyone expert in this area could comment?

Until one comes along, a few comments....

> The Dept for Work & Pensions have provided my mother with the
> following calculation to illustrate her pension entitlement:
>
> ________________________________________________________________________
> Basic pension: £84.25
>
> Your own pre-1997 additional pension: £111.44
> Inherited pre-1997 additional pension: £72.77 (50% of my deceased
> father's entitlement)
> Total additional pension: £184.21 (subject to contracted out
> deductions)
>
> Maximum additional pension payable by law: £146.12
>
> Your own contracted out deductions: 88.36
> Inherited contracted out deductions: 48.78
> Total contracted out deductions: 137.14
>
> Total additional pension payable: £146.12 - £137.14 = £8.98
>
> Graduated retirement benefit (1961-1975): £5.98
>
> Total state pension = £84.25 + £8.98 + £5.98 = £99.21
> __________________________________________________________________________
>
> The problem with this calculation seems to be that the £146.12 cap on
> the maximum payable pension is being applied *before* removing
> contracted out deductions. This makes no sense, since the £146.12 cap
> relates to the amount payable from government, but contracted out
> deductions do not related to government managed funds.

No - but they do relate to funds provided by government (indirectly - through NI
rebates to employee & employer).

> To further illustrate how this method of calculating must be a mistake
> and that the result is unfair, try removing the inherited additional
> pension (and the corresponding contracted out deductions) from the
> equation. The result is a total state pension of £113.21.

Yes - but presumably she is getting a widow's pension from whatever pension scheme
your late father contracted out into.

The cap itself may be unfair - but the way it is implement wrt contracted out
deductions isn't.  The rules should treat people in the same way whether they were
contracted out or not.

The "inherited COD" theoretically should mean that she gets a protected rights
widow's pension from the scheme your father contracted out into (may be part of a
company pension) of about the same amount as the COD (but may be more or less
depending on fund performance etc).

So if the COD was excluded from the cap, then by contracting out you avoid the cap,
this would be unfair to people who didn't contract out. Remember the COD results from
NI rebates which are paid to some other pension scheme which should provide the same
sort of amount as the COD.

> So, the net result of a scheme that supposedly allows a widow or
> widower to benefit from their deceased partner's NI contributions in
> this case actually *reduces* the amount that is being paid. Anyway, I
> think my mother will take this to tribunal, so any confirmation
> (ideally, referenced evidence) that the method of calculation used by
> the Pension Service is incorrect would be much appreciated.

Remember that she *is* (or should be) benefitting from your late father's NI
contributions through a widows pension from the scheme he contracted out into.

--
Andy