From: "Andy Pandy" 
Newsgroups: uk.finance
Subject: Re: Pension calculation mistake?
Date: Mon, 23 Apr 2007 10:28:24 +0100


"J Walsh"  wrote in message news:f0hp7n$ioq$1@north.jnrs.ja.net...
> Andy Pandy wrote:
>
> >
> > No - but they do relate to funds provided by government (indirectly - through NI
> > rebates to employee & employer).
> >
> ---SNIP---
> >
> > 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.
> >
>
> ---SNIP---
>
> >
> > 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.
> >
> >
>
>
> I think the real grievance here is that the Pensions Service are
> applying the cap for additional state pension (that should relate to a
> 100% SERPS pot) to a total pot of money that mostly isn't managed by them.

It doesn't matter - it's money that comes from NI rebates, and the govt set strict
rules on how that money can be invested and used ("protected rights"). It's not the
management of the fund which is the issue, it's where the money came from.

> In the literature sent to my mother by the Pensions Service, they do not
>   enquire as to the size of the payments made by the scheme funded by
> the contracted out deductions and indeed, it is no concern of theirs.

No. By contracting out you gamble that you can do better than the state.

> For example, I am pretty sure that if the COD funded scheme had
> performed badly and the payments were to fall behind what could have
> been expected from SERPS, the Pensions Service would not be making up
> the difference!

Nor would they be reclaiming the difference if the COD funded scheme performed well.

> The fair way to apply the Additional State Pension cap would be to apply
> it proportionally to the SERPS part of the total additional pension pot.

So then you escape the cap (for the COD funded part) by contracting out. That isn't
"fair".

Although I think that if the COD actually exceeded the capped additional pension,
you'd then avoid some of the cap - the state payable additional pension would then be
negative but I don't think they can touch the basic state pension to claim this.

--
Andy