State Pensions – Notification thereof.

[Peter G. ShawParticipant @peterg-shaw75338]

Following on from MadMike's comments, I decided to calculate the increase over last years pension. Her's was a little over 10% so ok. But mine works out at 15%. Which is worrying – did I mishear him? Quite possibly given the state of my ears. Or has something I don't understand/know about happened?

In general, attempting to work out my next years pension is fraught with all sorts of permutations. For example, the first few years – 15 or so? – of my career was as a civil servant with a non-contributary pension. Thereafter, it became contributary, contained strange things such as Contracted Out Deduction, Guaranteed Minimum Pension, 3% which is a figure above which the state pays the increase, or vice versa – don't know which, two dates which give three different calculations and so on and so forth. The end result is that It simply isn't possible to easily determine what my next years pensions will be: instead it's a case of doff the cap, tug the forelock, hold out the hand and say thankyou very much. Ok, maybe it's not that bad, but it's certainly not easy.

In respect of Income Tax, that is relatively simple – DWP inform HMRC how much I am getting. HMRC add it to my works pension, calculate the tax, inform the works pension paying authority how much to deduct and what's left is what I receive. Simples really in comparison.

But, it is a worry until I receive notification. For example, tomorrow I have to pay Council Tax, Water Bill, and a small standing order. Fortunately, we have built up a surplus to cover us, but what if we hadn't? Or perhaps even worse, suppose we had a large mortgage, or had to pay rental? Would the recipients be happy to wait because I don't know how much I'm getting?

There are indeed many problems along the way, and (in my case) not knowing for definite makes life somewhat difficult.

Cheers,

Peter G. Shaw

[Mike PooleParticipant @mikepoole82104]

Peter, the state pension was increased by CPI which was 10.1% last September which is the month that determines the increase to be applied the following April, if your pension is increased by RPI which has been running around the 15% range that may account for the difference. My pension is increased by RPI but capped at 5% so this year is bit of a loser for me. I suppose the years when RPI is under 5% are a winner when others are getting CPI increases that are generally lower than RPI.

Mike

[HowiParticipant @howi]

I haven't had my state pension increase notification yet, or my BT pension or fire service pension notification.

Why am I not worried!!!!

Well! the tax office notified me that my tax allowance was changing and to go online to check, low and behold the tax man knows what I am getting before I do.

So long as it is more than last year I am not too bothered.

So, why is everyone concerened, just add 10% to what you get now less tax so call it 8% and you are good to go.

unless you are one of those on the 40% tax rate, then you can go and work it out for yourself, I'm not going to do it for you, cheeky beggers!

[Peter G. ShawParticipant @peterg-shaw75338]

Okey-doke, it, or rather they, came today. Both from Belfast. Both dated 11 Mar 2023. So that's the first query. Where the blazes have they been for the last 20 days? Answers in pencil on a fiver please!

Now, my wife's works out ok, especially if you discount the fact that 6 + 0 = 7!!! Mea culpa. But mine! Here we go back into the land of 'I haven't a clue what's going on'.

Ok, the Basic State Pension is as expected so no problems there. But, I also have Pre97 Additional State Pension (10.09% increase over last year so ok) less Contracted Out Deduction, COD, (which seems to be 1.17% increase) plus Graduated Retirement Benefit (which has increased by 10.2% so makes sense). It would seem therefore that it's the COD thats causing my problem. And for Howi's benefit, that's all before we start looking into Income Tax.

Ok, some people say, what the hell just do this or that and it'll be ok. Maybe so, but that's not how I have worked over that last 50+ years, and it has paid off! What we have done is to ensure that for normal living expenses we have never spent more than we have coming in. If we needed something, eg a replacement car, we have used loans, but only as long as we could cover the monthly payments within our monthly income. Some of you will remember the "screaming" that went on a few years ago when people with overdrafts started being charged high amounts of interest by the banks. We have never had a large overdraft, yes we have an agreed allowance of £256, I think it is, but we've never used it. So we were not part of the "screaming brigade" of people who seemingly were incapable of keeping control of their finances, indeed, when I commented negatively back then about people spending beyond their means and not reading the conditions etc, I got well and truly slated. OK, that's up to them, but not me. And that is important. I need to know just how much is coming in so that we can spend appropriately, hence my concerns about the delayed arrival of these letters.

True, I don't understand about all the bits that make up my state pension. And frankly I don't really need to although I probably could do so if I really wanted to. In respect of Income Tax, I don't really have a problem with it in that I understand how it works for me – and here again I've taken steps to eliminate anything that could throw a spanner in the works, eg all our savings are now in ISA's so nothing to advise to HMRC. Indeed, the biggest problem I currently have is that my personal savings have slowly increased to a point where IHT may well be a distinct probability.

So, that, as far as I am concerned, is it. My system works for us, but it relies on being given timely information about our pensions and as long as that is reasonably early, then ok that'l do.

Cheers one and all, it's been interesting to read other peoples experiences and opinions.

Tottle pip,

Peter G. Shaw

[SillyOldDufferModerator @sillyoldduffer]

Posted by Peter G. Shaw on 31/03/2023 21:45:07:…

There are indeed many problems along the way, and (in my case) not knowing for definite makes life somewhat difficult.

…

We are all faced with not knowing! A long list of malfunctions are hurting everyone. Inflation, low growth, low productivity, skills shortages, underfunded public services, botched privatisations, unwise government spending in the billions, naive politics that take stupid economic risks, and the failure of said naive politics to deliver. Plus a European war, aggressive Chinese expansionism, energy shortages, the cost of climate change, a deeply divided and politically unstable USA, and perhaps most dangerous of all huge numbers of people preferring fake news to reality.

So it's difficult to know how much pensions will pay next year, how much savings will earn or lose, the value of stocks and shares, how much your house is worth, what the energy bills might be, and what the buying power of the pound will be. And there's high-level of uncertainty in the mix, for example the economists suggest inflation has already peaked, and will fall rapidly as the year progresses. Let's hope they're right!

Recognising how uncertain everything is, my retired gentleman financial planning is based on chunk assumptions of about 5%. At the moment, I'm assuming everything I want to do in the coming year will be about 5% more expensive, and am adjusting expectations accordingly. It's necessary to manage continuously, not to stick rigidly to a plan set in concrete in April. Therefore, at the moment, I wouldn't spend the maximum I could afford this year on a new car now, I'd cut the car budget by 5% or maybe defer the purchase until I'm sure I can afford it. Unlikely to need to borrow money, but I'd work extra hard to avoid doing so because it's become costly. I'm not trying to micromanage my spending, instead I set broad parameters and then tweak spending as necessary to end up in the black.

Not for everyone! How difficult is to stay flexible depends entirely on personal circumstances and what happens next. My financial plan fails if bad-health forces me to go into care. In which case, it's best to be either very rich or very poor! (Less than £23000 in savings, and don't own your house!)

Some people love financial planning. I'd rather cut metal, play with CAD or watch telly.

Dave

[Mike PooleParticipant @mikepoole82104]

The contracted out deduction seems a well kept secret, the method of calculation does not seem to be published. If you want to know what years you were contracted out the DWP refer you to check your tax code for the years of interest and expect you to refer to old payslips or ask your pension provider. To be able to perform the calculation they must have the relevant information about you but seem unwilling to share it with you. As HMRC and the DWP seem able to work together to issue us a tax code then surely one of them if not both have a record of our code for every change ever made, I can view my NI contributions for most years apart from my first three but they do state that I was fully paid up for those years. It would be nice if all our data that DWP and HMRC hold on us was readily available online rather than the limited selection they give us access to.

Mike

[old martParticipant @oldmart]

Got my letter today, 11.3% increase, whoopee!

[Neil WyattModerator @neilwyatt]

My dad's letter came on Saturday or Monday.

Surname starting with W, so maybe it's alphabetical!

Neil

[Author]

Posts