State Deduction –
For personal health reasons, after 36 years of continuous service Nicky took early retirement aged 55.
She made her decision to take a modest lump sum and much reduced bank pension of £7,397.28 pa, based on her understanding of her pension benefit at that time.
However, Nicky was unaware that her lower bank pension would reduce by a further £ 2,194.08 once in receipt of her state pension.
Nicky, like many of her colleagues, believed that this “State Deduction” amount referred to on her pension statement was a calculation of the difference between basic and higher state pensions for being contracted out of SERPS.
Now, Nicky is paying additional national insurance contributions to boost her state pension to offset the effect of both. She also believes that she may have to return to part time work to supplement her income.
“By contracting us out of SERPS without communicating the impact of doing so, and then clawing back some of our state pension off our bank pension, which is not paid at the full rate, is totally underhand” she says.