What happens to your NI contributions when you die?
Discussion
I was thinking last night - presumably when you die, any personal pension pot that you have gets passed to your spouse (depending on your will).
However, what happens to all the NI contributions you have made over the years? Presumably they have been accumulating in a "pot" allocated to you, along with your employer's contributions. Does that "pot" get transferred to your spouse too or does the government take it?
However, what happens to all the NI contributions you have made over the years? Presumably they have been accumulating in a "pot" allocated to you, along with your employer's contributions. Does that "pot" get transferred to your spouse too or does the government take it?
The Skunk said:
I was thinking last night - presumably when you die, any personal pension pot that you have gets passed to your spouse (depending on your will).
However, what happens to all the NI contributions you have made over the years? Presumably they have been accumulating in a "pot" allocated to you, along with your employer's contributions. Does that "pot" get transferred to your spouse too or does the government take it?
There is no 'pot'. The state pension is paid out of current taxation. Which will be a problem with an ageing population.However, what happens to all the NI contributions you have made over the years? Presumably they have been accumulating in a "pot" allocated to you, along with your employer's contributions. Does that "pot" get transferred to your spouse too or does the government take it?
perosnal pension (money YOU (or a boss) has put away for you) passes to whoever you have nominated to the fund trustees...nothing to do with your will.
state....the idea that there is enough money to allocate everyone a "pot" is laughable (i'm affraid)...its like a ponzi scheme where our (workers) tax pays for the current batch of old folks.....jump forward 30 years and the MILLIONS of old people (many of whom will be making 100+ with ease) will be getting paid by the few number of young people. Odd though it seems...there arent enough young people coming into the system.
state....the idea that there is enough money to allocate everyone a "pot" is laughable (i'm affraid)...its like a ponzi scheme where our (workers) tax pays for the current batch of old folks.....jump forward 30 years and the MILLIONS of old people (many of whom will be making 100+ with ease) will be getting paid by the few number of young people. Odd though it seems...there arent enough young people coming into the system.
I wrote on this somewhere else the other day. It was not a scam (at the time).
When pensions were set up they were done so on an annual basis, where the revenue for each year was used to pay the pensions in that year. So the answer to where did your pension go? is your Granddad/Dad had it.
However poplation growth/live expectency/Bith rate, make this very unworkable today.
Interestingly when we set up the systems in the colonies we gave independance to we wery often set the system up as a private 'pot' (Malayasia Singapore) of coure the downside to this was that you Granddad and Dad did not get a pension as they had not paid in.
When pensions were set up they were done so on an annual basis, where the revenue for each year was used to pay the pensions in that year. So the answer to where did your pension go? is your Granddad/Dad had it.
However poplation growth/live expectency/Bith rate, make this very unworkable today.
Interestingly when we set up the systems in the colonies we gave independance to we wery often set the system up as a private 'pot' (Malayasia Singapore) of coure the downside to this was that you Granddad and Dad did not get a pension as they had not paid in.
state pension is the ultimate ponzi scheme a pyramid scheme run by the goby.....govt. The only way long term for this to work and carry ok as a ponzi scheme is increase the retirement age and increase the ni payments. Or start a new system from scratch where you have two pots one individual and that's indifferent from a pvt pension the other part would be into the ponzi scheme as soon as we have maybe thirty years gone the gap might be plugged and then going fwd pvt schemes for all. Of course you then have the same issue small v big pots so quality of life or level of poverty in retirement would be not great for the non savers
state pension is the ultimate ponzi scheme a pyramid scheme run by the goby.....govt. The only way long term for this to work and carry ok as a ponzi scheme is increase the retirement age and increase the ni payments. Or start a new system from scratch where you have two pots one individual and that's indifferent from a pvt pension the other part would be into the ponzi scheme as soon as we have maybe thirty years gone the gap might be plugged and then going fwd pvt schemes for all. Of course you then have the same issue small v big pots so quality of life or level of poverty in retirement would be not great for the non savers
so what happens when there aren't enough young people working to fund the state pension obligation? I suppose increase the NI rates - but surely if they started to do that people will start to shout?I never realised that my NI contributions pay for the current pensioners' pensions. I always assumed it was safely being tucked away in a little pot marked "For The Skunk". Is it worth staying opted in (if i've got a separate personal pension pot that i'm contributing to?)
Currently when you die, your spouse might be able to use your NI contribution record to give them a state pension (or improve it). I think it's a reduced amount, maybe 60%, but not sure.
If you are a member of an occupational pension scheme through your employer you probably already are contracted out of the State Second Pension (you will still get the Basic Pension so long as you contributed NI for a certain number of years). This is all assuming the scheme still exists at that time; if it is to continue I daresay we'll see contributions increase and further increases in the state pension age (it's already going up to 68).
If you are a member of an occupational pension scheme through your employer you probably already are contracted out of the State Second Pension (you will still get the Basic Pension so long as you contributed NI for a certain number of years). This is all assuming the scheme still exists at that time; if it is to continue I daresay we'll see contributions increase and further increases in the state pension age (it's already going up to 68).
Its all a shocking mess, especially when you use realistic discount rates to determine net present value of public sector pension liabilities.
Save for your own retirement via a tax free pension, keep an eye on legislation in case the gov looks like it wants to nationalise private pensions as per Argentina! Be ready to cut and run to some other non communist state like France
Save for your own retirement via a tax free pension, keep an eye on legislation in case the gov looks like it wants to nationalise private pensions as per Argentina! Be ready to cut and run to some other non communist state like France
the probelm is joe blogs whines about the gov pension when we have all known for years it will be half of nothing in years to come...and even what it is now is pretty grim...yet they do nothing themselves (in general)
i was chatting to guy yesterday, runs his own firm, 50 years old.....he has an ok house, say £450k, and 10k in a pension. I explained that was pretty useless and he said - "i dont need to worry about that now, i'm 50" right.....plenty of time left then! He also suggested his house was his pension....so he plans to sell up at £450k and do what? buy a s
t hole for £200k? (this is Henley on thames...good luck) and even then, his £250k left over will generate a pitifull income relative to his current earnings and lifestyle.
so this guys works all his life then has to retire to a crap little flat and give up his twice a year overseas holidays for the last 30 years of his life?
i was also chatting to a lady (same age) who puts thousands a month into a pension and was moaning (a bit) that she drives an old car and doesnt do world cruises etc like her mates......yet deep down shes laughing because when shes 65 she will have a HUGE income for a pensioner and all her mates will sell the BMWs to buy bread and coal!
i was chatting to guy yesterday, runs his own firm, 50 years old.....he has an ok house, say £450k, and 10k in a pension. I explained that was pretty useless and he said - "i dont need to worry about that now, i'm 50" right.....plenty of time left then! He also suggested his house was his pension....so he plans to sell up at £450k and do what? buy a s
t hole for £200k? (this is Henley on thames...good luck) and even then, his £250k left over will generate a pitifull income relative to his current earnings and lifestyle.so this guys works all his life then has to retire to a crap little flat and give up his twice a year overseas holidays for the last 30 years of his life?
i was also chatting to a lady (same age) who puts thousands a month into a pension and was moaning (a bit) that she drives an old car and doesnt do world cruises etc like her mates......yet deep down shes laughing because when shes 65 she will have a HUGE income for a pensioner and all her mates will sell the BMWs to buy bread and coal!
Sound advice. I've been contributing to a stakeholder pension at work (portable) ever since it became an option (when i was 23 i think). I ticked the lowest risk options and must admit that i don't pay too much attention to it at the moment (i'm 30 now). I will be returning to live int he UK later this year though and intend to take stock of all my finances (welshbeef - i read your thread on overpaying mortgages the other day - very interesting stuff).
Just out of interest then, if you don't mind me asking, what are you guys doing - tiggsy, welshbeef and haworthlloyd1?
Just out of interest then, if you don't mind me asking, what are you guys doing - tiggsy, welshbeef and haworthlloyd1?
Am I right in thinking now that once you have paid NI for 30 years you get a full state pension? What happens of you only have 20 or 25 years contributions, is it pro-rata?
I have 28 years of contributions and they offer each year to let me buy the year I have just missed for about £300. I might be tempted if that 2 x £300 now lead to an extra 6.6% for all the years I am retired (which I guess could be 20 after the state retirement age). So, say state pension is £100 a week but I only have 28 years of contributions so get £93.40. So that £300 per annum for the missing 2 years ( £600) would pay me an extra £6 a week which is £300 a year which seems good value, or have I missed something here? Obviously my £600 invested for 16 years until I retuire wpould also worth something more than £600 one hopes!
BUT. My accounant suggested I thought about the possibility that by the time I hit retirement, that all state pensions might be means tested and therefore my conributions would be worth nothing because I have a private pension too.
Four Cofffee said:
Am I right in thinking now that once you have paid NI for 30 years you get a full state pension? What happens of you only have 20 or 25 years contributions, is it pro-rata?
I have 28 years of contributions and they offer each year to let me buy the year I have just missed for about £300. I might be tempted if that 2 x £300 now lead to an extra 6.6% for all the years I am retired (which I guess could be 20 after the state retirement age). So, say state pension is £100 a week but I only have 28 years of contributions so get £93.40. So that £300 per annum for the missing 2 years ( £600) would pay me an extra £6 a week which is £300 a year which seems good value, or have I missed something here? Obviously my £600 invested for 16 years until I retuire wpould also worth something more than £600 one hopes!
BUT. My accounant suggested I thought about the possibility that by the time I hit retirement, that all state pensions might be means tested and therefore my conributions would be worth nothing because I have a private pension too.
There has been a threat over pensions going back to the mid 1980s. I really see very few governments ever going down the route of restricting them. In fact, they have substantially increased over the past few years. Work on the basis that you will get a proper state pension when you retire.I have 28 years of contributions and they offer each year to let me buy the year I have just missed for about £300. I might be tempted if that 2 x £300 now lead to an extra 6.6% for all the years I am retired (which I guess could be 20 after the state retirement age). So, say state pension is £100 a week but I only have 28 years of contributions so get £93.40. So that £300 per annum for the missing 2 years ( £600) would pay me an extra £6 a week which is £300 a year which seems good value, or have I missed something here? Obviously my £600 invested for 16 years until I retuire wpould also worth something more than £600 one hopes!
BUT. My accounant suggested I thought about the possibility that by the time I hit retirement, that all state pensions might be means tested and therefore my conributions would be worth nothing because I have a private pension too.
Four Cofffee said:
Am I right in thinking now that once you have paid NI for 30 years you get a full state pension? What happens of you only have 20 or 25 years contributions, is it pro-rata?
I have 28 years of contributions and they offer each year to let me buy the year I have just missed for about £300. I might be tempted if that 2 x £300 now lead to an extra 6.6% for all the years I am retired (which I guess could be 20 after the state retirement age). So, say state pension is £100 a week but I only have 28 years of contributions so get £93.40. So that £300 per annum for the missing 2 years ( £600) would pay me an extra £6 a week which is £300 a year which seems good value, or have I missed something here? Obviously my £600 invested for 16 years until I retuire wpould also worth something more than £600 one hopes
From direct.gov:I have 28 years of contributions and they offer each year to let me buy the year I have just missed for about £300. I might be tempted if that 2 x £300 now lead to an extra 6.6% for all the years I am retired (which I guess could be 20 after the state retirement age). So, say state pension is £100 a week but I only have 28 years of contributions so get £93.40. So that £300 per annum for the missing 2 years ( £600) would pay me an extra £6 a week which is £300 a year which seems good value, or have I missed something here? Obviously my £600 invested for 16 years until I retuire wpould also worth something more than £600 one hopes
If you reach State Pension age on or after 6 April 2010
If you don’t qualify for the full basic State Pension, but have some qualifying years, you will get one thirtieth of the full amount for each qualifying year.
IIRC buying back the extra year gets more expensive (more than inflation?) so add that into the equation. Bear in mind that yes your £600 now will be worth much more if you invest it, but the pension should also increase with inflation. I'd say it's worth it if you're not going to have 30 years by the time you retire, otherwise it gets you exactly nothing. If you expect to live 20 years it'd have to be a good investment to make 10x the value plus inflation in 18 years - probably about 17% per annum net.
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