Buying past NIC years - change in April?

[Mr Pointy]

There's an article by Martin Lewis saying that the rules for paying for missing NIC contributions are changing in April:
https://www.dailymail.co.uk/femail/article-1150017...

When I called the pension department (DWP?) I was told that I could pay for past years but only the last six (from 2016-17 I was told) would count towards increasing my State Pension. HMRC would gladly take the money for previous years, but it wouldn't actually benefit me.

Has anyone else looked into this & been told differently because I'm not sure the article is accurate.

[Seantr6]

I think the point is that it only applys to certain people.
Like you I checked last year and was given the same response anything prior to 2016 was pointless. My sitaution involves a defined benefit company persion which had been contracted out. As with you they were very clear the line in the sand was drawn for me in 2016 and I could only influence the years after this date.
Another friend in a similar position has also checked getting the same response.
They are either deliberatly misleading us, which I doubt, or Mr Lewis is being over simplistic with the claims thus gaining more publicity. I shall leave you to decide which.

[Mazinbrum]

I’m a year short of max contributions but according to the government website buying another year will give me an extra £49 a year, not sure where the £275 in the article comes from.

[ridds]

I didn't think you needed "full" contributions to receive the Max pension.

Just over 35 years. Or has that changed?

https://www.gov.uk/new-state-pension/how-its-calcu...

Actually, it's buried halfway through the article. Lovely bit of scaremongering as usual. Unless you've been contracting for years and not been made aware of NIC requirements by your accountant. There aren't going to be many that this affects.

[dingg]

ridds said:

I didn't think you needed "full" contributions to receive the Max pension.

Just over 35 years. Or has that changed?

https://www.gov.uk/new-state-pension/how-its-calcu...

Actually, it's buried halfway through the article. Lovely bit of scaremongering as usual. Unless you've been contracting for years and not been made aware of NIC requirements by your accountant. There aren't going to be many that this affects.

35 years required

Its most likely to affect married women who take breaks from employment.

My wife needs to pay for 2 incomplete years nic, its a good return for the sake of about 800 quid, as long as she doesn't snuff it early of course....

Edited by dingg on Sunday 4th December 17:22

[Mazinbrum]

dingg said:

35 years required

Its most likely to affect married women who take breaks from employment.

My wife needs to pay for 2 incomplete years nic, its a good return for the sake of about 800 quid, as long as she doesn't snuff it early of course....

Edited by dingg on Sunday 4th December 17:22

My record shows 39 years full contributions but one year short of full pension.

[timbo999]

Mazinbrum said:

I’m a year short of max contributions but according to the government website buying another year will give me an extra £49 a year, not sure where the £275 in the article comes from.

The final year is often problematic especially if you have previously contracted out as your pension may well not be an exact number of years' worth of contributions and you can't get more than the maximum state pension.

I was in the same boat as you - my final year would have cost me £800 but would have only netted 85p a week! So, I stuck the money in the piggy bank instead.

Generally, it is true that a year's NI nets £275 a year pension, so pays back in 4 years or so.

[Mr Pointy]

dingg said:

35 years required

Its most likely to affect married women who take breaks from employment.

My wife needs to pay for 2 incomplete years nic, its a good return for the sake of about 800 quid, as long as she doesn't snuff it early of course....

That number of years is often quoted, but it's wrong. I need more than 35 years to get a full State Pension.

[timbo999]

Mr Pointy said:

That number of years is often quoted, but it's wrong. I need more than 35 years to get a full State Pension.

It's usually only 'wrong' if your pension has been reduced by a reduction for years when you were contracted out (i.e. didn't pay a full year's NI contribution). It should tell you on the state pensions estimate page in your personal tax account if this is the case.

[Kirkmoly]

Mr Pointy said:

There's an article by Martin Lewis saying that the rules for paying for missing NIC contributions are changing in April:
https://www.dailymail.co.uk/femail/article-1150017...

When I called the pension department (DWP?) I was told that I could pay for past years but only the last six (from 2016-17 I was told) would count towards increasing my State Pension. HMRC would gladly take the money for previous years, but it wouldn't actually benefit me.

Has anyone else looked into this & been told differently because I'm not sure the article is accurate.

The article is accurate and it is also likely that what you were told is accurate. If your purchase of past years before 2016 changes only the lower of the two valuations used to calculate your starting point (depends on circumstances) then your future entitlement will only change if that valuation consequently becomes the higher of the two.

[33q]

Mr Pointy said:

There's an article by Martin Lewis saying that the rules for paying for missing NIC contributions are changing in April:
https://www.dailymail.co.uk/femail/article-1150017...

When I called the pension department (DWP?) I was told that I could pay for past years but only the last six (from 2016-17 I was told) would count towards increasing my State Pension. HMRC would gladly take the money for previous years, but it wouldn't actually benefit me.

Has anyone else looked into this & been told differently because I'm not sure the article is accurate.

I have been down this road. No benefit gained for pre April 2016. I've paid additional years up to my state pension age but despite having 46 years contributions I don't get the full pension as I was contracted out. It was worth it for me as I was able to pay class 2 of about £150 per year not £800. Mr Lewis has oversimplified it and there are many people in my position.

[ridds]

dingg said:

ridds said:

I didn't think you needed "full" contributions to receive the Max pension.

Just over 35 years. Or has that changed?

https://www.gov.uk/new-state-pension/how-its-calcu...

Actually, it's buried halfway through the article. Lovely bit of scaremongering as usual. Unless you've been contracting for years and not been made aware of NIC requirements by your accountant. There aren't going to be many that this affects.

35 years required

Its most likely to affect married women who take breaks from employment.

My wife needs to pay for 2 incomplete years nic, its a good return for the sake of about 800 quid, as long as she doesn't snuff it early of course....

Edited by dingg on Sunday 4th December 17:22

[PF62]

ridds said:

Unless you've been contracting for years and not been made aware of NIC requirements by your accountant. There aren't going to be many that this affects.

Not many! Almost every person who has ever had a DB pension before 2016 is most likely affected - and there are millions of those.

[ridds]

PF62 said:

ridds said:

Unless you've been contracting for years and not been made aware of NIC requirements by your accountant. There aren't going to be many that this affects.

Not many! Almost every person who has ever had a DB pension before 2016 is most likely affected - and there are millions of those.

Why would a DB Pension arranged by your employer affect the amount you receive from your state pension?

[timbo999]

ridds said:

Why would a DB Pension arranged by your employer affect the amount you receive from your state pension?

Because many such will have been contracted out of the state pension scheme at some point and their state pension will have been reduced as they paid less NI during that time.

[Zigster]

ridds said:

Why would a DB Pension arranged by your employer affect the amount you receive from your state pension?

I agree. There’s a lot of confusion in some of these posts (understandably because the State pension is ridiculously complicated).

Contracting out won’t reduce your Basic State Pension. It will reduce the amount of SERPS or S2P, but that’s because you would have paid lower NIC and your company pension will include an amount of Guaranteed Minimum Pension broadly equivalent to the SERPS “lost”.

The 2016 change is from BSP + SERPS to “new” State Pension, with some complicated transitional rules for people reaching State Pension Age after that date. There’s a fairly helpful briefing document here.
https://commonslibrary.parliament.uk/research-brie...

[ridds]

timbo999 said:

ridds said:

Why would a DB Pension arranged by your employer affect the amount you receive from your state pension?

Because many such will have been contracted out of the state pension scheme at some point and their state pension will have been reduced as they paid less NI during that time.

Ahhh, OK. Wasn't aware of that. That would have been a rather silly thing to do. I guess this was all part of the underhand Pension activities that went on back then?

[timbo999]

Zigster said:

I agree. There’s a lot of confusion in some of these posts (understandably because the State pension is ridiculously complicated).

Contracting out won’t reduce your Basic State Pension. It will reduce the amount of SERPS or S2P, but that’s because you would have paid lower NIC and your company pension will include an amount of Guaranteed Minimum Pension broadly equivalent to the SERPS “lost”.

The 2016 change is from BSP + SERPS to “new” State Pension, with some complicated transitional rules for people reaching State Pension Age after that date. There’s a fairly helpful briefing document here.
https://commonslibrary.parliament.uk/research-brie...

I think the confusion is compounded as the calculation used to reduce the 'new' state pension, due to contracting out in the past, is opaque (as far as I know)... plus DC schemes used to hold/show the money invested in them in lieu of NI separately (can't remember what it was called - 'protected rights'?) so you could at least make some comparison of the two. DC pensions are no longer required to do so and thus many don't.

Edited DB to DC.

Edited by timbo999 on Sunday 4th December 22:00

Edited by timbo999 on Sunday 4th December 22:00

[timbo999]

ridds said:

Ahhh, OK. Wasn't aware of that. That would have been a rather silly thing to do. I guess this was all part of the underhand Pension activities that went on back then?

Nothing underhand about it - it was a straightforward decision - would the money you didn't pay in NI do better in your DC pension than in the state second pension... given the opacity described above its a tricky question but given that you can buy a year's NI for £800, my suspicion is that people who contracted out have done rather well.

Edited DB to DC.

Edited by timbo999 on Sunday 4th December 22:01

[ridds]

timbo999 said:

ridds said:

Ahhh, OK. Wasn't aware of that. That would have been a rather silly thing to do. I guess this was all part of the underhand Pension activities that went on back then?

Nothing underhand about it - it was a straightforward decision - would the money you didn't pay in NI do better in your DB pension than in the state second pension... given the opacity described above its a tricky question but given that you can buy a year's NI for £800, my suspicion is that people who contracted out have done rather well.

Was more whether they understood what they were getting into back then or not. I contracted out for 4 years (I think) out of choice with the understanding that I could top up as required later and that only 35 years + was required.

I guess those who have been fully invested in Employer DB schemes (that have then tanked if not protected) and have many years to Top up, could be in a tricky position. Particularly if they can't reach the 35 years. Although the 10-35 years is just then factored on your contributions.