State Pension potential shortfall warning
Discussion
TwigtheWonderkid said:
I had a meeting with my IFA yesterday. He's a bit of a pensions guru and really seems to know about all the changes to legislation on personal and state pensions. I put to him the scenario about retiring early, having made 35+ years NI contributions, being told you're entitled to the full £168.60 at age 67 on Govt Gateway, but not actually getting it unless you continue to make NI payments between retiring and turning 67.
He knew nothing about it and, although he admitted that it was possible this had passed him by, he was pretty confident it was nonsense.
What you say is absolutely correct. It links back to what was being said earlier in the thread - that State Pension Forecasts often show many underpaid years of NI which COULD be paid up at c.£780 a year (and, yes, it can be a lot more than 6 even though that's the "usual" number) but the forecasts don't give any information as to which years NEED to be paid up in order to hit the max' basic pension of £168.60. Or to put it another way, which years DON'T need to be paid up!He knew nothing about it and, although he admitted that it was possible this had passed him by, he was pretty confident it was nonsense.
To hit the full £168.60 a week I think "at least 35 years including all years between April 2016 and retirement age" need to be paid-up, but I haven't found 100% confirmation of that. I don't know what the weekly reduction would be for someone who had, say, 35 years paid up but actually needed 36...
To some extent the decision around paying-up prior years will depend on whether you'll be a non-taxpayer, 20% taxpayer or 40% taxpayer on the additional weekly benefit achieved.
rockin said:
TwigtheWonderkid said:
To hit the full £168.60 a week I think "at least 35 years including all years between April 2016 and retirement age" need to be paid-up, but I haven't found 100% confirmation of that. I don't know what the weekly reduction would be for someone who had, say, 35 years paid up but actually needed 36...
To some extent the decision around paying-up prior years will depend on whether you'll be a non-taxpayer, 20% taxpayer or 40% taxpayer on the additional weekly benefit achieved.
Not in my case. I worked/paid NI 1973 to 2011...contracted out. 38 years. Retired at 55 and paid no further NI and didn't register unemployed. Although I'm paying/intend to pay voluntary NI from 2016 to 2021 (when I reach State Retirement Age) I cannot get the full £168.60. I will be about 2 years short.To some extent the decision around paying-up prior years will depend on whether you'll be a non-taxpayer, 20% taxpayer or 40% taxpayer on the additional weekly benefit achieved.
It all hinges on the 2016 calculation.
The Leaper said:
i4got,
Looks like the DWP is the same as HMRC. The latter will not guarantee anything they say or communicate by phone, statement etc unless it is dealt with in an actual letter from HMRC. Actually, I think it is HMRC that prepares State pension forecasts anyway.
R.
That's what I was told when I contacted DWP today - and ended up asking HMRC for my 'statement of accounts'Looks like the DWP is the same as HMRC. The latter will not guarantee anything they say or communicate by phone, statement etc unless it is dealt with in an actual letter from HMRC. Actually, I think it is HMRC that prepares State pension forecasts anyway.
R.
rockin said:
To hit the full £168.60 a week I think "at least 35 years including all years between April 2016 and retirement age" need to be paid-up, but I haven't found 100% confirmation of that. I don't know what the weekly reduction would be for someone who had, say, 35 years paid up but actually needed 36...
the bit in bold is wrong. I retired last year with roughly 9 years to state pension age. I only need two more years to get a full pension. It all depends on the starting calculation in 2016. That's interesting - there must be variations from case to case. I've just checked one and in that case it does have to be 35 years including all years between April 2016 and state pension retirement age.
I've crunched the numbers, based on that case, and the cost/benefit works out very roughly as follows,
Cost of buying state pension is about £3 paid in a lump sum to buy an additional £1 of pension per year. The pension in payment is, of course, taxable where applicable. In very round numbers the % "returns on investment" based on the above case would work out as,
I've crunched the numbers, based on that case, and the cost/benefit works out very roughly as follows,
Cost of buying state pension is about £3 paid in a lump sum to buy an additional £1 of pension per year. The pension in payment is, of course, taxable where applicable. In very round numbers the % "returns on investment" based on the above case would work out as,
- For a non-taxpayer in retirement = 30% p.a.
- For a 20% taxpayer in retirement = 25% p.a.
- For a 40% taxpayer in retirement = 20% p.a.
I guess part of the variation from case to case may hinge upon a differential between service "contracted out" and "not contracted out".
For anyone who's not familiar with the difference it's quite technical stuff and possibly beyond the normal scope of PH finance forum.
Edit to say Craig got there first!
For anyone who's not familiar with the difference it's quite technical stuff and possibly beyond the normal scope of PH finance forum.
Edit to say Craig got there first!
anonymous said:
[redacted]
As an aside I had reason to speak today to the pension forecast department and HMRC for voluntary NI payments and everyone I spoke to was really helpful. Only issue is 5 minutes or so for the phone to be answered but after that no issue. So if anyone has any doubts or questions it is pretty straightforward to get answers.anonymous said:
[redacted]
To be honest, I think that's wrong. The new (post 2016) rules appear to be intended to make sure you can't escape contributing towards a full state pension by simply not going to work once you've got 35 years under your belt.If you can post a link from a government website to back up what you are saying I will be the first to admit my misunderstanding and eat some humble pie.
Here's the sort of thing I've been looking at https://www.gov.uk/new-state-pension/how-its-calcu...
"If your starting amount [at April 2016] is less than the full new State Pension you can get more State Pension by adding more qualifying years to your National Insurance record after 5 April 2016. You can do this until you reach the full new State Pension amount or reach State Pension age - whichever is first. Each qualifying year on your National Insurance record after 5 April 2016 will add about £4.82 a week to your new State Pension. The exact amount you get is calculated by dividing £168.60 by 35 and then multiplying by the number of qualifying years after 5 April 2016."
As others have suggested, it seems to all come back to what your position was at April 2016 and how many more years you may need to contribute to achieve the maximum basic state pension.
"If your starting amount [at April 2016] is less than the full new State Pension you can get more State Pension by adding more qualifying years to your National Insurance record after 5 April 2016. You can do this until you reach the full new State Pension amount or reach State Pension age - whichever is first. Each qualifying year on your National Insurance record after 5 April 2016 will add about £4.82 a week to your new State Pension. The exact amount you get is calculated by dividing £168.60 by 35 and then multiplying by the number of qualifying years after 5 April 2016."
As others have suggested, it seems to all come back to what your position was at April 2016 and how many more years you may need to contribute to achieve the maximum basic state pension.
anonymous said:
[redacted]
Correct he is wrong, and agree it’s confusing. Once you have 35 qualifying years. you will have earned a full state pension.The “qualifying” bit is important- I have needed 44 years of NI contributions as not all were “qualifying” due to I guess contracting out.
craig1912 said:
anonymous said:
[redacted]
Correct he is wrong, and agree it’s confusing. Once you have 35 qualifying years. you will have earned a full state pension.The “qualifying” bit is important- I have needed 44 years of NI contributions as not all were “qualifying” due to I guess contracting out.
from -
"You’ll still need to pay National Insurance until you reach your State Pension age.”
to -
"While you are still working, you’ll still need to pay National Insurance until you reach your State Pension age.”
i4got said:
Agreed - it is the wording that is causing issue here. It requires such a simple change of wording.
from -
"You’ll still need to pay National Insurance until you reach your State Pension age.”
to -
"While you are still working, you’ll still need to pay National Insurance until you reach your State Pension age.”
Slight tweak:from -
"You’ll still need to pay National Insurance until you reach your State Pension age.”
to -
"While you are still working, you’ll still need to pay National Insurance until you reach your State Pension age.”
"You will still need to pay National Insurance on non-pension earnings until you reach your State Pension age."
LeoSayer said:
Slight tweak: "You will still need to pay National Insurance on non-pension earnings until you reach your State Pension age."
That sounds weird to me but I'm always happy to be educated! Is/was it a first step towards charging NI (via the back door) on income that isn't actually "work related pay"? Perhaps someone can post a link to back it up.One thing's for certain, if we're wrestling with it on the PH Finance Forum the ordinary man in the street must be in a complete spin...
rockin said:
Here's the sort of thing I've been looking at https://www.gov.uk/new-state-pension/how-its-calcu...
"If your starting amount [at April 2016] is less than the full new State Pension you can get more State Pension by adding more qualifying years to your National Insurance record after 5 April 2016. You can do this until you reach the full new State Pension amount or reach State Pension age - whichever is first. Each qualifying year on your National Insurance record after 5 April 2016 will add about £4.82 a week to your new State Pension. The exact amount you get is calculated by dividing £168.60 by 35 and then multiplying by the number of qualifying years after 5 April 2016."
As others have suggested, it seems to all come back to what your position was at April 2016 and how many more years you may need to contribute to achieve the maximum basic state pension.
Isn’t it true that you can have COPA (contracted out years or part years) that no matter how many extra years you work they will simply not cover the gap. "If your starting amount [at April 2016] is less than the full new State Pension you can get more State Pension by adding more qualifying years to your National Insurance record after 5 April 2016. You can do this until you reach the full new State Pension amount or reach State Pension age - whichever is first. Each qualifying year on your National Insurance record after 5 April 2016 will add about £4.82 a week to your new State Pension. The exact amount you get is calculated by dividing £168.60 by 35 and then multiplying by the number of qualifying years after 5 April 2016."
As others have suggested, it seems to all come back to what your position was at April 2016 and how many more years you may need to contribute to achieve the maximum basic state pension.
As with everything else to do with pensions in my life, my SP (which, like most recipients, I receive every 4th Monday) is a complete and utter mess.
This mess was not even identified until 2016 prior to which I admit I had little or no interest in anything to do with the State Pension.
Finally in mid-2019 I made a breakthrough. Having spoken with approximately 20 different people over the years from front line call centre personnel to senior management at SES Benton Park View and having received many different explanations of the mess and how it arose I got access to a top level Complaints Team manager.
This chap eventually got to the real root of the issue and sorted it as far as it could be sorted. However, a follow-up call revealed he had retired. His successor discovered a small flaw in his remedy and she applied a further solution. Unfortunately there is still an issue remaining but (as advised by this HMRC person) whilst the problem is clearly visible and understood, the solution is beyond the remit of the Complaints Team to apply.
I have been asked to instruct a lawyer to further matters. It's a bit odd, because there is no animosity involved. I have basically been advised BY HMRC to sue HMRC for negligence of my NI account and assured that this is almost certain to result in the final part of the mess getting resolved.
The missus on the other hand has a similar mess to one mentioned above by another poster. 42 years of contributions but needing another 2 years to get the full state pension. I cant handle even trying to work that one out. Told her to just leave it till she's entitled to get the SP and we'll sort it out in arrears.
My advice to one and all is to not take for granted that the advice given when you phone them is accurate. Needs double and triple checking.
This mess was not even identified until 2016 prior to which I admit I had little or no interest in anything to do with the State Pension.
Finally in mid-2019 I made a breakthrough. Having spoken with approximately 20 different people over the years from front line call centre personnel to senior management at SES Benton Park View and having received many different explanations of the mess and how it arose I got access to a top level Complaints Team manager.
This chap eventually got to the real root of the issue and sorted it as far as it could be sorted. However, a follow-up call revealed he had retired. His successor discovered a small flaw in his remedy and she applied a further solution. Unfortunately there is still an issue remaining but (as advised by this HMRC person) whilst the problem is clearly visible and understood, the solution is beyond the remit of the Complaints Team to apply.
I have been asked to instruct a lawyer to further matters. It's a bit odd, because there is no animosity involved. I have basically been advised BY HMRC to sue HMRC for negligence of my NI account and assured that this is almost certain to result in the final part of the mess getting resolved.
The missus on the other hand has a similar mess to one mentioned above by another poster. 42 years of contributions but needing another 2 years to get the full state pension. I cant handle even trying to work that one out. Told her to just leave it till she's entitled to get the SP and we'll sort it out in arrears.
My advice to one and all is to not take for granted that the advice given when you phone them is accurate. Needs double and triple checking.
I think we're getting to the end of figuring out what to do with my Mrs pension, despite the 39 full contribution years but need to contribute 4 more.
Essentially we've figured out that if she makes class 3 contributions for four years then she will qualify for almost a full pension, only 63p/week off the full amount. At least our calculations based on our understanding of the rules agrees to the penny with theirs.
One more call to make and we will do it. The upside is that for three of those years the contributions required are considerably below the full class 3 contributions as insufficient contributions made in those years to count as full contribution years and make the 39 years to 42. All this should mean that the total lump sum will have a payback of less than two years so it makes sense to do it. Hopefully the final phone call will cement the agreement.
Fully agree with a comment above that if we are struggling with this on here in PH finance, then the man on the Clapham omnibus must be utterly bewildered, and that's before the consideration that you also need a lump of cash sitting about doing nothing and not likely to be needed.
Essentially we've figured out that if she makes class 3 contributions for four years then she will qualify for almost a full pension, only 63p/week off the full amount. At least our calculations based on our understanding of the rules agrees to the penny with theirs.
One more call to make and we will do it. The upside is that for three of those years the contributions required are considerably below the full class 3 contributions as insufficient contributions made in those years to count as full contribution years and make the 39 years to 42. All this should mean that the total lump sum will have a payback of less than two years so it makes sense to do it. Hopefully the final phone call will cement the agreement.
Fully agree with a comment above that if we are struggling with this on here in PH finance, then the man on the Clapham omnibus must be utterly bewildered, and that's before the consideration that you also need a lump of cash sitting about doing nothing and not likely to be needed.
rockin said:
One thing's for certain, if we're wrestling with it on the PH Finance Forum the ordinary man in the street must be in a complete spin...
We're only "wrestling" because there are too many ordinary men in here 
.Most folk don't give a s
te about this stuff until it's too late !!Right, so I'm 57 and a half. The website is showing £168.60 and also, when I click on my NI record, it shows 41 years of fully paid up contributions.
If I storm out of work today in fury (which is entirely possible
), and don't work again, will I get the full state pension when I turn 67?
If I storm out of work today in fury (which is entirely possible
), and don't work again, will I get the full state pension when I turn 67? Gassing Station | Finance | Top of Page | What's New | My Stuff