State pension advice- additional contribution
Discussion
My wife has generally worked part time, and has in some years failed to earn enough /contribute enough NI to give her full year credit for the state pension.
She's 53 now and will probably work to 60ish and take a small company pension while waiting on her state retirement age.
She has 26 yrs full contribution and 10yrs where she would need to pay additional contributions to the state. Some of the years will cost £550-650 pa. To get the additional ten or 12 yrs she needs to get the maximum state pension forecast for her of £159 per week this would cost in total about £6-7k in contributions.
We could pay this in and raise her projected state pension forecast from £108 per week to £159. Obviously this would be repaid and more in time while drawing state pension.
The big question however is does anyone know if the planned changes to state pension going flat rate etc will mean a change to the min required years contribution or would they actually ask for more paying in?
She can't seem to find anything concrete about plans for the state pension for her age group other than her retirement age of 67.
Any advice appreciated
She's 53 now and will probably work to 60ish and take a small company pension while waiting on her state retirement age.
She has 26 yrs full contribution and 10yrs where she would need to pay additional contributions to the state. Some of the years will cost £550-650 pa. To get the additional ten or 12 yrs she needs to get the maximum state pension forecast for her of £159 per week this would cost in total about £6-7k in contributions.
We could pay this in and raise her projected state pension forecast from £108 per week to £159. Obviously this would be repaid and more in time while drawing state pension.
The big question however is does anyone know if the planned changes to state pension going flat rate etc will mean a change to the min required years contribution or would they actually ask for more paying in?
She can't seem to find anything concrete about plans for the state pension for her age group other than her retirement age of 67.
Any advice appreciated
200Plus Club said:
....The big question however is does anyone know if the planned changes to state pension going flat rate etc will mean a change to the min required years contribution or would they actually ask for more paying in?...
Ah, if I knew the answer to that I'd play the lottery a lot more.As the state pension age is increasing, one might assume the number of qualifying years will increase as well. But, seeing as the required number of years have been up and down over the last few decades who knows what a future government will do.
Maybe the way to look at is will she get back in pension payments the £7k she pays. From the figures you cite I think the answer would be yes, as the extra payment could be recovered in about 3 years, excluding any inflation factors. She'd get an extra £2,500 per year for the £7k payment.
I've looked into the general issue of paying extra NI contributions to increase a State pension several times for a number of people. In general, I've concluded that the contributions required versus the increase in pension is a good deal financially. There are some provisos: depends on how long a person lives to draw their pension and also will a future government make the State pension of less value for those contributions at some time in the future?
There is also the matter of being able to use the same contributions in other ways to get a better deal outside the State system, with flexibility and availability, but that's all another subject altogether.
R.
There is also the matter of being able to use the same contributions in other ways to get a better deal outside the State system, with flexibility and availability, but that's all another subject altogether.
R.
200Plus Club said:
To get the additional ten or 12 yrs she needs to get the maximum state pension forecast for her of £159 per week this would cost in total about £6-7k in contributions.
retirement age of 67.
Extra £50 a week x 52 = £2,600 a year more pensionretirement age of 67.
Assume live at least 10 years in retirement so £2,600 x 10 = £26,000
Cost £6-7k. Payback £26k. Looks like a no brainer to me, even against a background of longer term uncertainty.
How much private pension could you buy at age 67 for a one-off contribution of £6-7k at age 53? Probably only about £500 a year.
We've already worked out the payback at 3 or 4 yrs but that assumes she can actually achieve full rate with avc contributions to make up missing years. I don't think we can get as good a return privately investing or similar tbh, the main concern is them changing the rules under her and requesting more than 36 yrs I guess.
Not sure if it is worth a call to someone at the dwp or whoever manages the state scheme but it does look worthwhile as it stands.
Not sure if it is worth a call to someone at the dwp or whoever manages the state scheme but it does look worthwhile as it stands.
mike74 said:
Don't pensioners currently get Pension Tax Credit to top up their state pension if they don't have full contributions?
So what's the point of ensuring you have maximum contributions if you'll just get it topped by pension tax credits anyway?
And annoyingly if you spend your whole life on benefits your NI contributions get paid for you! So what's the point of ensuring you have maximum contributions if you'll just get it topped by pension tax credits anyway?
mike74 said:
Don't pensioners currently get Pension Tax Credit to top up their state pension if they don't have full contributions?
So what's the point of ensuring you have maximum contributions if you'll just get it topped by pension tax credits anyway?
This is the sort of thing I'm wary of as we don't know how it all works to be honest.So what's the point of ensuring you have maximum contributions if you'll just get it topped by pension tax credits anyway?
Should be able to work it out on here... https://www.gov.uk/pension-credit-calculator
This thread prompted me to check my state pension entitlement.
I'm 60, working since I was 17.
From 1975 to 2010, I was in full time employment (average or above earnings), so these are proper "full years".
In 1998 and 2010 I was made redundant, so have 4 or 5 months of NI credits from signing on.
In 2010 I got a part time job, 19 hours a week at a few pennies over minimum wage.
In 2016, I dropped down to 14 hours a week in the same job.
For the last few years, I have paid a few pounds NI each year, basically one month each year when I did some overtime which pushed me above the lower earnings limit.
So far, from 1975 to 2016 (the latest year for which figures are shown on the government website), each year is shown as "full", so 43 years so far.
The pension statement shows that the maximum pension that I can receive is £159.55 a week.
The amount I have earned so far is £139.88.
I'm a bit confused by this, as I thought you only had to have 35 full years of NI contributions to qualify for the full state pension?
If that's not the case any more, how do I go about ensuring that I qualify for the "missing" £20 a week?
If I continue in my part time job, 14 hours a week, paying only the occasional week of NI, will that qualify, or will I have to make a top-up payment?
I also have some self employment, for which I had a small earnings exemption certificate. I think the exemption is now automatic (below £5k or so p.a.).
Is there any way I can use my self employment to top up my NI contributions for the remaining 6 years? I could do more work to take me over the lower earnings limit if that would help.
Between my employment and self employment I am pretty much working full time at just over minimum wage, so it'd be annoying if I don't qualify for full pension years because I'm missing a trick!
I should add that I've been drawing on 2 final salary pensions since 2010, so I won't qualify for state pension credit. These will both be back-indexed when I reach state retirement age, so about £12k p.a. from those.
I'm 60, working since I was 17.
From 1975 to 2010, I was in full time employment (average or above earnings), so these are proper "full years".
In 1998 and 2010 I was made redundant, so have 4 or 5 months of NI credits from signing on.
In 2010 I got a part time job, 19 hours a week at a few pennies over minimum wage.
In 2016, I dropped down to 14 hours a week in the same job.
For the last few years, I have paid a few pounds NI each year, basically one month each year when I did some overtime which pushed me above the lower earnings limit.
So far, from 1975 to 2016 (the latest year for which figures are shown on the government website), each year is shown as "full", so 43 years so far.
The pension statement shows that the maximum pension that I can receive is £159.55 a week.
The amount I have earned so far is £139.88.
I'm a bit confused by this, as I thought you only had to have 35 full years of NI contributions to qualify for the full state pension?
If that's not the case any more, how do I go about ensuring that I qualify for the "missing" £20 a week?
If I continue in my part time job, 14 hours a week, paying only the occasional week of NI, will that qualify, or will I have to make a top-up payment?
I also have some self employment, for which I had a small earnings exemption certificate. I think the exemption is now automatic (below £5k or so p.a.).
Is there any way I can use my self employment to top up my NI contributions for the remaining 6 years? I could do more work to take me over the lower earnings limit if that would help.
Between my employment and self employment I am pretty much working full time at just over minimum wage, so it'd be annoying if I don't qualify for full pension years because I'm missing a trick!
I should add that I've been drawing on 2 final salary pensions since 2010, so I won't qualify for state pension credit. These will both be back-indexed when I reach state retirement age, so about £12k p.a. from those.
Edited by clockworks on Wednesday 23 August 09:41
mike74 said:
Don't pensioners currently get Pension Tax Credit to top up their state pension if they don't have full contributions?
So what's the point of ensuring you have maximum contributions if you'll just get it topped by pension tax credits anyway?
If you mean Pension Credit, this is means tested and takes into account any capital you have.So what's the point of ensuring you have maximum contributions if you'll just get it topped by pension tax credits anyway?
When I last looked for my mother a few years ago, despite her income only being the standard single persons state pension, her savings took her over the threshold. And, she didn't have much at the time, about £30k. The calculation assume a certain amount of income from savings, and at the time the assumed interest rate was about 10%!! Average savings rates at the time were not much more than 5%.
200Plus Club said:
My wife has generally worked part time, and has in some years failed to earn enough /contribute enough NI to give her full year credit for the state pension.
She's 53 now and will probably work to 60ish and take a small company pension while waiting on her state retirement age.
She has 26 yrs full contribution and 10yrs where she would need to pay additional contributions to the state. Some of the years will cost £550-650 pa. To get the additional ten or 12 yrs she needs to get the maximum state pension forecast for her of £159 per week this would cost in total about £6-7k in contributions.
We could pay this in and raise her projected state pension forecast from £108 per week to £159. Obviously this would be repaid and more in time while drawing state pension.
The big question however is does anyone know if the planned changes to state pension going flat rate etc will mean a change to the min required years contribution or would they actually ask for more paying in?
She can't seem to find anything concrete about plans for the state pension for her age group other than her retirement age of 67.
Any advice appreciated
I seriously doubt that they'll move the goal posts in a way to affect your wife, especailly not by increasing the number of qualifying years required at this stage.She's 53 now and will probably work to 60ish and take a small company pension while waiting on her state retirement age.
She has 26 yrs full contribution and 10yrs where she would need to pay additional contributions to the state. Some of the years will cost £550-650 pa. To get the additional ten or 12 yrs she needs to get the maximum state pension forecast for her of £159 per week this would cost in total about £6-7k in contributions.
We could pay this in and raise her projected state pension forecast from £108 per week to £159. Obviously this would be repaid and more in time while drawing state pension.
The big question however is does anyone know if the planned changes to state pension going flat rate etc will mean a change to the min required years contribution or would they actually ask for more paying in?
She can't seem to find anything concrete about plans for the state pension for her age group other than her retirement age of 67.
Any advice appreciated
You say she plans to work til 60, so there's potentially another 7 qualifying years, so that'll get her up to 33 years. So, in theory she only needs to top up 2 more years for the full amount. That doesn't leave any leeway for ill health, or retiring earlier though, so might be prudent to pay top ups for a few extra years. Five sounds reasonable, and if she earnt anything (but under the LEL) in some of those years, some might be cheaper to top than others, which would make them particularly good value.
clockworks said:
This thread prompted me to check my state pension entitlement.
I'm 60, working since I was 17.
From 1975 to 2010, I was in full time employment (average or above earnings), so these are proper "full years".
In 1998 and 2010 I was made redundant, so have 4 or 5 months of NI credits from signing on.
In 2010 I got a part time job, 19 hours a week at a few pennies over minimum wage.
In 2016, I dropped down to 14 hours a week in the same job.
For the last few years, I have paid a few pounds NI each year, basically one month each year when I did some overtime which pushed me above the lower earnings limit.
So far, from 1975 to 2016 (the latest year for which figures are shown on the government website), each year is shown as "full", so 43 years so far.
The pension statement shows that the maximum pension that I can receive is £159.55 a week.
The amount I have earned so far is £139.88.
I'm a bit confused by this, as I thought you only had to have 35 full years of NI contributions to qualify for the full state pension?
If that's not the case any more, how do I go about ensuring that I qualify for the "missing" £20 a week?
If I continue in my part time job, 14 hours a week, paying only the occasional week of NI, will that qualify, or will I have to make a top-up payment?
I also have some self employment, for which I had a small earnings exemption certificate. I think the exemption is now automatic (below £5k or so p.a.).
Is there any way I can use my self employment to top up my NI contributions for the remaining 6 years? I could do more work to take me over the lower earnings limit if that would help.
Between my employment and self employment I am pretty much working full time at just over minimum wage, so it'd be annoying if I don't qualify for full pension years because I'm missing a trick!
I should add that I've been drawing on 2 final salary pensions since 2010, so I won't qualify for state pension credit. These will both be back-indexed when I reach state retirement age, so about £12k p.a. from those.
Not sure if you're aware, but the LEL is lower than the primary threshold, e.g. this year the LEL £5876/yr, but you don't start paying employee's NI contributions until the PT of £8164/yr. So in between those amounts you are earning enough to make it a qualifying year, even though you haven't actually had any NI deductions. It could be that the years you thought you hadn't earnt enough to qualify, that you actually had? I'm 60, working since I was 17.
From 1975 to 2010, I was in full time employment (average or above earnings), so these are proper "full years".
In 1998 and 2010 I was made redundant, so have 4 or 5 months of NI credits from signing on.
In 2010 I got a part time job, 19 hours a week at a few pennies over minimum wage.
In 2016, I dropped down to 14 hours a week in the same job.
For the last few years, I have paid a few pounds NI each year, basically one month each year when I did some overtime which pushed me above the lower earnings limit.
So far, from 1975 to 2016 (the latest year for which figures are shown on the government website), each year is shown as "full", so 43 years so far.
The pension statement shows that the maximum pension that I can receive is £159.55 a week.
The amount I have earned so far is £139.88.
I'm a bit confused by this, as I thought you only had to have 35 full years of NI contributions to qualify for the full state pension?
If that's not the case any more, how do I go about ensuring that I qualify for the "missing" £20 a week?
If I continue in my part time job, 14 hours a week, paying only the occasional week of NI, will that qualify, or will I have to make a top-up payment?
I also have some self employment, for which I had a small earnings exemption certificate. I think the exemption is now automatic (below £5k or so p.a.).
Is there any way I can use my self employment to top up my NI contributions for the remaining 6 years? I could do more work to take me over the lower earnings limit if that would help.
Between my employment and self employment I am pretty much working full time at just over minimum wage, so it'd be annoying if I don't qualify for full pension years because I'm missing a trick!
I should add that I've been drawing on 2 final salary pensions since 2010, so I won't qualify for state pension credit. These will both be back-indexed when I reach state retirement age, so about £12k p.a. from those.
Edited by clockworks on Wednesday 23 August 09:41
If the HMRC website says you have 43 years made up, then I wouldn't worry about not having enough.
I think the difference between the £139 and £159 is the additional state pension, which you probably won't get as you would have been contracted out of it while you were paying into a private pension.
Thanks for clearing that up for me. I was paying into company schemes for 28 years in total, so the contracting out thing makes sense regarding the £20 shortfall
I didn't know that you could qualify for a full year without actually paying any NI. Last tax year may just about qualify, as I dropped my hours half way through.
This tax year will be about £100 below the lower limit. Should I do a bit of overtime to get over the threshold, or will it not make any difference because I have 43 full years already?
Is it possible to "buy back" the £20 a week I will miss out on because of contracting out?
I didn't know that you could qualify for a full year without actually paying any NI. Last tax year may just about qualify, as I dropped my hours half way through.
This tax year will be about £100 below the lower limit. Should I do a bit of overtime to get over the threshold, or will it not make any difference because I have 43 full years already?
Is it possible to "buy back" the £20 a week I will miss out on because of contracting out?
clockworks said:
Thanks for clearing that up for me. I was paying into company schemes for 28 years in total, so the contracting out thing makes sense regarding the £20 shortfall
I didn't know that you could qualify for a full year without actually paying any NI. Last tax year may just about qualify, as I dropped my hours half way through.
This tax year will be about £100 below the lower limit. Should I do a bit of overtime to get over the threshold, or will it not make any difference because I have 43 full years already?
Is it possible to "buy back" the £20 a week I will miss out on because of contracting out?
Yes. In effect, yes you can buy back the £20 per week under the new system although this was not previously an option. This is an unintended, though welcome, consequence of the transition between the two systems arising because your 'starting amount' is frozen at April 2016. So, whereas the 13 years you have (over the 30) are wasted under the old system, any years you complete from 16/17 onwards will add to your weekly pension under the new one (by approx £4.55).I didn't know that you could qualify for a full year without actually paying any NI. Last tax year may just about qualify, as I dropped my hours half way through.
This tax year will be about £100 below the lower limit. Should I do a bit of overtime to get over the threshold, or will it not make any difference because I have 43 full years already?
Is it possible to "buy back" the £20 a week I will miss out on because of contracting out?
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