NI contributions and pensions
Discussion
Chatting to a friend last night I learned that the 35 years' contributions needed for a full state pension has been put up to 40 years. Smashing.
So I logged in and looked at the numbers. It says I have 35 years full contributions and 7 years not enough. I haven't paid any NI for the last four years because I thought I was fully paid up.
The forecast max is £175.20pw, and current forecast is £162.49pw. I'm not sure if £162.49 is the max I'll get if I top up three years, or whether that's what I'll get if I do nothing and £175.20 is the figure I'll get if I top up three years.
Can anyone say which interpretation is right, and also how much a years' worth of NI is? Then I can do the maths and see what the return on further 'investment' is. Thanks!
So I logged in and looked at the numbers. It says I have 35 years full contributions and 7 years not enough. I haven't paid any NI for the last four years because I thought I was fully paid up.
The forecast max is £175.20pw, and current forecast is £162.49pw. I'm not sure if £162.49 is the max I'll get if I top up three years, or whether that's what I'll get if I do nothing and £175.20 is the figure I'll get if I top up three years.
Can anyone say which interpretation is right, and also how much a years' worth of NI is? Then I can do the maths and see what the return on further 'investment' is. Thanks!
OP: there have been a couple of recent threads which got quite long & tortuous:
https://www.pistonheads.com/gassing/topic.asp?h=0&...
https://www.pistonheads.com/gassing/topic.asp?h=0&...
Can you post a scan of the section of your online quote that looks like this:
If you have not been in employment & want to make voluntary Class 3 contributions then the rates are:
2020 to 2021: £795.60
2019 to 2020: £780.00
2018 to 2019: £761.80
2017 to 2018: £741.00
If you were "self employed" then you would probably have to calculate the Class 2 rate:
https://www.gov.uk/government/publications/rates-a...
You can phone up the Pensions Department for more guidance on eligable years - don't go back beyond 2105/16 (I think) as it won't count.
https://www.pistonheads.com/gassing/topic.asp?h=0&...
https://www.pistonheads.com/gassing/topic.asp?h=0&...
Can you post a scan of the section of your online quote that looks like this:
If you have not been in employment & want to make voluntary Class 3 contributions then the rates are:
2020 to 2021: £795.60
2019 to 2020: £780.00
2018 to 2019: £761.80
2017 to 2018: £741.00
If you were "self employed" then you would probably have to calculate the Class 2 rate:
https://www.gov.uk/government/publications/rates-a...
You can phone up the Pensions Department for more guidance on eligable years - don't go back beyond 2105/16 (I think) as it won't count.
Mr Pointy said:
CoolHands said:
Worms. Can, open
Buckle up, we're going in.CoolHands said:
Basically start paying, as you’re short.
Thanks Mr Pointy - useful link. I was self-employed, now retired, so on average the last 3 years would cost me about £750 each.
So an 'investment' of £2,250. Now I need to know how much extra OAP that will buy me so I can judge the payback
Well, it seems that if I pay in the extra 3 years (or 5 over time) it's basically dead money and I won't get it back for about 13 years. That's if the pension rules don't change, for example to patch up the hole that the pandemic will have caused.
I can't show workings out, but I think in 13 years my money can do better in the markets - and I have control of it.
I can't show workings out, but I think in 13 years my money can do better in the markets - and I have control of it.
Where is it stayed the qualifying years has gone up to 40 from 35? The page below says 35 years
https://www.gov.uk/new-state-pension/how-its-calcu...
https://www.gov.uk/new-state-pension/how-its-calcu...
That's a good point...
In reply to Mr Pointy here's the screen grab:
And on the 'View your NI record' page' it says
35 years of full contributions
9 years to contribute before 5 April 2028
7 years when you did not contribute enough
The contradiction is that I have contributed all I am required to do, yet have not contributed enough.
In reply to Mr Pointy here's the screen grab:
And on the 'View your NI record' page' it says
35 years of full contributions
9 years to contribute before 5 April 2028
7 years when you did not contribute enough
The contradiction is that I have contributed all I am required to do, yet have not contributed enough.
All of this was worked through in the other thread that Mr Pointy linked to earlier (p.1). In essence,
- It's 35 years of full NI contributions that are required.
- When you look at the website it lists ALL underpaid years, not just the ones that it will benefit you to pay up. Speak to them on the phone and you find out how many are actually worth paying. The rate of return is much better than other forms of investment, assuming you stay alive to collect and assuming they don't change the rules...
- The total number of years required to hit maximum state pension MAY be more than 35 IF some "contracted out" years have been transferred from a DB scheme to a different pension arrangement.
Simpo Two said:
Well, it seems that if I pay in the extra 3 years (or 5 over time) it's basically dead money and I won't get it back for about 13 years. That's if the pension rules don't change, for example to patch up the hole that the pandemic will have caused.
I can't show workings out, but I think in 13 years my money can do better in the markets - and I have control of it.
I believe it takes about three years to recoup what you pay out for each additional year. (Approx 750 a year to buy and you get a fiver a week extra pension) So if you are close enough to retirement that you think the rules won't change and you believe you will live more than 3 years beyond state pension age, then it's worth thinking about.I can't show workings out, but I think in 13 years my money can do better in the markets - and I have control of it.
We topped up NI for my wife last week.
The process was roughly:
- on the HMRC site check the year by year details, when expanded it gives you a specific amount of top up needed. We had some partial years where it was only ~£400 and made it an easy decision.
- ring the pension advice free phone number to confirm everything, they will give you the correct HMRC number to ring for NI top up and what you need to say on the automated voice recognition system to get the right department.
- ring HMRC and navigate the automated system to get a human who can give you their bank details and an 18 digit reference to use on a bank transfer.
We did this last week and it was all working with regular duration phone queues (around 45 mins).
The top-up amounts can go up on 28th April, so worth doing quickly if you think you want to.
The process was roughly:
- on the HMRC site check the year by year details, when expanded it gives you a specific amount of top up needed. We had some partial years where it was only ~£400 and made it an easy decision.
- ring the pension advice free phone number to confirm everything, they will give you the correct HMRC number to ring for NI top up and what you need to say on the automated voice recognition system to get the right department.
- ring HMRC and navigate the automated system to get a human who can give you their bank details and an 18 digit reference to use on a bank transfer.
We did this last week and it was all working with regular duration phone queues (around 45 mins).
The top-up amounts can go up on 28th April, so worth doing quickly if you think you want to.
Thanks, I'll try to call them though expect with things as they are it might take a while to get through.
I was in a company scheme from 86-88 so maybe that's the reason the forecast is slightly below max - but then, I have 35 full years which is all you need.
It also mentioned a COPE estimate of £11.29pw which is or will apparently come from my private pension. That's a new one on me. Maybe that's just a way of saying 'You're a bit short so make it up from your own means'.
I was in a company scheme from 86-88 so maybe that's the reason the forecast is slightly below max - but then, I have 35 full years which is all you need.
It also mentioned a COPE estimate of £11.29pw which is or will apparently come from my private pension. That's a new one on me. Maybe that's just a way of saying 'You're a bit short so make it up from your own means'.
Simpo Two said:
Thanks, I'll try to call them though expect with things as they are it might take a while to get through.
I was in a company scheme from 86-88 so maybe that's the reason the forecast is slightly below max - but then, I have 35 full years which is all you need.
It also mentioned a COPE estimate of £11.29pw which is or will apparently come from my private pension. That's a new one on me. Maybe that's just a way of saying 'You're a bit short so make it up from your own means'.
Kind of. Its a short way of saying "You paid a lower contribution into the NI system and the extra was redirected into your personal pension, which we would expect to be paying you at least £11.29pw".I was in a company scheme from 86-88 so maybe that's the reason the forecast is slightly below max - but then, I have 35 full years which is all you need.
It also mentioned a COPE estimate of £11.29pw which is or will apparently come from my private pension. That's a new one on me. Maybe that's just a way of saying 'You're a bit short so make it up from your own means'.
Its stupidly complicated as per the other thread. In short, IIRC, you may need more than 35 years - it depends on some valuation at a particular point in time which varies person-to-person depending on their contracted out details which varies for each person. So it is difficult to find 1 single answer. that's the whole problem. But you can't get stuck on the '35 years' thing cos it isn't true.
Anyone know how much you need to earn in 1 tax year to get that tax year to count as a full nic year?
If you earn that amount in a day or a week is it still counted as a full nic year?
Or do they take into account how many weeks of that year you were paying nic for?
Admirable simplicity it ain't
If you earn that amount in a day or a week is it still counted as a full nic year?
Or do they take into account how many weeks of that year you were paying nic for?
Admirable simplicity it ain't
https://www.thisismoney.co.uk/money/pensions/artic...
"For a year of your working life to be a ‘qualifying year’ towards your state pension, you have to have paid (or been credited) with NI contributions on earnings equal to 52 times the weekly lower earnings limit.
As noted above, periods when you are earning below the lower earnings limit do not count towards this target.
But the good news is that weeks (or months) when you are earning more than the lower earnings limit help to make up for weeks (or months) when you were not earning (or earning below the LEL).
To give a simple example, suppose that you have a year in which you do no paid work for 26 weeks and then you do 26 weeks at an earnings level of £236 – double the lower earnings limit.
For the year as a whole, you have qualifying earnings of 52 times the LEL and this is therefore a qualifying year.
In the example given in the question, we can ignore the periods when the individual earned a token amount, and focus on the five months where pay was £2,000.
In each of those months, the pay was above the monthly LEL and therefore the full amount counts towards the annual target.
As five lots of £2,000 totals £10,000 for the year, and this is in excess of 52 times the weekly LEL (£6,136) this would count as a qualifying year."
"For a year of your working life to be a ‘qualifying year’ towards your state pension, you have to have paid (or been credited) with NI contributions on earnings equal to 52 times the weekly lower earnings limit.
As noted above, periods when you are earning below the lower earnings limit do not count towards this target.
But the good news is that weeks (or months) when you are earning more than the lower earnings limit help to make up for weeks (or months) when you were not earning (or earning below the LEL).
To give a simple example, suppose that you have a year in which you do no paid work for 26 weeks and then you do 26 weeks at an earnings level of £236 – double the lower earnings limit.
For the year as a whole, you have qualifying earnings of 52 times the LEL and this is therefore a qualifying year.
In the example given in the question, we can ignore the periods when the individual earned a token amount, and focus on the five months where pay was £2,000.
In each of those months, the pay was above the monthly LEL and therefore the full amount counts towards the annual target.
As five lots of £2,000 totals £10,000 for the year, and this is in excess of 52 times the weekly LEL (£6,136) this would count as a qualifying year."
Edited by bogie on Saturday 18th April 14:23
Wouldn't have thought so for example
You make 200000 in one month your nic is capped at a certain amount say 1000.
So not the same as making 200000 over the full year and paying 1000 a month.
All these well built company director types would just pay themselves once a month to skirt around it
You make 200000 in one month your nic is capped at a certain amount say 1000.
So not the same as making 200000 over the full year and paying 1000 a month.
All these well built company director types would just pay themselves once a month to skirt around it
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