Paying voluntary NI contributions
Discussion
I’ve just checked my NI record, and there are two gap years (16/17 and 17/18) during which I wasn’t working and didn’t make contributions. Both of these years are eligible for voluntary payments of £824.20 each.
My record says I have 27 qualifying years, which by my reckoning means I need to contribute 8 more years to reach 35 for full State Pension (or I assume 6 more years if I pay off the 2 gap years). However, my State Pension forecast says I only need to contribute 4 more years to get full SP. How so?
The question of whether to pay the two years is not obvious. Each year purchased would increase my pension by £5.29 a week, which I reckon means I’d need to receive the increased pension for 3 years in order to break even and start benefitting. Since I would very much hope to live beyond 71, that seems a good bet.
But I’m only 49 now, and therefore have 18 years in which to reach full SP. That said, Mrs Oxgreen and I are entering “semi-retirement”, so I might not want to work for the required time to reach 35 qualifying years. But it’s highly likely I’ll work for at least a few more years, in which case perhaps I’d be better off leaving the 2 gap years as they are and then purchase any additional years if necessary in the future?
The decision to pay for those 2 years or not is one I’ll need to make soon, because the deadline for the 16/17 year is April next year.
Is there anything I’ve overlooked or got wrong?
My record says I have 27 qualifying years, which by my reckoning means I need to contribute 8 more years to reach 35 for full State Pension (or I assume 6 more years if I pay off the 2 gap years). However, my State Pension forecast says I only need to contribute 4 more years to get full SP. How so?
The question of whether to pay the two years is not obvious. Each year purchased would increase my pension by £5.29 a week, which I reckon means I’d need to receive the increased pension for 3 years in order to break even and start benefitting. Since I would very much hope to live beyond 71, that seems a good bet.
But I’m only 49 now, and therefore have 18 years in which to reach full SP. That said, Mrs Oxgreen and I are entering “semi-retirement”, so I might not want to work for the required time to reach 35 qualifying years. But it’s highly likely I’ll work for at least a few more years, in which case perhaps I’d be better off leaving the 2 gap years as they are and then purchase any additional years if necessary in the future?
The decision to pay for those 2 years or not is one I’ll need to make soon, because the deadline for the 16/17 year is April next year.
Is there anything I’ve overlooked or got wrong?
Like you I have a gap for the 16-17 year and one other, also have 4 years to go and looking at retirement.
You may not get £5.29 for the 16-17 year as the amount will be based on the old state pension.
I wrote to them asking them to confirm my forecast (there are some stories of the online tool being inaccurate) and to confirm my 'starting amount' for the new state pension and also the increase I would get if I made the 16-17 voluntary contribution.
I don't recall all the detail however I received a detailed reply, happy to dig it out later and send you a copy if you PM me your email.
For me it will be more cost effective to make the contribution against a different year.
You may not get £5.29 for the 16-17 year as the amount will be based on the old state pension.
I wrote to them asking them to confirm my forecast (there are some stories of the online tool being inaccurate) and to confirm my 'starting amount' for the new state pension and also the increase I would get if I made the 16-17 voluntary contribution.
I don't recall all the detail however I received a detailed reply, happy to dig it out later and send you a copy if you PM me your email.
For me it will be more cost effective to make the contribution against a different year.
Do not believe the simple "35 years contribuition for a full State Pension" advice as it can be more complicated than that. I have 43 years & I'm still one year short.
With 18 years left to go only you can decide whether it's worth buying 16/17 & 17/18 but before paying for a year you need to call the pension service (not HMRC) to discover if contributing will actually buy you another year - HMRC will happily take your money even if it's not going to increase your contributing years. The pension service will also confirm if it really is only 4 more years that you need. If it is then unless you are going to retire soon I'd plan on having four more years of contributions from employment.
Don't forget that if you have worked but not made up a full year then you can top up to get that year - it won't be the full amount. I bought two years for £156 each.
With 18 years left to go only you can decide whether it's worth buying 16/17 & 17/18 but before paying for a year you need to call the pension service (not HMRC) to discover if contributing will actually buy you another year - HMRC will happily take your money even if it's not going to increase your contributing years. The pension service will also confirm if it really is only 4 more years that you need. If it is then unless you are going to retire soon I'd plan on having four more years of contributions from employment.
Don't forget that if you have worked but not made up a full year then you can top up to get that year - it won't be the full amount. I bought two years for £156 each.
In general - don't buy them until you need to. You can go back 6 years.
There are no prizes for having too many years, and you can't elect to stop making NI payments as long as you're working.
If you're reasonably likely to work long enough to make up a full pension, then a few missing years doesn't matter. If you decide to retire early, you can figure out what you need at that point as long as you have enough years left to buy.
There are no prizes for having too many years, and you can't elect to stop making NI payments as long as you're working.
If you're reasonably likely to work long enough to make up a full pension, then a few missing years doesn't matter. If you decide to retire early, you can figure out what you need at that point as long as you have enough years left to buy.
I'm currently 56, and retired for 15 months . Was in a pension scheme opted out of serps for many years, and my forecast is 3 years short of the full 35.
I'm going to wait till nearer state pension age to see what my health is like , but plan if I'm looking ok to purchase the extra years then, and benefit from the full pension from the on.
I'm going to wait till nearer state pension age to see what my health is like , but plan if I'm looking ok to purchase the extra years then, and benefit from the full pension from the on.
rigga said:
I'm currently 56, and retired for 15 months . Was in a pension scheme opted out of serps for many years, and my forecast is 3 years short of the full 35.
I'm going to wait till nearer state pension age to see what my health is like , but plan if I'm looking ok to purchase the extra years then, and benefit from the full pension from the on.
Did you get the official statement or just use the Gateway site? As has been mentioned the Gateway site seems a bit flakeyI'm going to wait till nearer state pension age to see what my health is like , but plan if I'm looking ok to purchase the extra years then, and benefit from the full pension from the on.
Thanks guys!
It’s useful to know (I didn’t) that you can top-up partial years. That may well happen, because at the moment I have just started driving HGVs on an agency basis and I’m not sure how reliable that income will be - and I may well choose to do this on a more part-time basis in the future, once our retirement funds have recovered from the battering they’ve taken recently.
Having reflected further on this, my thinking is beginning to align with Carbon’s assessment. It would be silly to buy those two years, only to then work enough years to earn the full State Pension anyway. It is unlikely that our retirement funds will bounce back strongly enough for me to stop working entirely in the next few years, and in the meantime I’m keen to earn enough to avoid drawing down at all if possible. So I’ll almost certainly accrue enough NI years over the next five years or so I’d have thought.
Thanks for helping me think it through!
It’s useful to know (I didn’t) that you can top-up partial years. That may well happen, because at the moment I have just started driving HGVs on an agency basis and I’m not sure how reliable that income will be - and I may well choose to do this on a more part-time basis in the future, once our retirement funds have recovered from the battering they’ve taken recently.
Having reflected further on this, my thinking is beginning to align with Carbon’s assessment. It would be silly to buy those two years, only to then work enough years to earn the full State Pension anyway. It is unlikely that our retirement funds will bounce back strongly enough for me to stop working entirely in the next few years, and in the meantime I’m keen to earn enough to avoid drawing down at all if possible. So I’ll almost certainly accrue enough NI years over the next five years or so I’d have thought.
Thanks for helping me think it through!
ray von said:
rigga said:
I'm currently 56, and retired for 15 months . Was in a pension scheme opted out of serps for many years, and my forecast is 3 years short of the full 35.
I'm going to wait till nearer state pension age to see what my health is like , but plan if I'm looking ok to purchase the extra years then, and benefit from the full pension from the on.
Did you get the official statement or just use the Gateway site? As has been mentioned the Gateway site seems a bit flakeyI'm going to wait till nearer state pension age to see what my health is like , but plan if I'm looking ok to purchase the extra years then, and benefit from the full pension from the on.
I will however get a statement to confirm.
rigga said:
ray von said:
rigga said:
I'm currently 56, and retired for 15 months . Was in a pension scheme opted out of serps for many years, and my forecast is 3 years short of the full 35.
I'm going to wait till nearer state pension age to see what my health is like , but plan if I'm looking ok to purchase the extra years then, and benefit from the full pension from the on.
Did you get the official statement or just use the Gateway site? As has been mentioned the Gateway site seems a bit flakeyI'm going to wait till nearer state pension age to see what my health is like , but plan if I'm looking ok to purchase the extra years then, and benefit from the full pension from the on.
I will however get a statement to confirm.
I was opted out for a good few years so I was expecting that to show up. Also says I would be due £203/ week before any inflation so can't get my head around that either
The official statement is legally binding and prepared by a human actually checking your record year by year.
The gateway data is not legally binding and is frequently incorrect.
Base nothing on the gateway numbers.
If you delay buying a previous year then it will cost you more to buy that year later.
You can only buy back the last 6 years, currently from 2016 onwards.
Present figures (only likely to become less favourable in the future) are ~£800 for ~£275 more state pension per year from ~67 years until death, index linked.
That's a fecking bargain.
Obviously you may drop on your way metaphorically to the Post office to collect your first payment.
Equally you may still be walking to that PO to collect the money on your 100th birthday.
The gateway data is not legally binding and is frequently incorrect.
Base nothing on the gateway numbers.
If you delay buying a previous year then it will cost you more to buy that year later.
You can only buy back the last 6 years, currently from 2016 onwards.
Present figures (only likely to become less favourable in the future) are ~£800 for ~£275 more state pension per year from ~67 years until death, index linked.
That's a fecking bargain.
Obviously you may drop on your way metaphorically to the Post office to collect your first payment.
Equally you may still be walking to that PO to collect the money on your 100th birthday.
Edited by rfisher on Sunday 17th July 17:46
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