State Pension potential shortfall warning
Discussion
Due to the little known new rules introduced in 2016, lots of people who retire before state pension age, and DONT continue to pay their NI contributions, MAY see a shortfall in their state pension.
However, the only way to pay NI is from a wage, you can't pay it from a private pension (though you can claim to be self employed and pay a voluntary amount each year). Previously you just needed to have paid the minimum number of years NI contributions (35ys) but thats now changed. Even if you've paid NI for 35yrs, if you don't keep paying NI after you've retired and right upto applying for your state pension, you may receive a smaller state pension than the maximum you could be expecting to receive.
The snag is, nobody makes you aware of this, even the gov.uk state pension forecast website doesn't tell you, instead it says you will receive the higher mount and that you won't need to pay any extra NI.
The good news is that you can pay buy back the missing years of NI. Some folk I know are expecting a shortfall in theiry state pension of £20/week and to negate this they can buy back the missing years of NI at around £780 for each missing year. So, retire at age 55 and with the state pension age of 67 that means having to buy back 12yrs of NI.
So, if you are planning to retire before state pension age, telephone the pension helpline on gov.uk and make checks for your own personal circumstances.
However, the only way to pay NI is from a wage, you can't pay it from a private pension (though you can claim to be self employed and pay a voluntary amount each year). Previously you just needed to have paid the minimum number of years NI contributions (35ys) but thats now changed. Even if you've paid NI for 35yrs, if you don't keep paying NI after you've retired and right upto applying for your state pension, you may receive a smaller state pension than the maximum you could be expecting to receive.
The snag is, nobody makes you aware of this, even the gov.uk state pension forecast website doesn't tell you, instead it says you will receive the higher mount and that you won't need to pay any extra NI.
The good news is that you can pay buy back the missing years of NI. Some folk I know are expecting a shortfall in theiry state pension of £20/week and to negate this they can buy back the missing years of NI at around £780 for each missing year. So, retire at age 55 and with the state pension age of 67 that means having to buy back 12yrs of NI.
So, if you are planning to retire before state pension age, telephone the pension helpline on gov.uk and make checks for your own personal circumstances.
For those who are wanting me to post links to prove what I’m saying, sorry but I’m not trawling through all the research I’ve done in this just to try and prove myself. I’m not trying to tell anyone to believe me, I’m just warning others of a potential shortfall depending on their circumstances.
Just because the gov.uk says you’ve paid the maximum NI and don’t need to do anything else, that may not be true depending on your circumstances. You may have to continue paying NI.
I’ve personally spoken to people who have been affected by this and who are now having to buy extra years NI.
Being opted out of state pension for any period may definitely make the above true.
My point is, don’t automatically trust what the website says. If you are/have retired early then do your research and don’t get caught out. Finding out too late will mean there’s nothing you can do to correct it.
Just because the gov.uk says you’ve paid the maximum NI and don’t need to do anything else, that may not be true depending on your circumstances. You may have to continue paying NI.
I’ve personally spoken to people who have been affected by this and who are now having to buy extra years NI.
Being opted out of state pension for any period may definitely make the above true.
My point is, don’t automatically trust what the website says. If you are/have retired early then do your research and don’t get caught out. Finding out too late will mean there’s nothing you can do to correct it.
Jasey_ said:
does anyone know what happened to the SERPS before you contracted out - I would have though everyone would have a bit where it said the extra pension you were paying before you contracted out (and when you contracted back in) has gone.
Or did that Pay For Gordon Brown's leaving party ?
The bit you didn’t pay will have gone into your alternative pension, such as an occupational pension and will probably give a better return than if you had paid SERPS. But buying extra NI can give you a bigger state pension as well. Or did that Pay For Gordon Brown's leaving party ?
jsf said:
The OP is not correct as far as i can see, once you have paid up the years required for full benefit, that's all you need for a full state pension.
Not necessarily true say if youve opted out for any period, and some won’t even know if they have. But I’m not insisting you believe me, I’m warning folk to check. They have a choice to follow my advice and check for themselves, or assume they are safe and find out the hard way when they are age 67, which could be too late.
Drumroll said:
So basically you have nothing?
All the time you have spent replying on here you could have simply supplied a link.
Surely can't be that hard?
Even if we believe you how do we do something about it? Again a link would help.
Life doesn’t always revolve around links. Sometimes information exists outside of the internet, in the ‘real’ world. All the time you have spent replying on here you could have simply supplied a link.
Surely can't be that hard?
Even if we believe you how do we do something about it? Again a link would help.
In this case, I’ve spoken to people face to face in the real world outside of the web. Some whom have retired before 67 and started receiving their occupational pension and then discovered they won’t qualify for the full state pension, being about £20/week short. They are lucky to have found out in time so they can buy back the missing years of NI at a cost of about £780 for each missing year.
If you are remaining in work and paying your NI right up to when you apply to receive your state pension then you may be ok, but not if you retire early and don’t continue to pay NI.
How do you do something about it you ask? I’ve already told you. You need to phone the help line on the gov.uk website and find out for yourself as ‘they’ won’t contact you to tell you. It’s onky from some people realising at the last minute that I’ve become aware of this.
‘Even if we believe you how do we do something about it’ you ask........I’ve already answered that one. PHONE THEM AND CHECK.
Edited by LeadFarmer on Thursday 2nd January 18:46
Edited by LeadFarmer on Thursday 2nd January 18:46
anonymous said:
[redacted]
It matters not that you don’t believe me. Feel free to doubt it, for it matters not to me. I’m not even trying to make anyone believe me, I’m just raising the matter for people less shortsighted than yourself so they can check for themselves incase they are affected by this. If you discover at age 67 that it does affect you, please be sure to let me know and I’ll provide you a ‘link’ to this thread
anonymous said:
[redacted]
Well for a start, it may assume you will remain in employment and paying NI until aged 67, when infact you may decide to retire earlier on a private pension. This is particularly relevant if you've been opted out for a period.Having 35 yrs NI contributions and a statement saying your getting the full amount of state pension, say £168 or whatever the amount is, isn't set in stone if your personal circumstances dictate otherwise.
Fastpedeller said:
How will 'phoning them clarify matters if they keep "moving the goalposts". I have a printed statement saying I've 35+ years of payment and qualify for full basic - Are they about to refute that?
They may not be allowing for any contracted out period you've had. They may issue your going to stay in employment until 67. Your 35+ years will certainly qualify you for the state pension, but might not guarantee you getting the full amount.Drumroll said:
Your assertion that none of what you are claiming is on the web, just gives your opening statement even less credibility.
You don't get it do you, Im not seeking credibility from you or anyone else, you can choose for yourself to research the problem, or not. Im not seeking anything other than making people aware of a potential issue. As for you demanding a 'link' to proof, why must everything be proved with a link????I could post a link to an online discussion I had with a retired public sector worker who discovered that whilst his government online pension statement said he had enough qualifying years of NI, and that he didn't need to do anything further to receive the full state pension, he went on to discover that due to being contracted out he would actually have a £20/week shortfall in his state pension, and therefore he wouldn't receive the full pension, despite what the website said. But I'd have to seek his permission to post what might be regarded as a private/personal conversation. But I don't intend to do that as its not necessary as I'm not seeking credibility from you or anyone else.
Sometimes trying to help others comes back to bite you, as is the case for me here, so I'll probably just leave those who have a genuine interest in the subject to follow my advice and check for themselves, and not take the government pension statement at full value. Those who refuse to take action unless i post a 'link' may have a nasty surprise in store for them in a few years time, due to their own ignorance.
anonymous said:
[redacted]
You can pay voluntary NI contributions for each full year from 2016/17 to the year before the one in which you reach state pension age. The cost of a year of voluntary (Class 3) National Insurance is currently about £733 per year. One extra year of National Insurance adds 1/35th of the full pension rate of £155.65 to your entitlement. This is about £4.45 per week or £231 per year.
In other words, a one-off lump sum of £733 would buy you an increased pension of £231 per year at state pension age for the whole of your retirement.
How does that sound?
Brads67 said:
Yeh you said all that.
Just provide me with a source for the info if you can. No one else seems to have found this issue, just you which makes you vitally important to our future, so please help us out with a source for this issue you have stated will affect us all.
The government don't tell you, its perhaps not in their interest to tell you People are only just starting to fond this out.Just provide me with a source for the info if you can. No one else seems to have found this issue, just you which makes you vitally important to our future, so please help us out with a source for this issue you have stated will affect us all.
As for providing a source, you've obviously not read the thread properly. My sources are real living people that have experienced this. Must I tell them to create a website so I can post a link to it???????????
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