Voluntary NI contributions

[MyNameIsUrl]

This is a question about making voluntary NI contributions as state pension age approaches in order to maximise one’s state pension.

A woman born in May 1954 becomes eligible for state pension January 2020.

She has 40 years contributions with the last year being 2011/12.

Her intention is to make additional contributions soon to maximise her state pension – however, we believe making any contributions for 2015/16 or before would not increase her pension. Which leaves 2016/17, 2017/18, 2018/19, and the part-year 2019/20 potentially to make contributions for.

The online service today shows an ‘Estimate based on your National Insurance record up to 5 April 2018 of £135.97 a week’, and ‘The most you can increase your forecast to is £145.37 a week’, which looks like 2 years voluntary contributions will give her the maximum available.

As an aside, and rather mystifyingly, this latter figure was £150.06 when we logged in on 18 April 2018, which looks like the opportunity to increase by 1 year has gone.

Is it simply a case of phoning to make 2 years contributions? Must this be done by next 5 April to avoid a further year dropping off the opportunity?

Can voluntary contributions be made after the state pension age if we misjudge this?

Is the government pension helpline fully competent to understand and explain the facts correctly to ensure that we contribute for years which give the full benefit?

[mc2fool]

A woman born in May 1954 becomes eligible for state pension January 2020.

She has 40 years contributions with the last year being 2011/12.

Her intention is to make additional contributions soon to maximise her state pension – however, we believe making any contributions for 2015/16 or before would not increase her pension.

That is correct.

Which leaves 2016/17, 2017/18, 2018/19, and the part-year 2019/20 potentially to make contributions for.

You can't make part year contributions. The last year you can contribute for is the tax year preceding the one in which you reach state pension age, so for her that's 2018/19.

The online service today shows an ‘Estimate based on your National Insurance record up to 5 April 2018 of £135.97 a week’, and ‘The most you can increase your forecast to is £145.37 a week’, which looks like 2 years voluntary contributions will give her the maximum available.

As an aside, and rather mystifyingly, this latter figure was £150.06 when we logged in on 18 April 2018, which looks like the opportunity to increase by 1 year has gone.

From £135.97 to £145.37 is 2 additional years worth, but on the info you've presented I see no reason why you shouldn't be able to make contributions for all three years. Are you sure you are reading it correctly? I think you should be seeing three numbers:

Estimate based on your National Insurance record up to 5 April 2018 ...
Forecast if you contribute until 5 April 2019 ...
The most you can increase your forecast to is ...

Is it simply a case of phoning to make 2 years contributions? Must this be done by next 5 April to avoid a further year dropping off the opportunity?

You can make contributions up to six years in arrears, but note that they go up in cost after two years and so you have to get the 2016/17 contribution in before this coming 5-April if you want to save a few quid (£733.20 vs £780 for class 3). Re paying, I always just send them a cheque.

See https://www.gov.uk/voluntary-national-i ... ions/rates and the following page, and the links therein.

[Nimrod103]

A woman born in May 1954 becomes eligible for state pension January 2020.

She has 40 years contributions with the last year being 2011/12.

Her intention is to make additional contributions soon to maximise her state pension – however, we believe making any contributions for 2015/16 or before would not increase her pension.

That is correct.

Which leaves 2016/17, 2017/18, 2018/19, and the part-year 2019/20 potentially to make contributions for.

You can't make part year contributions. The last year you can contribute for is the tax year preceding the one in which you reach state pension age, so for her that's 2018/19.

The online service today shows an ‘Estimate based on your National Insurance record up to 5 April 2018 of £135.97 a week’, and ‘The most you can increase your forecast to is £145.37 a week’, which looks like 2 years voluntary contributions will give her the maximum available.

As an aside, and rather mystifyingly, this latter figure was £150.06 when we logged in on 18 April 2018, which looks like the opportunity to increase by 1 year has gone.

From £135.97 to £145.37 is 2 additional years worth, but on the info you've presented I see no reason why you shouldn't be able to make contributions for all three years. Are you sure you are reading it correctly? I think you should be seeing three numbers:

Estimate based on your National Insurance record up to 5 April 2018 ...
Forecast if you contribute until 5 April 2019 ...
The most you can increase your forecast to is ...

Is it simply a case of phoning to make 2 years contributions? Must this be done by next 5 April to avoid a further year dropping off the opportunity?

You can make contributions up to six years in arrears, but note that they go up in cost after two years and so you have to get the 2016/17 contribution in before this coming 5-April if you want to save a few quid (£733.20 vs £780 for class 3). Re paying, I always just send them a cheque.

See https://www.gov.uk/voluntary-national-i ... ions/rates and the following page, and the links therein.

I'm confused. I thought somebody reaching retirement age in 2020 would be retiring under the new rules (unless she was a large SERPS/S2P payer, and her base pension is already larger than the maximum), for which 35 years contributions are needed for the maximum state pension. Since she has 40 years already, surely additional payments now will not lead to an increased pension?

[mc2fool]

I'm confused. I thought somebody reaching retirement age in 2020 would be retiring under the new rules (unless she was a large SERPS/S2P payer, and her base pension is already larger than the maximum), for which 35 years contributions are needed for the maximum state pension. Since she has 40 years already, surely additional payments now will not lead to an increased pension?

Anyone with a 5-Apr-2016 "starting amount" of less than the full new state pension amount can continue adding contributions until they get to the full new state pension amount or reach state pension age, whichever comes first, irrespective of the number of years they already have.

https://www.gov.uk/new-state-pension/how-its-calculated

[Nimrod103]

I'm confused. I thought somebody reaching retirement age in 2020 would be retiring under the new rules (unless she was a large SERPS/S2P payer, and her base pension is already larger than the maximum), for which 35 years contributions are needed for the maximum state pension. Since she has 40 years already, surely additional payments now will not lead to an increased pension?

Anyone with a 5-Apr-2016 "starting amount" of less than the full new state pension amount can continue adding contributions until they get to the full new state pension amount or reach state pension age, whichever comes first, irrespective of the number of years they already have.

https://www.gov.uk/new-state-pension/how-its-calculated

I understand that, but how would somebody with 40 years of contributions have such a low starting amount? I assume by 40 years of contributions, the OP means 40 qualifying years. Surely that would be enough?

[mc2fool]

I'm confused. I thought somebody reaching retirement age in 2020 would be retiring under the new rules (unless she was a large SERPS/S2P payer, and her base pension is already larger than the maximum), for which 35 years contributions are needed for the maximum state pension. Since she has 40 years already, surely additional payments now will not lead to an increased pension?

Anyone with a 5-Apr-2016 "starting amount" of less than the full new state pension amount can continue adding contributions until they get to the full new state pension amount or reach state pension age, whichever comes first, irrespective of the number of years they already have.

https://www.gov.uk/new-state-pension/how-its-calculated

I understand that, but how would somebody with 40 years of contributions have such a low starting amount? I assume by 40 years of contributions, the OP means 40 qualifying years. Surely that would be enough?

"Your starting amount will include a deduction if you were contracted out of the Additional State Pension." https://www.gov.uk/new-state-pension/how-its-calculated

[Chrysalis]

Mc2fool, is there a link anywhere to exactly how the starting amount is affected by contracting out?
Is the amount deducted the same as the COPE?

[mc2fool]

Mc2fool, is there a link anywhere to exactly how the starting amount is affected by contracting out?
Is the amount deducted the same as the COPE?

The COPE is the amount deducted.

I explained how the starting amount is calculated back in TMF days. See http://web.archive.org/web/201701120049 ... 01655.aspx (COPE = COD + RDA, and the numbers need updating to the current ones, but otherwise it's still good), or you can just search for COPE on this board, it's been covered many times.

[Alaric]

The COPE is the amount deducted.

If there's a COPE, presumably there's also a private pension somewhere.

[MyNameIsUrl]

The online service today shows an ‘Estimate based on your National Insurance record up to 5 April 2018 of £135.97 a week’, and ‘The most you can increase your forecast to is £145.37 a week’, which looks like 2 years voluntary contributions will give her the maximum available.

As an aside, and rather mystifyingly, this latter figure was £150.06 when we logged in on 18 April 2018, which looks like the opportunity to increase by 1 year has gone.

From £135.97 to £145.37 is 2 additional years worth, but on the info you've presented I see no reason why you shouldn't be able to make contributions for all three years. Are you sure you are reading it correctly? I think you should be seeing three numbers:

Estimate based on your National Insurance record up to 5 April 2018 ...
Forecast if you contribute until 5 April 2019 ...
The most you can increase your forecast to is ...

We've double-checked, we are seeing three numbers as you say, but the last one - 'the most' - has reduced by £4.69 within this current tax year. This is worrying because I don't understand it and I'm nervous that another year may soon disappear.

I think you've confirmed that any voluntary payments must be made before state pension age - so we have to get it right before then.

I should mention, in the light of some of the discussion above, there is a cope figure as the woman was contracted-out. I think I and mc2fool took this as read in the first couple of posts on this thread, apologies if it confused anyone else.

[mc2fool]

We've double-checked, we are seeing three numbers as you say, but the last one - 'the most' - has reduced by £4.69 within this current tax year. This is worrying because I don't understand it and I'm nervous that another year may soon disappear.

So, if I may ask, if the "estimate" is £135.97 and the "most" is £145.37, what is the middle one, the "forecast"? And what is the COPE?

I suggest the next thing you do is check your NI record shown by the online service and see if it matches up with what you think it should be.

I think you've confirmed that any voluntary payments must be made before state pension age - so we have to get it right before then.

Actually I think you can make class 3 NICs for gaps in previous years after SPA, see https://www.gov.uk/voluntary-national-i ... tributions, but if you can make them before I'm not sure I see a good reason not to.

[MyNameIsUrl]

So, if I may ask, if the "estimate" is £135.97 and the "most" is £145.37, what is the middle one, the "forecast"? And what is the COPE?

Here are the numbers from the Government website. The reduction in possible maximum pension is puzzling to me:

On 4/3/2018, previous tax year:
‘Estimate based on NI record’ £132
‘Forecast if you contribute to 5 April 2019’ £141.12
‘Most you can increase your forecast to’ £145.68

On 18/4/2018, current tax year:
‘Estimate based on NI record’ £135.97
‘Forecast if you contribute to 5 April 2019’ £145.36
‘Most you can increase your forecast to’ £150.06

On 28/2/2019, current tax year:
‘Estimate based on NI record’ £135.97
‘Forecast if you contribute to 5 April 2019’ £140.67
‘Most you can increase your forecast to’ £145.37
COPE £58.80

The change from the first set of numbers to the second, in different tax years, is simply a 3% rise.

The change from the second to the third, both in the current tax year, show a reduction by one year of pension amount. I have no explanation for this, and clearly my concern is that I do not want to pay a voluntary year contribution which gains no benefit.

[Chrysalis]

Could it be due to losing the ability to go back and fill in a gap six years ago? (Still doesn’t explain why your numbers reduced during the tax year, so I’m guessing not). Have you/your wife spoken to the future pensions centre and asked them about the change?

[mc2fool]

COPE £58.80

Ok, so going on her having 40 pre-2016 years already and nothing from then onward, we can figure that the new state pension figure for the starting amount would be £164.35-£58.80=£105.55, and as she's being quoted £135.97 her starting amount is from the old system calculation and comprises of £125.95 basic + £10.02 additional state pension from the periods when she wasn't contracted out. (The £10.02 may include some Graduated Retirement Benefit if she was earning up to 1975).

Note that, judging from comments on this board, if you call up DWP they are likely to give you the numbers in 2016 amounts and then tell you the inflation uplift since. In 2016 the old SP was £119.30 (and the new £155.65) and the uplift since to this year is approx. 5.58%. So, they are likely to say that her starting amount in 2016 was £128.79, comprising of £119.30 basic + £9.49 additional.

The change from the second to the third, both in the current tax year, show a reduction by one year of pension amount. I have no explanation for this, and clearly my concern is that I do not want to pay a voluntary year contribution which gains no benefit.

That does indeed seem to be what it shows and I agree that, on the information presented, it's strange and there isn't any obvious explanation.

Have you checked your NI record shown by the online service? Scroll down the main page and click on View gaps in your record and the costs of filling them and check, firstly, if the years shown as full/not full match up with what you think is correct (count them up too!).

Then click on View details for each not full year to see if you can still contribute for all the ones you think you should be able to (really we should only be talking about 2016 onward, but check them all anyway...)

[mearnsfool]

Long Shot here but at the end of November 2018, the DWP with private pension companies finished their audit of contracted out payments which in a lot of cases either increased or decreased peoples state pension as records were updated.

I wonder if in this case the lady had her records updated that would decrease her state pension as the DWP had in error assumed she had a years less contrated in pension. Not convinced that I'm correct here.

[MyNameIsUrl]

Have you checked your NI record shown by the online service? Scroll down the main page and click on View gaps in your record and the costs of filling them and check, firstly, if the years shown as full/not full match up with what you think is correct (count them up too!).

Then click on View details for each not full year to see if you can still contribute for all the ones you think you should be able to (really we should only be talking about 2016 onward, but check them all anyway...)

The years 1975/76 to 2011/12 inclusive are all full years, plus 3 full years up to 5 April 1975. Total 40 years.

The 5 years 2012/13 to 2015/16, no contributions made, but a figure shown for each year (ranging from £410 to £733) and the statement ‘You can make up the shortfall. Pay a voluntary contribution…’, but I think in every case for these 5 years there would be no increase in pension if the voluntary contribution were made. If I'm right this looks rather misleading...

For completeness: 2017/18, not full, states ‘we are checking’ (but I know no contribs made); 2018/19, not available.

[mc2fool]

The 5 years 2012/13 to 2015/16, no contributions made, but a figure shown for each year (ranging from £410 to £733) and the statement ‘You can make up the shortfall. Pay a voluntary contribution…’, but I think in every case for these 5 years there would be no increase in pension if the voluntary contribution were made. If I'm right this looks rather misleading...

2012/13 to 2015/16 is four years, and yes, you are right, it telling you you can make contributions for years that are technically fillable but won't actually benefit you, as those won't in your case, is less than helpful!

For completeness: 2017/18, not full, states ‘we are checking’ (but I know no contribs made); 2018/19, not available.

Aha! ‘we are checking’, eh?!? I've never seen or heard of that before, and it seems likely that may be the issue: I suspect the algorithm that tots up the number of gaps you can fill to get to "the most" figure treats the "we are checking" status as an unfillable year.

One wonders as to why it says that. I have yet to make my NIC for 2017/18 (I'll do it around this time next year, just before the price goes up) and when I look it just gives me the expected "You can make up the shortfall. Pay a voluntary contribution of £741...".

So the "we are checking" you are getting isn't a universal 2017/18 thing and I guess you'll need to get on the blower to them to find out what's up. Or you could just wait a while to see if it resolves itself, as there's no actual urgency for making the 2017/18 contribution.

Now, you didn't mention 2016/17, although I suspect that in your first line above you actually meant "The 5 years 2012/13 to 2016/17" and that for 2016/17 it says "You can make up the shortfall. Pay a voluntary contribution of £733.20...", yes?

Making the 2016/17 NIC will increase her pension and there is some urgency in making it as the £733.20 is only good for another month; from 6-Apr-19 onward it'll go up to £780. My experience (of paying by cheque in the post around this time of year) is that it takes them 2-3 weeks to get to it, so I do recommend you get the 2016/17 NIC to them ASAP. I sent mine off last weekend...