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State Pension Forecasts and NI Record

modellingman
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State Pension Forecasts and NI Record

#330953

Postby modellingman » August 4th, 2020, 10:00 pm

I will reach state pension age next month. I have been looking at my pension forecast and NI records on gov.uk.

I gave up working at end of 2014/15. My NI records tell me I have
  • 40 years of full contributions
  • 1 year to contribute before 5 April 2020
  • 8 years when I did not contribute enough

The 40 years comprise 1971/72 to 2014/15 less a couple of 2-year gaps. I was contracted out for most of my working life and my Contracted Out Pension Equivalent (COPE) estimate is £112.63/week.

My pension forecast shows three numbers
  • Estimate based on my National Insurance record up to 5 April 2019 - £145.37/week
  • Forecast if I contribute until 5 April 2020 - £150.38/week
  • The most I can increase my forecast to is - £165.40/week

I have looked at past topics on this board and searched around the internet. I think I've made sense of the numbers but if there are any flaws in my logic I'd be happy to know about these.

This post from John B Buying NI years, a worked example, this TMF Post from mc2fool, and this page from Royal London were useful and informative.

Under the new state scheme the maximum pension of £175.20/week is based on 35 years NI contributions - equivalent to £5.006/week for each full NI year. The differences between my forecasts of £145.37, £150.38 and £165.40 fit with this. The differences between the smallest forecast and the two larger ones equate to £5.01/week and £20.03/week, equivalent to an additional one and four years worth of NI contributions, respectively.

My NI record has not changed since the end of 2014/15 and my "starting amount" as at 6 April 2016 (used in the transition to the new state pension) appears (to me at least) to be £145.37/week. I surmise this is the current value under the old system and comprises a full (30 year) basic state pension of £134.25/week plus (net) additional state pension of £11.12/week (the £134.25 value came from the Royal London page, the £11.12 by difference). This is greater than the value under the new system of a full (35 year) pension of £175.20/week less COPE of £112.63.

My maximum is less than the £175.20 maximum because I only have 4 NI years available between the switch to the new arrangements and my state pension age. Unlike JohnB, I can't get any benefit from years before the switch because I had 30 full years at 6 April 2016. The best I can do is to stump up for 2016/17, 2017/18, 2018/19 and 2019/20. The cost of this looks like it will be around £3100 for an additional £20.03/week - a payback period of 3 years. Not too shabby.

I haven't as yet done anything about making a claim for my pension. Am I correct in assuming that it would be sensible to pay for the additional years and have them show up on my record before I make my claim?

mc2fool
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Re: State Pension Forecasts and NI Record

#331140

Postby mc2fool » August 5th, 2020, 3:03 pm

modellingman wrote:My NI record has not changed since the end of 2014/15 and my "starting amount" as at 6 April 2016 (used in the transition to the new state pension) appears (to me at least) to be £145.37/week. I surmise this is the current value under the old system and comprises a full (30 year) basic state pension of £134.25/week plus (net) additional state pension of £11.12/week (the £134.25 value came from the Royal London page, the £11.12 by difference). This is greater than the value under the new system of a full (35 year) pension of £175.20/week less COPE of £112.63.

My maximum is less than the £175.20 maximum because I only have 4 NI years available between the switch to the new arrangements and my state pension age. Unlike JohnB, I can't get any benefit from years before the switch because I had 30 full years at 6 April 2016. The best I can do is to stump up for 2016/17, 2017/18, 2018/19 and 2019/20. The cost of this looks like it will be around £3100 for an additional £20.03/week - a payback period of 3 years. Not too shabby.

Hi. Ok, I've run your numbers and that all looks correct. ;) A few tangential FYIs (that don't change anything):

You can always give them a call to confirm the ASP amount. However, if you do be aware that they talk about the "starting amount" and its components in 2016 figures. So, while you are mostly correct in saying that, as your record hasn't changed since 2014/15, the £145.37 must be the starting amount, it's actually the starting amount revalued for pension increases since.

So don't be startled when they tell you that your starting amount was £129.15, with an ASP of £9.88. Increases since 2016 have accumulated to 12.56%, and you can calculate increases up to any year simply by dividing that years full pension amount by 2016's. (You can use either the old or new pension amounts, it's the same save for rounding.)

Also, while you are correct that you can't get any benefit from pre 2016 years, it's not (just) because you had 30 full years at 6 April 2016. Anyone who has less than 30 years at 6 April 2016 will always benefit from adding a pre 2016 year and anyone with more than 35 years will always not. People with 30-34 years may or may not and have to do the arithmetic, but as you have 40 years we don't need to bother. :-)

I haven't as yet done anything about making a claim for my pension. Am I correct in assuming that it would be sensible to pay for the additional years and have them show up on my record before I make my claim?

Now that I don't know and I don't recall anyone posting any experiences of, either here or on TMF. I do note that you can pay class 3 NICs to fill gaps even if you're over state pension age. https://www.gov.uk/voluntary-national-i ... tributions

However, on a look through the usual sources and a quick google, I can't find any information beyond that fact.

I would like to believe that any additional NICs would increase your pension from the month following their receipt of the dosh -- or be backdated to then if there is any administrative delay -- and similarly I would like to believe that you can put in your claim ASAP and as long as you get the money to them for the extra NICs before you receive your first pension payment, then it'll be increased from, or at least backdated to, the first payment.

But assumptions and liking to believe aren't reality, so methinks best that you give them a call and ask. Please do report back, I think you're a TLF first on this question. ;)

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Re: State Pension Forecasts and NI Record

#331414

Postby modellingman » August 6th, 2020, 5:25 pm

mc2fool wrote:
modellingman wrote:My NI record has not changed since the end of 2014/15 and my "starting amount" as at 6 April 2016 (used in the transition to the new state pension) appears (to me at least) to be £145.37/week. I surmise this is the current value under the old system and comprises a full (30 year) basic state pension of £134.25/week plus (net) additional state pension of £11.12/week (the £134.25 value came from the Royal London page, the £11.12 by difference). This is greater than the value under the new system of a full (35 year) pension of £175.20/week less COPE of £112.63.

My maximum is less than the £175.20 maximum because I only have 4 NI years available between the switch to the new arrangements and my state pension age. Unlike JohnB, I can't get any benefit from years before the switch because I had 30 full years at 6 April 2016. The best I can do is to stump up for 2016/17, 2017/18, 2018/19 and 2019/20. The cost of this looks like it will be around £3100 for an additional £20.03/week - a payback period of 3 years. Not too shabby.

Hi. Ok, I've run your numbers and that all looks correct. ;) A few tangential FYIs (that don't change anything):

You can always give them a call to confirm the ASP amount. However, if you do be aware that they talk about the "starting amount" and its components in 2016 figures. So, while you are mostly correct in saying that, as your record hasn't changed since 2014/15, the £145.37 must be the starting amount, it's actually the starting amount revalued for pension increases since.

So don't be startled when they tell you that your starting amount was £129.15, with an ASP of £9.88. Increases since 2016 have accumulated to 12.56%, and you can calculate increases up to any year simply by dividing that years full pension amount by 2016's. (You can use either the old or new pension amounts, it's the same save for rounding.)


Thank you for your response - it is reassuring that my understanding is broadly correct. Your response also confirmed my suspicion about the way indexation works - the starting amount calculations can either be based on 2016/17 values with the final result then indexed up to 2020/21 or the input values can be indexed up prior to the calculations with any need for further indexing of the result.

mc2fool wrote:Also, while you are correct that you can't get any benefit from pre 2016 years, it's not (just) because you had 30 full years at 6 April 2016. Anyone who has less than 30 years at 6 April 2016 will always benefit from adding a pre 2016 year and anyone with more than 35 years will always not. People with 30-34 years may or may not and have to do the arithmetic, but as you have 40 years we don't need to bother. :-)


I had some trouble with this at first. But then I realised that from a mathematical perspective there are 6 cases. These arise from 3 ranges for full years of NI at 6 April 2016 (<30, 30-34, >=35) and 2 possibilities for candidate starting amounts (old or new scheme). In tabular form, it is as shown below, with a Y indicating an improvement can be made in the candidate starting amount and an N indicating it cannot.

Code: Select all

          Old   New
<30        Y     Y 
30-34      N     Y
>=35       N     N


The 30-34 possibility of improvement arises when the new scheme provides the starting amount, in which case any additional years prior to 2016/17 (up to a maximum of 35 in total) will increase the starting amount. For this 30-34 range, there is also a possibility that if the old scheme provides the starting amount but is not excessively ahead of the new scheme value, additional years might cause the starting amount to switch from the old scheme to the new one. This same switching possibility also exists in the <30 range. I think I'm correct in saying that a switch can ever be from new to old because each added year under the new scheme is worth more than under the old scheme (in 2020/21 values - £175.20/35 = £5.006 versus £134.25/30 = £4.475). So if new is better than old, it must stay better than old with each added year. I do recall mention of switching in one of your previous posts. Now I understand (I think) the underlying logic.

mc2fool wrote:
modellingman wrote:I haven't as yet done anything about making a claim for my pension. Am I correct in assuming that it would be sensible to pay for the additional years and have them show up on my record before I make my claim?

Now that I don't know and I don't recall anyone posting any experiences of, either here or on TMF. I do note that you can pay class 3 NICs to fill gaps even if you're over state pension age. https://www.gov.uk/voluntary-national-i ... tributions

However, on a look through the usual sources and a quick google, I can't find any information beyond that fact.

I would like to believe that any additional NICs would increase your pension from the month following their receipt of the dosh -- or be backdated to then if there is any administrative delay -- and similarly I would like to believe that you can put in your claim ASAP and as long as you get the money to them for the extra NICs before you receive your first pension payment, then it'll be increased from, or at least backdated to, the first payment.

But assumptions and liking to believe aren't reality, so methinks best that you give them a call and ask. Please do report back, I think you're a TLF first on this question. ;)


I first gave DWP a call, but I didn't get into the details of the starting amount, etc. By that point I was confident (or reckless) enough to think I'd got my logic sorted. The main outcome from the call was an HMRC number to find out how much and how to pay for my additional 4 years. The HMRC agent wanted to confirm precisely which years I wanted to buy because, as she noted, not all years will result in an improvement. She gave me a sort code, account number and 18-digit reference number and the amount payable. She indicated that she would add a file note about which years should be added to my record. In response to questions, she indicated that it would take about a fortnight for my online record to show the change, I needn't wait to make my claim as there is quite detailed checking that occurs when the claim is processed and, in the event that I am underpaid, I will get any underpayments backdated to the first payment.

One final comment relating to another point you made in an earlier post. The presentation of the pension forecasts does seem to be really dumbed down. In trying to make sense of it, I followed the links on .gov.uk pages and found myself navigating in loops around the same few pages, without getting any additional numbers about my forecasts. It would have been helpful to have been presented with a page showing the calculation used to determine my starting amount.

Many thanks.

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Re: State Pension Forecasts and NI Record

#331589

Postby mc2fool » August 7th, 2020, 3:39 pm

modellingman wrote:Your response also confirmed my suspicion about the way indexation works - the starting amount calculations can either be based on 2016/17 values with the final result then indexed up to 2020/21 or the input values can be indexed up prior to the calculations with any need for further indexing of the result.

Yes, you can do it either way and, indeed, I usually do it with current values, rather than 2016 values and then revaluing that. I mentioned it so you wouldn't get a confused shock if you called them and they gave you a number that was less than you expected!

For completeness I should note that the method I described of finding the increases to a year (dividing that year's full pension amount by 2016's) is only valid for starting amounts up to the full new state pension amount, those being increased by the "triple lock". If the starting amount is over the full new state pension (a result of lots of ASP under the old system) the excess is called the "protected payment" and is increased by CPI.

Re your understanding of <30, 30-34, >=35, increases from extra years, switching, etc ... congratulations! You are now a Starting Amount Guru and I can retire! :D

In response to questions, she indicated that it would take about a fortnight for my online record to show the change, I needn't wait to make my claim as there is quite detailed checking that occurs when the claim is processed and, in the event that I am underpaid, I will get any underpayments backdated to the first payment.

Wow! "Liking to believe" sometimes is reality! :o That's great. Just what you'd hope for.

I'll be impressed if the fortnight comes true though, that's nowhere near my general experience, but maybe they put ones from folks very close to state pension age at the front of the queue. Let us know. ;)

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Re: State Pension Forecasts and NI Record

#331680

Postby mearnsfool » August 8th, 2020, 9:19 am

The timescale for updating the NI record can vary.

A lady I was assisting was circa £0.80 a week down on her flat rate pension.

In May 2019 she paid a final class 2 NI payment via self assessment for the year 2018 2019.

She recieved her state pension July 2019 less the £0.80 per week.

It took until December 2019 for her NI record to be updated.

She recieved a letter late January 2020 to advise of the increase to her State Pension of circa £0.80 a week. If I remember her February 2020 payment was at the increased weekly amount and plus the catchup supplement of around £25. The March 2020 payment of her state pension was at her new regular payment.

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Re: State Pension Forecasts and NI Record

#331683

Postby seagles » August 8th, 2020, 9:30 am

mearnsfool wrote:The timescale for updating the NI record can vary.

A lady I was assisting was circa £0.80 a week down on her flat rate pension.

In May 2019 she paid a final class 2 NI payment via self assessment for the year 2018 2019.

She recieved her state pension July 2019 less the £0.80 per week.

It took until December 2019 for her NI record to be updated.

She recieved a letter late January 2020 to advise of the increase to her State Pension of circa £0.80 a week. If I remember her February 2020 payment was at the increased weekly amount and plus the catchup supplement of around £25. The March 2020 payment of her state pension was at her new regular payment.


Also HMRC are constantly checking and updating their data. Recently my Pension was increased and backdated payments given from my retirement date due to them "updating" my NI records. A year after retirement and many checks by me I thought that they looked correct, so be aware their "records" may not always be correct and can be updated. Good luck.

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Re: State Pension Forecasts and NI Record

#332119

Postby mearnsfool » August 10th, 2020, 11:28 am

Yes there are issues with the historical record that is still being sorted.

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Re: State Pension Forecasts and NI Record

#405597

Postby modellingman » April 20th, 2021, 2:00 pm

mc2fool wrote:
modellingman wrote:Your response also confirmed my suspicion about the way indexation works - the starting amount calculations can either be based on 2016/17 values with the final result then indexed up to 2020/21 or the input values can be indexed up prior to the calculations with any need for further indexing of the result.

Yes, you can do it either way and, indeed, I usually do it with current values, rather than 2016 values and then revaluing that. I mentioned it so you wouldn't get a confused shock if you called them and they gave you a number that was less than you expected!

For completeness I should note that the method I described of finding the increases to a year (dividing that year's full pension amount by 2016's) is only valid for starting amounts up to the full new state pension amount, those being increased by the "triple lock". If the starting amount is over the full new state pension (a result of lots of ASP under the old system) the excess is called the "protected payment" and is increased by CPI.

Re your understanding of <30, 30-34, >=35, increases from extra years, switching, etc ... congratulations! You are now a Starting Amount Guru and I can retire! :D

In response to questions, she indicated that it would take about a fortnight for my online record to show the change, I needn't wait to make my claim as there is quite detailed checking that occurs when the claim is processed and, in the event that I am underpaid, I will get any underpayments backdated to the first payment.

Wow! "Liking to believe" sometimes is reality! :o That's great. Just what you'd hope for.

I'll be impressed if the fortnight comes true though, that's nowhere near my general experience, but maybe they put ones from folks very close to state pension age at the front of the queue. Let us know. ;)


Just to bring this thread up to date.

You were right about the fortnight being optimistic. I made my payment on 5 August 2020 for 4 added years of NI and officially became an OAP on 6 September. I wasn't paid at the rate reflecting my 4 added years of NI contributions and that continues to be the case. Since buying my additional years, I have periodically checked to see whether my NI record has been updated and until earlier today it hadn't. However, on checking this morning I found the 4 added years were now showing.

So, HMRC have at last updated my NI record: I think I previously checked in mid-March, so that's something between 7 and 8 months for my record to get updated. When the pension increase (and presumably the "back pay") will get dealt with by DWP is anybody's guess. I'll post again when that happens.

One final comment, for the present. My wife has just gone through the same process and that's the main reason I checked my own NI record earlier today. However, both the general pages about NI and pensions on gov.uk and the personalised pages (accessed via the Government Gateway) do not make it clear how to make a one-off contribution to pay Class 3 NI for past years. If you want to make regular current contributions monthly or quarterly, there's a form that can be used for that. But for a one-off, the site is totally unhelpful. I eventually found a number - 0300 200 3500 - which is HMRC's NICO enquiry line. My wife used that and was able to get hold of the 18 digit reference which she has now used to buy her own added years through BACS. It went through as a faster payment, though probably not a "faster receipt".

modellingman

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Re: State Pension Forecasts and NI Record

#405646

Postby mc2fool » April 20th, 2021, 5:28 pm

modellingman wrote:You were right about the fortnight being optimistic. I made my payment on 5 August 2020 for 4 added years of NI and officially became an OAP on 6 September. I wasn't paid at the rate reflecting my 4 added years of NI contributions and that continues to be the case. Since buying my additional years, I have periodically checked to see whether my NI record has been updated and until earlier today it hadn't. However, on checking this morning I found the 4 added years were now showing.

Blimey, I didn't think it'd be that slow! :(

modellingman wrote:However, both the general pages about NI and pensions on gov.uk and the personalised pages (accessed via the Government Gateway) do not make it clear how to make a one-off contribution to pay Class 3 NI for past years. If you want to make regular current contributions monthly or quarterly, there's a form that can be used for that. But for a one-off, the site is totally unhelpful. I eventually found a number - 0300 200 3500 - which is HMRC's NICO enquiry line. My wife used that and was able to get hold of the 18 digit reference which she has now used to buy her own added years through BACS. It went through as a faster payment, though probably not a "faster receipt".

I used to just send them a cheque in the post, but I see they now say "You cannot currently pay by cheque through the post because of coronavirus (COVID-19).", but in any case faster payments is clearly more convenient....

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Re: State Pension Forecasts and NI Record

#405748

Postby sloth » April 21st, 2021, 5:42 am

mc2fool wrote:
modellingman wrote:You were right about the fortnight being optimistic. I made my payment on 5 August 2020 for 4 added years of NI and officially became an OAP on 6 September. I wasn't paid at the rate reflecting my 4 added years of NI contributions and that continues to be the case. Since buying my additional years, I have periodically checked to see whether my NI record has been updated and until earlier today it hadn't. However, on checking this morning I found the 4 added years were now showing.



I made an online payment in respect of 2020-21 in October which still hasn't showed on my contribution record-looks like I need to wait another couple of months...


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