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State Pension & NICS

elkay
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State Pension & NICS

#402754

Postby elkay » April 8th, 2021, 9:54 pm

Having seen some topics in this general area, I thought I should have a look at my own circumstances.

I am 59yo and plan to retire in the next 18 months.
I have 43 years of full contributions (possibly 44 as 20-21 is not included).
8 years to contribute before 5 April 2028.

My State Pension forecast is:
Estimate based on your National Insurance record up to 5 April 2020 - £155.29 a week
Forecast if you contribute another 4 years before 5 April 2028 - £175.20 a week

Elsewhere I have read that you need 35 years contributions to qualify for a full state pension.

So I don't understand why it appears that I need 4 further years of contributions to qualify for the full SP :?:

I will have a private pension, and I have seen references to "contracted out". I have no idea what that means, but suspect it may be a factor.

Any pointers? I've trawled through a few sites after googling, but can't find anything that explains my scenario.

mc2fool
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Re: State Pension & NICS

#402758

Postby mc2fool » April 8th, 2021, 10:12 pm

elkay wrote:I have read that you need 35 years contributions to qualify for a full state pension.

That's only true for folks who will be totally under the new state pension, i.e. those that started working in 2016 or later.

For people, like you, who earned some of their qualifying years before 2016 and are retiring after it, there is a much more complex calculation, which includes a deduction for being contracted out, as you paid reduced NI contributions when you were. That is quantified by the Contracted-Out Pension Equivalent (COPE) amount, which is in your pension forecast and I assume, in your case, is rather large.

elkay
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Re: State Pension & NICS

#402759

Postby elkay » April 8th, 2021, 10:12 pm

Actually making some progress....
- Your COPE estimate is£96.49 a week.

It's a pity they don't break the estimates down to show how they worked it out.

mc2fool
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Re: State Pension & NICS

#402781

Postby mc2fool » April 9th, 2021, 12:42 am

elkay wrote:Actually making some progress....
- Your COPE estimate is£96.49 a week.

It's a pity they don't break the estimates down to show how they worked it out.

Yep, that'll do it!

They did originally provide how the figures were arrived at in state pension forecasts but I suspect that generated too many calls from people trying to understand it!

I wrote up how the calculations under the old and new systems, and the "starting amount" at April 2016 for folks with qualifying years before 2016 but retiring after, work on TMF some years back. The numbers have changed since, and COD+RDA for the new system is now called the COPE, oh, and where it says "current" state pension it, of course, would now read "old" -- but otherwise the explanation is still good ;). It's archived at http://web.archive.org/web/201701120049 ... 01655.aspx

An additional complication not mentioned in that write up is the increases in pensions over the years, which you have to know how to handle to correctly apply the calculations and make sense of what a state pension forecast today is showing you. I've just done it for another lemon and if you want you can see how and try sticking in your own figures to try and get the breakdown for you, here: viewtopic.php?f=17&t=28809#p402651

vrdiver
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Re: State Pension & NICS

#402783

Postby vrdiver » April 9th, 2021, 1:19 am

To the OP:

Long story short; you have paid more than the required 35 years NI contributions, but some of those years don't count as much as they should because you were contracted out.

However, you can pay additional years of NI and increase your State Pension up to the amount shown in your letter.

One option would be to register as self-employed (e.g. selling homemade fishing flies on eBay*) and pay voluntary Class 2 NICs for the next 3 or 4 years (depending on whether 20/21 is credited to your record).
At the end of the 4 years, pack up your business and when you reach State Retirement Age, enjoy the full pension.

Alternatively, you could not bother with the self-employed route and pay voluntary class 3 NICs if you prefer. Or you could do nothing and accept the lower state pension, although even class 3 NICs are still a pretty good return on investment, assuming you live to average life expectancy ;)

VRD

*Other business ideas would work too... you don't have to make a profit, or even a sale, provided you are registered as self-employed and do actually have a legitimate business activity, which can be very, very, part-time.


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