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another state pension qn

James
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another state pension qn

#448906

Postby James » October 9th, 2021, 11:24 am

I started working in the UK at 32. To get the full state pension, I'll need to work to 67 to meet the 35 years contribution.
Question is: If I retire at say, 62, is it possible to keep contributing to make up the following five years if I'm living off other investments in the meantime?
I fit is possible, how is it done and what does it cost?
J

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Re: another state pension qn

#448911

Postby pochisoldi » October 9th, 2021, 11:46 am

First thing - check your pension forecast to determine exactly how many years you need.

Then look at paying voluntary class 2 NI (can only be done "in year"), or class 3 NI (can be done retrospectively, but with time limits for each year)

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Re: another state pension qn

#448913

Postby James » October 9th, 2021, 11:50 am

pochisoldi wrote:First thing - check your pension forecast to determine exactly how many years you need.

Then look at paying voluntary class 2 NI (can only be done "in year"), or class 3 NI (can be done retrospectively, but with time limits for each year)


I have checked my pension forecast. There are no blanks between 1997 and now.
The question is not about filling past gaps, but future gaps.
To get to the full 35 years will require a record from age 32 to age 67.
What I want to know is how (and what) to pay between 62 and 67 if I'm no longer in employment then.

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Re: another state pension qn

#448917

Postby tjh290633 » October 9th, 2021, 12:07 pm

James wrote:
pochisoldi wrote:First thing - check your pension forecast to determine exactly how many years you need.

Then look at paying voluntary class 2 NI (can only be done "in year"), or class 3 NI (can be done retrospectively, but with time limits for each year)


I have checked my pension forecast. There are no blanks between 1997 and now.
The question is not about filling past gaps, but future gaps.
To get to the full 35 years will require a record from age 32 to age 67.
What I want to know is how (and what) to pay between 62 and 67 if I'm no longer in employment then.

Voluntary Class 3 contributions when you are no longer employed. See https://www.gov.uk/voluntary-national-i ... tributions

TJH

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Re: another state pension qn

#448919

Postby pochisoldi » October 9th, 2021, 12:25 pm

You can also pay voluntary class 2, currently around 5 times cheaper per week than class 3, but (as I said) can't be done retrospectively.

Also note that if you don't have a job, are actively looking for work, and signing on, you get NI credits after contribution based JSA ends, even if you don't get income related JSA/Universal Credit because you have too much savings.
Those credits cost you nothing other than the bus fare/shoe leather to get to the jobcentre.

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Re: another state pension qn

#448920

Postby monabri » October 9th, 2021, 12:28 pm

James wrote:I started working in the UK at 32. To get the full state pension, I'll need to work to 67 to meet the 35 years contribution.
Question is: If I retire at say, 62, is it possible to keep contributing to make up the following five years if I'm living off other investments in the meantime?
I fit is possible, how is it done and what does it cost?
J



Yes...via voluntary contributions.

COST

The cost of buying an individual year varies depending on which year you want to buy and when you want to buy it.

For example, The rates for the 2021 to 2022 tax year are £15.40 a week for Class 3 ( approx £800 for a full year). If you bought that particular year in, say 5 years time, you would pay more than buying it now.

(I seem to remember that the cost for 2020 to 2021 was £780 to buy 1 extra year...but don't quote me on that!).

https://www.gov.uk/voluntary-national-i ... ions/rates


Buying

Quite a few ways to pay..

https://www.gov.uk/pay-voluntary-class- ... -insurance

In the past I've sent a cheque and covering note explaining what tax year I wanted to fillm , complete with my NI number written on the cheque and letter. I also supplied full contact details inc phone and email address.

One can pay quarterly by direct debit.

For a recent payment, the website said they were not accepting cheques ( covid!). I phoned HMRC 0300 200 3500 and I explained what I wanted to do ( buy 2020/21 Class 3 NI). The lady at HMRC took details and gave me a unique 16 digit (?) code , a bank account number and sort code. I was able to pay online, stating the 16 digit code as a reference. After about 2 weeks, the payment was visible on my Government Gateway account ( the year was marked as "full" where previously it was "incomplete").My pension forecast increased by ~ £5 per week so payback time would be 3 years approx after when my pension starts to be paid. The pension increase was evident using the Gov Gateway account before and after the payment was made.

https://www.gov.uk/government/organisat ... ndividuals

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Re: another state pension qn

#448927

Postby James » October 9th, 2021, 12:50 pm

Perhaps should have clarified...
I only moved to the UK in 1997, age 32. Have worked and paid NICs since then. Still in work now age 56 and will continue to work and contribute until I stop.
At ideal 'stop work' time somewhere between age 60 and 65, I will only have 28-33 qualifying years.
I will be working up until that time and am not looking to retrospectively fill gaps before then.
After stopping work, I will only have investment/private pension income to live on.
It would seem from:
https://www.gov.uk/voluntary-national-i ... tributions
that my status between stopping working and hitting 67 would be 'unemployed and not claiming benefits', which would require the more expensive class 3 contributions.
Does that sound right?
Even paying and extra £800 a year for those years seems to increase the nominal 'pension pot' (assuming 4% withdrawal) by about £6k per year so appears to be worth doing.
But will also look at possibility of being "self-employed" for those years so I can pay the cheaper class 2.
Happy to take advice.
J

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Re: another state pension qn

#448933

Postby monabri » October 9th, 2021, 1:17 pm

In today's money..!

Every extra year of NI contributions buys about £4.5 extra pension per week ballpark or £234 per year. So, your 5 bought years would top up your pension by just under £1200 per year ( don't understand how you arrived at £6k).

What you actually pay for the years you want to buy in 6,7,8,9,10 years time will cost more than 800 quid per for each year. You will pay more but your pension paid will also increase. I'd hazard a guess that the first payment in 6 years time might cost £950 based on 3% increases over the next 6 yrs. However, you will receive a corresponding 3% per year uplift in pension to balance. The payback time for your additional contributions will remain at ~3 years.

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Re: another state pension qn

#448935

Postby scrumpyjack » October 9th, 2021, 1:24 pm

It is probably a very good 'buy' but don't forget that the NI payments are not tax deductible whilst the pension received is taxable (assuming your personal allowance is used up by your other income).

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Re: another state pension qn

#448938

Postby mc2fool » October 9th, 2021, 1:36 pm

The "35 years" is a red herring; that's only for people that start working from 2016 onwards, when the new state pension scheme started.

For people that worked before 2016 there is a complex formula that determines your "starting amount" of pension at the 2016 transition and, hence, what follows. As you have no pre 2016 gaps in your record it's academic in your case, so we'll only get into that if you really want to. :)

Anyway, the important thing to understand is that, because of the transition rules, someone may have more than the full new state pension without having contributed 35 years, while also someone else may need to have more than 35 years to get the full new state pension, while others may never be able to get the full new state pension.

So, getting to your case, the thing to know is that the only rules are if you don't already have the full new state pension then you can continue contributing until either you reach the full new state pension or you reach state pension age, whichever comes first. The number of years is irrelevant, there's no 35 year minimum, or indeed, maximum. It's just the tests mentioned.

Now, you say you have a state pension forecast (an online one?), so that should tell you what you want to know. Unless they've changed it since I last looked (I'm already a pensioner so no longer see that info), it should tell you how much you'll get from your contributions up to now, how much you'll get if you carry on contributing, and what the maximum you can get is. Post the figures here if you're not clear on their implications, now you know the rules mentioned above.

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Re: another state pension qn

#448940

Postby James » October 9th, 2021, 1:46 pm

monabri wrote:In today's money..!

Every extra year of NI contributions buys about £4.5 extra pension per week ballpark or £234 per year. So, your 5 bought years would top up your pension by just under £1200 per year ( don't understand how you arrived at £6k).

What you actually pay for the years you want to buy in 6,7,8,9,10 years time will cost more than 800 quid per for each year. You will pay more but your pension paid will also increase. I'd hazard a guess that the first payment in 6 years time might cost £950 based on 3% increases over the next 6 yrs. However, you will receive a corresponding 3% per year uplift in pension to balance. The payback time for your additional contributions will remain at ~3 years.


Yeah, today's money is all I've got to work with.

Calcs were regarding an investment into a pension pot that paid an annuity:

Weekly pension with 35 years contribution is £179.60 per week/£9,339.20 per year. To get that from a pot paying 4% a year would be £9,339.20 x 25 = £233,480.00

Weekly pension with 34 years contribution is £179.60/35x34=£174.47 per week/£9,072.37 per year. To get that from a pot paying 4% a year would be £9,339.20 x 25 = £226,809.14

£233,480.00 - £226,809.14 = £6,670.86

But yes, £800 to buy an annual increase of £266.83 would take three years to make a return but I am hoping to live to at least 70.

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Re: another state pension qn

#448941

Postby mc2fool » October 9th, 2021, 1:48 pm

pochisoldi wrote:You can also pay voluntary class 2, currently around 5 times cheaper per week than class 3, but (as I said) can't be done retrospectively.

That's actually not so, although it may be problematic. You can retrospectively declare yourself self-employed, and pay the related retrospective voluntary class 2 NICs.

However when you retrospectively declare yourself self-employed HMRC will ask you to fill in a self-assessment tax return for those years, or amend them if you've already filed, and then, depending on the bottom line of those, that may result in penalties, interest, etc.

OTOH if the bottom line, tax wise, is zero or no change, then it's not a problem. :D

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Re: another state pension qn

#448964

Postby James » October 9th, 2021, 3:22 pm

mc2fool wrote:The "35 years" is a red herring; that's only for people that start working from 2016 onwards, when the new state pension scheme started.

For people that worked before 2016 there is a complex formula that determines your "starting amount" of pension at the 2016 transition and, hence, what follows. As you have no pre 2016 gaps in your record it's academic in your case, so we'll only get into that if you really want to. :)

Anyway, the important thing to understand is that, because of the transition rules, someone may have more than the full new state pension without having contributed 35 years, while also someone else may need to have more than 35 years to get the full new state pension, while others may never be able to get the full new state pension.

So, getting to your case, the thing to know is that the only rules are if you don't already have the full new state pension then you can continue contributing until either you reach the full new state pension or you reach state pension age, whichever comes first. The number of years is irrelevant, there's no 35 year minimum, or indeed, maximum. It's just the tests mentioned.

Now, you say you have a state pension forecast (an online one?), so that should tell you what you want to know. Unless they've changed it since I last looked (I'm already a pensioner so no longer see that info), it should tell you how much you'll get from your contributions up to now, how much you'll get if you carry on contributing, and what the maximum you can get is. Post the figures here if you're not clear on their implications, now you know the rules mentioned above.


Okay, so have dug out the details again from HMRC.
I can't see any forecast on what I'll get from what I've contributed to date, but can work it out as above.
It says I'll get my full state pension of 179.60 on my pension day in 2032 (Age 67)
My national insurance contributions have records for 1997/8-2020/21, i.e. 24 years of payments.
But it also says I have 27 years of full contributions, so I appear to have picked up three along the way somehow.
Sill, that means I've still got eight to go to get to get to the 35 HMRC says is required to get to full pension payment.
Ideally, I want to stop working in four to six years.
I guess I'll just have to give my wife enough to pay me for doing the gardening as a self-employed person so I fall into the "Self-employed with income over £1,000 but with profits of less than £6,515" category and keep paying class 2.

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Re: another state pension qn

#448970

Postby mc2fool » October 9th, 2021, 3:41 pm

James wrote:Okay, so have dug out the details again from HMRC.
I can't see any forecast on what I'll get from what I've contributed to date, but can work it out as above.

No, you can't work it out as above 'cos you don't know what your 2016 "starting amount" is.

Sign up here: https://www.gov.uk/check-state-pension (click the Start now button) and get yourself a forecast. You can't make any sensible conclusions until you get a proper forecast. And stop thinking about 35 years of contributions; as already explained, it only applies to anyone that started work from 2016 onwards; it doesn't apply to you.

James wrote:But it also says I have 27 years of full contributions, so I appear to have picked up three along the way somehow.

Well, most people get three "free" years for being at school 16-18, although you said you only moved to the UK age 32, so I don't know if that could apply to you or not. You can double check your NI record once you sign up to the online service above.

James wrote:I guess I'll just have to give my wife enough to pay me for doing the gardening as a self-employed person so I fall into the "Self-employed with income over £1,000 but with profits of less than £6,515" category and keep paying class 2.

Better still, arrange for your self-employment to have an income & profits of less than £1,000. You can still pay voluntary class 2 and the income will be tax free. ;)

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Re: another state pension qn

#448973

Postby James » October 9th, 2021, 4:03 pm

mc2fool wrote:
James wrote:Okay, so have dug out the details again from HMRC.
I can't see any forecast on what I'll get from what I've contributed to date, but can work it out as above.

No, you can't work it out as above 'cos you don't know what your 2016 "starting amount" is.

Sign up here: https://www.gov.uk/check-state-pension (click the Start now button) and get yourself a forecast. You can't make any sensible conclusions until you get a proper forecast. And stop thinking about 35 years of contributions; as already explained, it only applies to anyone that started work from 2016 onwards; it doesn't apply to you.

James wrote:But it also says I have 27 years of full contributions, so I appear to have picked up three along the way somehow.

Well, most people get three "free" years for being at school 16-18, although you said you only moved to the UK age 32, so I don't know if that could apply to you or not. You can double check your NI record once you sign up to the online service above.

James wrote:I guess I'll just have to give my wife enough to pay me for doing the gardening as a self-employed person so I fall into the "Self-employed with income over £1,000 but with profits of less than £6,515" category and keep paying class 2.

Better still, arrange for your self-employment to have an income & profits of less than £1,000. You can still pay voluntary class 2 and the income will be tax free. ;)


That's exactly where those figures I just posted come from.
"You can get your State Pension on Day Month 2032. Your forecast is
£179.60 a week
£780.94 a month, £9,371.27 a year"

There is nothing about what happens if I stop working now but there is a line saying:

"If you’re working you may still need to pay National Insurance contributions until Day Month 2032 as they fund other state benefits and the NHS."

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Re: another state pension qn

#448976

Postby mc2fool » October 9th, 2021, 4:18 pm

James wrote:That's exactly where those figures I just posted come from.
"You can get your State Pension on Day Month 2032. Your forecast is
£179.60 a week
£780.94 a month, £9,371.27 a year"

There is nothing about what happens if I stop working now but there is a line saying:

"If you’re working you may still need to pay National Insurance contributions until Day Month 2032 as they fund other state benefits and the NHS."

Oh well, then if it is only giving you that one figure, then possibly you are already due for a full new state pension with the contributions you've got so far. That's entirely possible if you weren't contracted out of SERPS/S2P and had a decent salary.

What is your COPE (Contracted Out Pension Equivalent -- used to be off of a link about contracting out lower down in the page)? And how many years do you have up to 2015/16, and how many from 2016/17 onwards?

in the meanwhile, maybe someone else that's pre-retirement can looks to see if they still get the separate figures for (a) how much you'll get from your contributions so far (b) how much you can get if you keep on contributing and (c) what the maximum you can get is, or if the system has changed recently?

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Re: another state pension qn

#448994

Postby mc2fool » October 9th, 2021, 6:05 pm

BTW, does your forecast also include the line You cannot improve your forecast any more, as per viewtopic.php?p=442667#p442667?

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Re: another state pension qn

#449000

Postby James » October 9th, 2021, 6:51 pm

mc2fool wrote:BTW, does your forecast also include the line You cannot improve your forecast any more, as per viewtopic.php?p=442667#p442667?

Yes, full text is:

Your forecast:
is not a guarantee and is based on the current law
is based on your National Insurance record up to 5 April 2021
does not include any increase due to inflation
£179.60 is the most you can get
You cannot improve your forecast any more.
If you’re working you may still need to pay National Insurance contributions until Day Month 2032 as they fund other state benefits and the NHS.

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Re: another state pension qn

#449005

Postby mc2fool » October 9th, 2021, 7:42 pm

James wrote:
mc2fool wrote:BTW, does your forecast also include the line You cannot improve your forecast any more, as per viewtopic.php?p=442667#p442667?

Yes, full text is:

Your forecast:
is not a guarantee and is based on the current law
is based on your National Insurance record up to 5 April 2021
does not include any increase due to inflation
£179.60 is the most you can get
You cannot improve your forecast any more.
If you’re working you may still need to pay National Insurance contributions until Day Month 2032 as they fund other state benefits and the NHS.

Alright! And presumably that's below a big teal (ish) coloured box that has the info you mentioned previously:

You can get your state pension on <your 67th birthday date>.
Your forecast is
£179.60 a week
£780.94 a month, £9,371.27 a year

Yes? Well congratulations, you are already up for a full new state pension and can stop making contributions right away! As it says, is based on your National Insurance record up to 5 April 2021 and You cannot improve your forecast any more. :D

Here's an example of what the forecast looks like if you haven't already reached the full new state pension amount (note, this example is from last year and so has last year's full new state pension amount).
https://forums.moneysavingexpert.com/discussion/6178754/guaranteed-minimum-pension/p4

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Re: another state pension qn

#449283

Postby James » October 11th, 2021, 1:31 pm

mc2fool wrote:
James wrote:
mc2fool wrote:BTW, does your forecast also include the line You cannot improve your forecast any more, as per viewtopic.php?p=442667#p442667?

Yes, full text is:

Your forecast:
is not a guarantee and is based on the current law
is based on your National Insurance record up to 5 April 2021
does not include any increase due to inflation
£179.60 is the most you can get
You cannot improve your forecast any more.
If you’re working you may still need to pay National Insurance contributions until Day Month 2032 as they fund other state benefits and the NHS.

Alright! And presumably that's below a big teal (ish) coloured box that has the info you mentioned previously:

You can get your state pension on <your 67th birthday date>.
Your forecast is
£179.60 a week
£780.94 a month, £9,371.27 a year

Yes? Well congratulations, you are already up for a full new state pension and can stop making contributions right away! As it says, is based on your National Insurance record up to 5 April 2021 and You cannot improve your forecast any more. :D

Here's an example of what the forecast looks like if you haven't already reached the full new state pension amount (note, this example is from last year and so has last year's full new state pension amount).
https://forums.moneysavingexpert.com/discussion/6178754/guaranteed-minimum-pension/p4


Well, that's good news. So even if I chipped off work now at 56 I'd still be entitled to the full pension in 11 years?
What had confused me was the big statement somewhere on the site regarding needing 35 years and the calculations showing how to work out what you'd get without 35 years contribs.


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