greaseladder wrote:...is it worth me making extra contributions to increase that weekly pension payment?
Well, without wishing to sound too black, whether it's
worth making extra contributions to increase your state pension will depend on how long you live. What's
possible for you is as follows:
Starting with the current tax year, 2016/17, each and every additional year of contributions you make will increase your state pension by ~£4.45 per week (one 35th of £155.65), up to a maximum of £155.65. This is irrespective of your current record.
That means that to get to the full £155.65 you'd have to make 8.2 more years contributions, except that you can't do 0.2 of a year, you can only do whole years. So, 8 years of contributions will get to £154.88 and a final ninth year will get you the extra 77p to the full £155.65. The current cost of class 3 voluntary NICs is £14.10pw (£733.20pa), so the "flat" payback period of the first 8 years is (14.10/4.45) = 3.17years, so as long as you live to at least 69 years and 2 months they'll be worth it. For that last 77p it's at least 84 years and 4 months.
Now, you can make the voluntary contributions for those years at (almost) any time from now until your state pension age, subject to the following:
a) you can only make contributions for the last six years, so your final chance to contribute for 2016/17 will be 5-Apr-2023, and so on.
b) the price of NICs for a year is only fixed for two years, so the cost of the 2016/17 class 3 NIC will stay at £733.20pa (£14.10pw) until 5-Apr-2019. After that, for the remaining years you can pay it (up to 5-Apr-2023), it will cost the price of that year's class 3 NIC.
c) the last year you can make a contribution for is the tax year
before the one in which you reach state pension age, so if your 66th birthday is before 6-Apr-2025 then you won't be able to make that ninth (77p) year.
A couple of other things to note. Firstly, the pension figures (£155.65, £4.45) are all current ones, but those will increase by the triple lock until the end of this parliament (2020 in theory!) and by national average earnings after that, so, in fact, the payback period is very likely to be better (shorter) than the "flat" one shown above. Secondly, the cost of contributions goes up by CPI each year, and so are guaranteed not to go up more than (and, most likely, less than) the pro-rata increase they buy until at least 2020. (All of that assuming the govt doesn't change the legislation along the way!)
So, if you're feeling confident about getting to 69 years and 2 months, the most cost effective way is to stick an item in your calendar for early 2019 (Feb/Mar) to pay the contribution for 2016/17 and thereafter each year 2 years in arrears until a final catchup in the penultimate year. If you are less confident then look at it again in early 2023 and pay six years in arrears, although it will cost more then (and hence have a longer payback period).
Some others will say you should register as self-employed and pay class 2 NIC until they are abolished in 2018, as they are
a lot cheaper, which they are, but I have no experience of that route so I'll let others detail it.
One last thing, it's
possible (albeit unlikely with your numbers) that you
may be able to pay some pre-2016 NICs, which have the advantage of being a bit cheaper than the current ones. In order to determine that you'll need know if you have any gaps (missing years) in your NI record since 2006, and a recent (last few months) pension statement. If you know about gaps and you do have a recent statement please post about the gaps and (from the statement) your number of qualifying years and your COPE. If not, find out, and get one