Should I top up my state pension

[Dod101]

I’m reviving a very old thread because I think it is salutary to recognise that just six and a half years ago we were having conversations in the context of low inflation and low interest rates and a steadily rising equities market.

We talked about how many years it would take to recover the cost but, of course, it all changes with a few years of 5-10% inflation.

Best wishes,

Steve

But nothing has really changed. The State Pension still has the triple lock to the benefit of us pensioners just as it did a few years back. We are very fortunate that we have this protection. Anyone who had the opportunity a few years ago to buy extra years and did not do so had the choice.

Dod

[richfool]

I’m reviving a very old thread because I think it is salutary to recognise that just six and a half years ago we were having conversations in the context of low inflation and low interest rates and a steadily rising equities market.

We talked about how many years it would take to recover the cost but, of course, it all changes with a few years of 5-10% inflation.

Best wishes,

Steve

But nothing has really changed. The State Pension still has the triple lock to the benefit of us pensioners just as it did a few years back. We are very fortunate that we have this protection. Anyone who had the opportunity a few years ago to buy extra years and did not do so had the choice.

Dod

But as Steve said, it HAS changed.

Inflation has changed, which should mean that the cost of topping up (or deferring) one's state pension should be recovered more quickly with the inflation linked annual increases in the pension now that inflation is higher, and the state pension should become more worthwhile. All assuming future Gov's don't radically move or change the goalposts.

[Dod101]

But nothing has really changed. The State Pension still has the triple lock to the benefit of us pensioners just as it did a few years back. We are very fortunate that we have this protection. Anyone who had the opportunity a few years ago to buy extra years and did not do so had the choice.

Dod

But as Steve said, it HAS changed.

Inflation has changed, which should mean that the cost of topping up (or deferring) one's state pension should be recovered more quickly with the inflation linked annual increases in the pension now that inflation is higher, and the state pension should become more worthwhile. All assuming future Gov's don't radically move or change the goalposts.

The numbers have changed but the principle is still the same. If it is worthwhile now, it was surely worthwhile before inflation took off. That is what I mean.

Dod

[mc2fool]

I’m reviving a very old thread because I think it is salutary to recognise that just six and a half years ago we were having conversations in the context of low inflation and low interest rates and a steadily rising equities market.

We talked about how many years it would take to recover the cost but, of course, it all changes with a few years of 5-10% inflation.

Best wishes,

Steve

But nothing has really changed. The State Pension still has the triple lock to the benefit of us pensioners just as it did a few years back. We are very fortunate that we have this protection. Anyone who had the opportunity a few years ago to buy extra years and did not do so had the choice.

Dod

But as Steve said, it HAS changed.

Inflation has changed, which should mean that the cost of topping up (or deferring) one's state pension should be recovered more quickly with the inflation linked annual increases in the pension now that inflation is higher, and the state pension should become more worthwhile. All assuming future Gov's don't radically move or change the goalposts.

Ah, such nominal thinking. Think real gentlemen, think real!

Folks handed over £ amounts that would have bought N weeks of shopping and are getting back £ amounts that will buy N/18 weeks of shopping each year for the rest of their lives, and that's true irrespective of the rate of inflation. So, Dod is right, nothing has real-ly changed.

(Assumes your shopping goes up by CPI each year ... foodwise it's been much more recently of course)

[Steveam]

I’m reviving a very old thread because I think it is salutary to recognise that just six and a half years ago we were having conversations in the context of low inflation and low interest rates and a steadily rising equities market.

We talked about how many years it would take to recover the cost but, of course, it all changes with a few years of 5-10% inflation.

Best wishes,

Steve

But as Steve said, it HAS changed.

Inflation has changed, which should mean that the cost of topping up (or deferring) one's state pension should be recovered more quickly with the inflation linked annual increases in the pension now that inflation is higher, and the state pension should become more worthwhile. All assuming future Gov's don't radically move or change the goalposts.

Ah, such nominal thinking. Think real gentlemen, think real!

Folks handed over £ amounts that would have bought N weeks of shopping and are getting back £ amounts that will buy N/18 weeks of shopping each year for the rest of their lives, and that's true irrespective of the rate of inflation. So, Dod is right, nothing has real-ly changed.

(Assumes your shopping goes up by CPI each year ... foodwise it's been much more recently of course)

You’ve said this before but I think it’s incomplete. If you read the whole thread you’ll see that several posters talk about getting inflation beating returns from equities and that their money is better put into equities rather than buying (either directly or through deferral) more state pension. This, it seems to me, has changed.

It is this comparative use of money decision which was being made six and a half years ago. It was made, for many, without articulating the underlying assumptions and the value of the inflation proofing.

I’ve no problem with you telling me that nothings changed for the inflation proofed income (n weeks of shopping) but most other income streams or wealth deposits have been hammered. The decision making six and a half years ago didn’t, in my opinion, properly take this into account.

Best wishes, Steve

[richfool]

And, despite those inflation increased pension payments, the cost of topping up has not increased, so far.

[EthicsGradient]

The original discussion in 2017 was about the scheme for those who had already retired, who could purchase a top-up. The scheme ended in April 2017. So the discussions and calculations about whether it was worth it are historic - there's no decision about that to be made now.

There is the separate "buy missing years" opportunity, but that wasn't really calculated in the thread (one set of figures, which showed it to look very good, and I believe it's pretty much always recommended to plan to have got the full years by the time you've retired).

What's the state with deferral? That was mentioned in passing, but people seemed unsure of the future figures then.

[DrFfybes]

I’ve no problem with you telling me that nothings changed for the inflation proofed income (n weeks of shopping) but most other income streams or wealth deposits have been hammered. The decision making six and a half years ago didn’t, in my opinion, properly take this into account.

Well it should have done, because that element of risk is the entire basisi of the decision.

For me at 57, do I fix an amount of money for a guaranteed future return, or take the risk and manage it myself. Similar question as "Do I buy an annuity or not"?

As we have plenty of assets, topping up my missing 5 NI years would hardly make a dent, but somehow I'm also thinking the extra income (a calculation that appears so complicated that I think only Geoff100 and Mc2Fool have a chance of getting close) will also make no diffference to our lifestyle, and who knows if I'll live to benefit from it.

I'll probably do one year then see how my health is in 7 years

Paul

[Dod101]

And, despite those inflation increased pension payments, the cost of topping up has not increased, so far.

That is the point. You are still buying an inflation proofed additional pension just as you were 6 1/2 years ago and on the same terms. If the triple lock had changed to a double lock then that would have been a material change but so far it has not.

Dod

[swill453]

And, despite those inflation increased pension payments, the cost of topping up has not increased, so far.

That is the point. You are still buying an inflation proofed additional pension just as you were 6 1/2 years ago and on the same terms. If the triple lock had changed to a double lock then that would have been a material change but so far it has not.

There is a point that the same money today "costs" less than 6 1/2 years ago, so it's a better deal.

Scott.

[mc2fool]

Ah, such nominal thinking. Think real gentlemen, think real!

Folks handed over £ amounts that would have bought N weeks of shopping and are getting back £ amounts that will buy N/18 weeks of shopping each year for the rest of their lives, and that's true irrespective of the rate of inflation. So, Dod is right, nothing has real-ly changed.

(Assumes your shopping goes up by CPI each year ... foodwise it's been much more recently of course)

You’ve said this before but I think it’s incomplete. If you read the whole thread you’ll see that several posters talk about getting inflation beating returns from equities and that their money is better put into equities rather than buying (either directly or through deferral) more state pension. This, it seems to me, has changed.

Self contained rather than incomplete. There are always other things that you could have put funds into instead that might have done better (or not), and with the benefit of hindsight may or may not prove to have been true.

You could say the same of equities: they could have done much better or they could have done much worse. I really don't know how useful it is now to say that one counterfactual happened rather than an other, other than for an "I told you so" for those with the luckier crystal ball.

It is this comparative use of money decision which was being made six and a half years ago. It was made, for many, without articulating the underlying assumptions and the value of the inflation proofing.

I’ve no problem with you telling me that nothings changed for the inflation proofed income (n weeks of shopping) but most other income streams or wealth deposits have been hammered. The decision making six and a half years ago didn’t, in my opinion, properly take this into account.

The decision six and a half years ago didn't take into account that income and wealth deposits would be "hammered" six years later? Have they? Not sure about that, but in either case, if you'd like to tell us what the state of the equity markets, inflation, interest rates, etc will be six years from now I'm sure there'll be plenty of interest.

P..S. I did read the whole thread as I didn't recall it, indeed, don't recall the scheme at all. Possibly 'cos it didn't affect me and possibly 'cos this isn't a board I usually follow.

[mc2fool]

And, despite those inflation increased pension payments, the cost of topping up has not increased, so far.

? There is no cost now, as others have said, this was a once-only 2017 scheme.

You are still buying an inflation proofed additional pension just as you were 6 1/2 years ago and on the same terms. If the triple lock had changed to a double lock then that would have been a material change but so far it has not.

The scheme 6 1/2 years ago being referred to doesn't exist any more, and AIUI the extra from that scheme was only CPI linked, not triple locked.

[1nvest]

This may be of interest

https://uk.yahoo.com/news/martin-lewis- ... 00319.html

[csearle]

Moderator Message:
At this point the thread splits in order not to conflate two issues. The split-off part is here. - Chris