Worth buying extra years?

littlerock · 7 October 2015 at 12:44PM

OH comes up for retirement in Jan 2016 so not eligible for new scheme. Has got a forecast which show has full contributions record so entitled to full state pension plus extra for SSp2. Will it still be worthwhile buying further years contributions?

xylophone · 7 October 2015 at 1:39PM

Do you mean this? https://www.gov.uk/state-pension-topup

http://www.thisismoney.co.uk/money/pensions/article-3202732/How-new-state-pension-TREBLE-income-Women-self-employed-set-benefit-DWP-scheme.html

littlerock · 7 October 2015 at 6:02PM

yes but is it worth doing? Should add he has been self employed for many years now so was surprised to see Pension quote shows additional pension (+£20 pwk) based on NI while working for an employer.

He was employed on leaving school, for about 8 years but only on a very low salary. After that he went self employed.So he is surprised to find that his NI contributions during that time built up a credit of an extra £20 per week in second state pension now. There is a comment on the quotation form saying the supplementary pension is estimated based on his NI contributions but no supplementary pension is payable for self employed. Which he is and has been for last 35 years. Could the quoted extra payment be an error?

jamesd · 7 October 2015 at 6:45PM

There are three different things to consider:

1. Buying extra years. Worth doing for most who do not have 30 years and reach state pension age before 6 April 2016, the exception is those who will be on means tested benefits.

2. Deferring the state pension. Increases by 10.4% per year of deferral for those who reach state pension age before 6 April 2016 and is partly inheritable by a spouse. It's inflation linked. An excellent deal, the best guaranteed return I know of.

3. Class 3A NI, a usually rubbish deal because it pays far less than deferring at the ages where it is normally considered. Deferring instead will get more income for the money for those who are not over 80 years old. Compare the age and percentage you get with the 10.4% for deferring:

Age Increase Calculation, also multiply by 100 to get %
63 5.56% (52 / 934)
64 5.70% (52 / 913)
65 5.84% (52 / 890)
66 5.97% (52 / 871)
67 6.14% (52 / 847)
68 6.29% (52 / 827)
69 6.49% (52 / 801)
70 6.68% (52 / 779)
75 7.72% (52 / 674)
80 9.56% (52 / 544)
81 10.12% (52 / 514)
82 10.74% (52 / 484)
85 13.20% (52 / 394)

It can be worth considering for a person who would already want to defer for as long as deferring makes sense, since even the age 63 rate provides far more inflation-linked safe income for life than buying an annuity, for those in reasonable health.

xylophone · 7 October 2015 at 6:49PM

He was born in 1951 and started work when he was 18 and was employed until he was around 30?

He may have a some graduated pension and some SERPS?

His expected state pension is £135 a week? He has additional private provision?

Whether or not it is worth his buying 3A NI depends on whether he thinks it a good bet based on the information in the links and above.

I understand that you are not married to your OH so part of the benefit of buying the additional pension would not apply in your case?

littlerock · 8 October 2015 at 8:19PM

Yes he has other pension arrangements. I also have separate arrangements of my own.

Worth buying extra years?

Comments

Confirm your email address to Create Threads and Reply

🚀 Getting Started

Categories

Is this how you want to be seen?

Get our FREE Weekly email full of deals & guides - and it’s spam-free