Contracting out and the state pension
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thatoldchestnut
Posts: 123 Forumite
I am a 35 year old male who has paid into the LGPS since 2009 and so I’d been contracted out until April 2016. I checked my state pension forecast online for the first time today and was surprised to find that these years are described as “Full Years” and I have built up 14 years of NI contributions so far. I thought my contracted out years would be ones I would have to make up for at some point between now and SPA if they were fewer in number than the years I’d spent contracted in. Is this not the case or have I totally misunderstood the situation (as usual)? I thought looking at my forecast would tell me my starting amount too, but I can’t find any reference to it.
The other confusing thing is that the most I can get in state pension is £159.55 pw. 159.55 / 35 x 14 = £63.82, but it says this would actually give me £67.81 pw. I’m sure there’s probably something I’m missing, but it’s quite perplexing!
I have one year in 06/07 that is not full but I have the option to pay about £70 to add it if I wish, which on the face of it sounds like a good deal but I might try to get advice from the Money Advice Service about that.
The other confusing thing is that the most I can get in state pension is £159.55 pw. 159.55 / 35 x 14 = £63.82, but it says this would actually give me £67.81 pw. I’m sure there’s probably something I’m missing, but it’s quite perplexing!
I have one year in 06/07 that is not full but I have the option to pay about £70 to add it if I wish, which on the face of it sounds like a good deal but I might try to get advice from the Money Advice Service about that.
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Comments
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As you're going to have another 30+ years to contribute what do you expect to benefit from paying for the old year? Or won't you be working enough years in the future to get to the £159.55 mark?
The other confusing thing is that the most I can get in state pension is £159.55 pw
What is confusing about it? What did you expect to be able to get, as a maximum amount?0 -
Dazed_and_confused wrote: »What is confusing about it? What did you expect to be able to get, as a maximum amount?
Sorry, perhaps I phrased that badly. What confused me is the that it thinks I have built up £67.81 per week in state pension, but if I divide £159.55 by 35 years and multiply it by 14 years I get £63.82, so I didn't understand the discrepancy.
I was considering paying for the old year so it'd get me closer to 35 years of contributions sooner, but I take your point that all being well I'd get there anyway.0 -
DWP are confusing things for some reason - their definition of 'full year' is 'full financial year' rather then 'full not contracted out year'.
Your DWP foundation amount calculation will be under the old rules. ie:
£119 (old basic State pension) /30 x 14 = £55.53 plus a bit of SERPS/SP2 (from pre 2009) taking you up to £67.81.
This is higher than your calculation under the new rules, which would have been :
£159.55 /35 x 7 = £31.91
You only need about 23 years of post 2016 NI to bump you up to the maximum State pension so, unless you intend to retire at 55, you won't benefit from paying for previous years.0 -
A year is "full" if you have paid whatever NI you should have, either contracted-in or -out doesn't matter, it's either a full year or not
......Gettin' There, Wherever There is......
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Ah, that makes a bit more sense. Thank you Silvertabby!Silvertabby wrote: »DWP are confusing things for some reason - their definition of 'full year' is 'full financial year' rather then 'full not contracted out year'.
Your DWP foundation amount calculation will be under the old rules. ie:
£119 (old basic State pension) /30 x 14 = £55.53 plus a bit of SERPS/SP2 (from pre 2009) taking you up to £67.81.
This is higher than your calculation under the new rules, which would have been :
£159.55 /35 x 7 = £31.91
You only need about 23 years of post 2016 NI to bump you up to the maximum State pension so, unless you intend to retire at 55, you won't benefit from paying for previous years.0 -
Silvertabby wrote: »DWP are confusing things for some reason - their definition of 'full year' is 'full financial year' rather then 'full not contracted out year'.
Your DWP foundation amount calculation will be under the old rules. ie:
£119 (old basic State pension) /30 x 14 = £55.53 plus a bit of SERPS/SP2 (from pre 2009) taking you up to £67.81.
This is higher than your calculation under the new rules, which would have been :
£159.55 /35 x 7 = £31.91
You only need about 23 years of post 2016 NI to bump you up to the maximum State pension so, unless you intend to retire at 55, you won't benefit from paying for previous years.
At your age I wouldn’t have known that I’d be looking to retire (ok, take pension and change direction possibly unpaid) at 55. If you can find the £70 without too much trouble I’d be inclined to get that year paid up. Keeps your options that tiny bit more open.I have borrowed from my future self
The banks are not our friends0
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