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  • FIRST POST
    • NE5
    • By NE5 3rd Dec 17, 8:14 PM
    • 9Posts
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    NE5
    Pension Forecast
    • #1
    • 3rd Dec 17, 8:14 PM
    Pension Forecast 3rd Dec 17 at 8:14 PM
    Hello....I've just been on the Government Gateway and had a pension forecast and it says I am 3 years short, and I have 6 incomplete years.

    Does this mean I can pay any 3 of these years and as I've done 41 qualified years, isn't 44 years an odd number to qualify ???

    Also how does COPE affect this ?

    Thank you.
Page 1
    • Silvertabby
    • By Silvertabby 3rd Dec 17, 8:42 PM
    • 1,912 Posts
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    Silvertabby
    • #2
    • 3rd Dec 17, 8:42 PM
    • #2
    • 3rd Dec 17, 8:42 PM
    Don't pay any pre 2016 years - they won't make any difference.

    If you work/pay NI for another 3 years then you should be ok. Ignore the COPE - it's already been accounted for.
    • molerat
    • By molerat 3rd Dec 17, 8:43 PM
    • 17,464 Posts
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    molerat
    • #3
    • 3rd Dec 17, 8:43 PM
    • #3
    • 3rd Dec 17, 8:43 PM
    At April 2016, when the calculation of your starting amount was made, years became irrelevant and the £s figure from the calculation became the only thing of importance going forward. The COPE amount was used in that calculation only. If you have in excess of 35 pre 2016 years then making up any those pre 2016 incomplete years will add no benefit to your pension. You need to add post 2016 years to count. If you want to post up all the figures here and you will be pointed in the right direction.
    www.helpforheroes.org.uk/donations.html
    • NE5
    • By NE5 4th Dec 17, 11:48 AM
    • 9 Posts
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    NE5
    • #4
    • 4th Dec 17, 11:48 AM
    • #4
    • 4th Dec 17, 11:48 AM
    I have 41 years of contributions. I am 63. I am 3 years short (44 years seems a bit odd ?)

    These years are as follows.

    2016-17 pay £589.10 by 5 April 2023 (I will be 68 by then ???)

    2015-16 pay 423 by 5 April 2023

    2014-15 pay £472.60 by 5 April 2023

    2012-13 pay 64.08 by 5 April 2023

    2011-12 pay 340.23 by 5 April 2023

    I also had a shortfall in 1975-76 when I was young but that is not relevant now.

    These amounts may increase after 5 April 2019.

    The current year is not available yet.

    My forecast currently is £135.14 a week.

    Forecast if I contribute until 5 April 2020 is £148.82 a week

    Maximum possible is £153.38 a week.

    I am now retired in receipt of a Govt pension but I have been working part time for 6 years and not paying stamp. Previously my forecast said I was fully paid up 30/30 years so I thought nothing of it.

    I can maybe commence paying NI contributions for this job but I might pack it in soon as all my outstanding debts ie mortgage are finished etc now and I'm only working out of choice.

    I am 66 on 29 October 2020.

    Many thanks for any replies and advice.
    Last edited by NE5; 04-12-2017 at 11:50 AM.
    • p00hsticks
    • By p00hsticks 4th Dec 17, 11:56 AM
    • 5,771 Posts
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    p00hsticks
    • #5
    • 4th Dec 17, 11:56 AM
    • #5
    • 4th Dec 17, 11:56 AM
    As silvertabby says, there is no point in paying up years pre April 2016 as they're not going to increase your pension amount.

    From April 2016 each year paid up to the tax year before you retire (i.e. 2016-17, 2017-18, 2018-19 and 2019-20) will increase your amount by around £4.50 a week.
    • molerat
    • By molerat 4th Dec 17, 12:01 PM
    • 17,464 Posts
    • 11,683 Thanks
    molerat
    • #6
    • 4th Dec 17, 12:01 PM
    • #6
    • 4th Dec 17, 12:01 PM
    You need to pay the £589.10 for 2016-17 by 5 April 2019 to keep it at that price, it will increase to whatever the cost is in the year you pay it after then. You then need to contribute for 2017-18, 18-19 and 19-20 by whatever means and that will bring you up to the £148.82 quoted. Class 3 contributions are currently around £741 per year but pay back in 3-5 years depending on your tax situation. Obviously part time work, benefits or looking after grandchildren could contribute towards those years. Paying the pre 2016 years will add nothing so forget about them.
    www.helpforheroes.org.uk/donations.html
    • NE5
    • By NE5 4th Dec 17, 12:07 PM
    • 9 Posts
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    NE5
    • #7
    • 4th Dec 17, 12:07 PM
    • #7
    • 4th Dec 17, 12:07 PM
    what if I stop working part time, how do I pay the last 2 years ? Voluntary from my pension ?
    • molerat
    • By molerat 4th Dec 17, 12:14 PM
    • 17,464 Posts
    • 11,683 Thanks
    molerat
    • #8
    • 4th Dec 17, 12:14 PM
    • #8
    • 4th Dec 17, 12:14 PM
    what if I stop working part time, how do I pay the last 2 years ? Voluntary from my pension ?
    Originally posted by NE5
    Yes, voluntary class 3 contributions.
    www.helpforheroes.org.uk/donations.html
    • NE5
    • By NE5 4th Dec 17, 12:38 PM
    • 9 Posts
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    NE5
    • #9
    • 4th Dec 17, 12:38 PM
    • #9
    • 4th Dec 17, 12:38 PM
    Thanks. I'm starting to understand the furore about this when the rules changed now....

    does it also mean that EVERYBODY in my age group was short before the April 2016 cut off point ?

    And how does it affect people who might be retired early on medical grounds or something and can't work again ? I presume if I go to sign on I will get a credit instead ? Not that I'm doing that again because I'm not I've done my share of that.

    One thing I'm going to do immediately when I'm at work on Thursday is tell them I want to start paying NI conts from now again.
    Last edited by NE5; 04-12-2017 at 12:41 PM.
    • Silvertabby
    • By Silvertabby 4th Dec 17, 1:28 PM
    • 1,912 Posts
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    Silvertabby
    does it also mean that EVERYBODY in my age group was short before the April 2016 cut off point ?
    No. Only those of us who paid reduced NI because we were/had been members of contracted out occupational or, (less commonly) private pensions. Someone who had never been contracted out would have paid full rate NI and could have accrued far more than £160 through their SERPS/SP2 top ups.

    In theory, the amount of SERPS/SP2 you gave up by contracting out will be included with your occupational pension - so one way of looking at it is that you'll get this from when you retire instead of waiting until you are 66.

    And how does it affect people who might be retired early on medical grounds or something and can't work again ? I presume if I go to sign on I will get a credit instead ? Not that I'm doing that again because I'm not I've done my share of that.
    Yes, you would get a credit if you sign on - but you would have to be 'actively seeking work' to qualify. Not sure how that would work as you are currently working part time.

    One thing I'm going to do immediately when I'm at work on Thursday is tell them I want to start paying NI conts from now again.
    You can only do this if you earn enough - and if you are then you would have been paying NI already.
    Last edited by Silvertabby; 04-12-2017 at 1:54 PM.
    • molerat
    • By molerat 4th Dec 17, 1:46 PM
    • 17,464 Posts
    • 11,683 Thanks
    molerat
    You can only do this if you earn enough - and if you are then you would have been paying NI already.
    Originally posted by Silvertabby
    Or credited if earning between £113 and £157 per week.
    www.helpforheroes.org.uk/donations.html
    • Jerben
    • By Jerben 4th Dec 17, 2:51 PM
    • 57 Posts
    • 27 Thanks
    Jerben


    Previously my forecast said I was fully paid up 30/30 years so I thought nothing of it.

    Originally posted by NE5
    Yes, but that was for the BASIC state pension (qualifying system before April 2016), which had a value of approx. £119.00
    The NEW state pension has a level of currently £159.65
    So you are not losing out at all!
    You still have an opportunity to improve on what you would have got, under the new system. (Each NI year after April 2016 will add about £4.56 per week. up to the capped £159 figure).
    • Tom99
    • By Tom99 4th Dec 17, 3:13 PM
    • 656 Posts
    • 394 Thanks
    Tom99
    The £741 for each full missing year is very good value, about 4x years purchase after 20% tax whereas to buy that in the open market might cost 20x or 30x.
    • NE5
    • By NE5 4th Dec 17, 7:41 PM
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    NE5
    quick calculation......741 x 3 years = 2223.

    Gives an increase of approx 13 quid a week = 171 weeks to get back. From age of 66. Therefore I need to live longer than approx 69 and few months...if I kick the bucket before that I've lost out....LOL.....I realise that doesn't take into any other factors.
    • NE5
    • By NE5 4th Dec 17, 8:15 PM
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    NE5
    Actually Tom99...could you explain how that tax at 20% works please ?
    • Silvertabby
    • By Silvertabby 4th Dec 17, 9:29 PM
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    Silvertabby
    quick calculation......741 x 3 years = 2223.

    Gives an increase of approx 13 quid a week = 171 weeks to get back. From age of 66. Therefore I need to live longer than approx 69 and few months...if I kick the bucket before that I've lost out....LOL.....I realise that doesn't take into any other factors. Posted by NE5
    Um no - each one-off payment £741will buy you an exta £4.50 (ish) per week State pension for the rest of your life. Assuming that you will be a basic rate (20%) tax payer in retirement, that's £3.60 per week.

    £741 / £3.60 = 205.83 weeks
    205.83 / 52.17 = 3.95 years.

    Call it 4 years to get your £741 back. After that, you're quids in.

    Oops - sorry - just re-read your post and realised that you were talking about buying 3 years of voluntary NI! Too big a glass with my dinner!
    Last edited by Silvertabby; 04-12-2017 at 9:37 PM.
    • Dazed and confused
    • By Dazed and confused 4th Dec 17, 9:30 PM
    • 1,936 Posts
    • 872 Thanks
    Dazed and confused
    The State Pension is taxable income just like wages or other pension income.

    In your previous posts you mention working and a govt pension so chances are you already get sufficient income to pay tax.

    So any extra taxable income will incur 20% tax. The Pension Service/DWP don't actually deduct this tax, your tax code will be adjusted so you pay extra on your wages or govt pension.

    If your other income is low enough you might not have 20% tax to pay on it all but if it's high enough you could easily have 40% to pay (or more in extreme cases).

    I think what Tom99 is getting at is that the State Pension you are already sure of getting is almost certainly going to make you at the very least a basic rate (20%) payer so any extra State Pension you choose to buy now will have (at least) 20% tax due on it.
    • Tom99
    • By Tom99 4th Dec 17, 11:48 PM
    • 656 Posts
    • 394 Thanks
    Tom99
    Actually Tom99...could you explain how that tax at 20% works please ?
    Originally posted by NE5
    The £741 Class 3 NI is paid out of already taxed income so the payback period should take tax on the pension into consideration as well, hence:-

    £4.56 per week = £237.05pa less 20% tax = £189.64pa net ( or £142.23 for 40% taxpayer)
    The payback period is therefore:

    20% taxpayer – 741/189.64 = 3.9 years

    40% taxpayer – 741/142.23 = 5.2 years
    • atush
    • By atush 5th Dec 17, 11:51 AM
    • 16,371 Posts
    • 10,131 Thanks
    atush
    Thanks. I'm starting to understand the furore about this when the rules changed now....

    does it also mean that EVERYBODY in my age group was short before the April 2016 cut off point ?
    No you arent quite understanding. In the old system you got 119 and change for a full lifetime contribution, so the new SP is much higher. You also got any S2P or serps if you had any.

    You were never going to get the new full SP if you were contrated out really, unless youo had a high level of s2p/serps.

    You have not been disadvantaged.
    • NE5
    • By NE5 5th Dec 17, 12:43 PM
    • 9 Posts
    • 0 Thanks
    NE5
    Thank you to everybody.

    Tom99 I don't quite understand your last post, but what I think I get so far is :

    I am currently paying tax on my govt pension.....so I will pay tax at 20% on my state pension be it 135.14, 148.82 or 153.38. I should have realised that but never really thought about it. But as has been pointed out, its still an increase on £119 and is more than I'm getting then my part time job for doing nothing !

    So I will get 135.18 - 20% = 108.11
    148.82 - 20% = 119.05
    153.38 - 20% = 122.70

    If I start to pay class 3 conts....and I pay the full 3 years ie this year in arrears of 741, year 2018-19 of 741 from my pension, and 2019-20 from my pension that is a total of 2223.

    I will then receive a pension increase at 66 of the difference between 153.38 and 135.14 (14.59 a week after 20% tax) and to pay back 2223 would take 152 weeks. Therefore for 152 weeks after the age of 66 I am only recovering what I have paid in ? If I live much longer than that it is well worth it, if I live less, then less so.

    I am not really sure when I have been contracted out though, only the last 6 years when I have worked part time ?

    If my basic gist as above is correct, should I pay this year in arrears and arrange to pay monthly from April 2018 for the last 2 years or just pay the last 2 years and be happy with a slightly smaller pension, or just do nothing and take the current forecast of 135.18 ?
    Last edited by NE5; 05-12-2017 at 1:19 PM.
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