Pension Boosting article discussion

[Deleted User]

I am due to reach SPA after April 2010 and so will only need 30 years to qualify for the full state pension. As I don't earn enough to pay NI through my job, I've been paying Class 3 voluntary contributions for the past 6 years.

I have just reached 30 years contributions so is it safe to stop paying any more (and put the money into something-else, e.g. a savings plan) or am I going to miss out on other benefits by doing so?

I've looked everywhere for this advice, including contacting the PAS, but no-one seems to know! Can anyone here help?

prt137

Get it as a lump sum.
As long as you've deferred for at least a year, and began to defer after 5 April 2005, you can choose a lump sum. This is made up of the deferred payment plus interest at 2% above base rate (this time it is compounded). After collecting the lump sum, you then get the standard pension. Any lump sum payment cannot push you into a higher tax bracket so will be taxed at the same rate as your other income.

Does this mean that there will be no tax to pay if other income comes to less than the personal allowance in the tax year that the lump sum is paid?

Peter
Anglesey

SnowMan

prt137 wrote: »

Get it as a lump sum.
As long as you've deferred for at least a year, and began to defer after 5 April 2005, you can choose a lump sum. This is made up of the deferred payment plus interest at 2% above base rate (this time it is compounded). After collecting the lump sum, you then get the standard pension. Any lump sum payment cannot push you into a higher tax bracket so will be taxed at the same rate as your other income.

Does this mean that there will be no tax to pay if other income comes to less than the personal allowance in the tax year that the lump sum is paid?

Peter
Anglesey

Effectively yes. The answer is in this link which is about state pension deferral see

http://www.thepensionservice.gov.uk/...ts-and-tax.asp

which says

"How are extra State Pension and the lump sum payment treated for tax?

State Pension is counted as income for tax purposes. Extra State Pension is taxable in the same way as normal State Pension. Your lump sum is taxed at the highest tax rate that applies to your other income. This will help make sure that the lump-sum payment will not push you into a higher tax bracket. For example, if the highest rate of tax applicable to your other income is 20%, your lump sum will be taxed at 20% rather than being counted with your other income which might take you into the 40% tax band.

If you choose a lump sum, you will be asked to complete a simple statement so that tax can be deducted from your payment before it is paid to you. The tax office check the amount at the end of the tax year. They repay any amount due to you if you have paid too much tax or ask you to make up the difference if you have paid too little.

You can choose to take the lump sum when you claim your State Pension or in the following tax year. This is likely to help if your income falls after you have claimed State Pension, for example because you no longer work. However, the tax effects will depend on your particular circumstances. Contact your tax office if you have specific tax enquiries."

SnowMan

Corona wrote: »

I am due to reach SPA after April 2010 and so will only need 30 years to qualify for the full state pension. As I don't earn enough to pay NI through my job, I've been paying Class 3 voluntary contributions for the past 6 years.

I have just reached 30 years contributions so is it safe to stop paying any more (and put the money into something-else, e.g. a savings plan) or am I going to miss out on other benefits by doing so?

I've looked everywhere for this advice, including contacting the PAS, but no-one seems to know! Can anyone here help?

It is as good as safe to stop paying any more.

Class 3 contributions do not count towards other benefits (such as contributions based Jobseekers Allowance or contributions based Employment and Support Allowance)

Technically speaking paying class 3 contributions so that you have more than 30 years credit could increase your state bereavement benefits, but for anyone in vaguely reasonable health it is not even worth considering paying class 3 if that is your only reason for so doing.

Ronaldo_2

You state the following in yesterday's article:-
However, according to the Financial Services Authority, a healthy 65-year-old man is expected to live, on average, for another 18 years and a 60-year-old woman is expected to live for another 21 years.

This makes male life expectancy to be 83 and a female 81. This seems back to front to me and although welcome, a tad high.

Synonymous

Hello again, I've been thinking some more about my pension!

I currently pay 6.5% into a local government pension scheme and was wondering how beneficial it would be to me to pay additional money into my pension?

I've read my pension authority's literature and it seems I can pay Additional Regular Contributions to buy extra scheme pension, and these are worked out depending on my age (25) and how much I want to add to my pension, as I understand it this is like a contract and I have to pay it for a set time. My wage will increase substantially in September so I could pay an extra £100ish and I wouldn't notice the difference.

I'm just wondering how worth it this is, retirement is still soooo far away, should I just enjoy my money while I'm young? Or will getting the cash into my pension as soon as possible really pay off in later life? I'm also saving for my first house so don't know whether it would be best to concentrate on getting the biggest deposit possible, as I also don't want to still be paying my mortgage when I'm 68!

Any sage advice welcome, I know this might be a bit heavy and require a Financial Advisor, just wondering if I am getting FAR too stressed about this at my age!!

harryhound

At a base level you have to decide if our fiat currency, coupled with your government's state guarantee to protect you from inflation, can be trusted. When will you be allowed or afford to retire shall we say at the age of 70?
Can the people of this island maintain an output per head to maintain the current or better standard of living in a world economy?
Might you decide to change career or emigrate?
What is your opportunity cost of putting another (say) 100 GBP into a very long term savings plan. (If it is the difference between drinking Cava instead of Champagne, then it could be a sensible choice).
The most life changing decision most of us make is deciding or not to have children - they cost a fortune to raise properly.

Personally I played the property game to make the most (tax free) money in my lifetime and minimised my outgoings BUT the economy I have lived through will not be exactly repeated in your life time.
(You won't enjoy a 25 year party financed by squandering North Sea oil nor will anyone, if the reality of population and climate change is to be handled sensibly - that is a big IF).

http://en.wikipedia.org/wiki/Fiat_currency

eve1104

I am 54. From 1979 to 1990 I stayed home to raise my children therefore have no NI credits for these years. Can I claim HRP for this time? If so when do I claim.

maxmiler

eve1104 wrote: »

I am 54. From 1979 to 1990 I stayed home to raise my children therefore have no NI credits for these years. Can I claim HRP for this time? If so when do I claim.

My understanding is that Family Allowance earned after 1978 whilst your child (or if you have more than 1 child, whilst the youngest child is not over 16) is automatically converted into NI credits up to a maximum of 22 years. So as it looks like you have 11 years FA credits so they all will count, and as long as you have paid NI for 19 years of work, that makes 30 years and you will qualify for a full State Pension.
But if I am wrong, then I'm sure at least one of our experts will soon correct me.

My wife is 55 and has 23 years FA under her belt so 22 will count. She thinks that she worked for 6 years paying a full "stamp" so her overall pension will be 28/30. i.e. 93% of a full pension. If she gets a job for 2 years in the next 10 years, she will then have made it up to a full pension.

Max

gmacm1

I am still confused by comments about a couples pension suggesting that it would be optional.

1) Does this mean that if both members of a "couplle" have a State Pension entitlement as individuals then they can choose to have two single pensions rather than a couples pension?
2) Because I did not pay NI when I was studying I do not have a full State Pension but my wife does have a full State Pension entitlement - can the couples pension be based on her contributions?

These queries may have arisen earlier in this forum but - please forgive me - I have only just read todays email and I have to go out in fifteen minutes.

Graeme