Pension Boosting article discussion

Colly_2

expat_mike wrote: »

For married women with very low NI contributions in their own right its unlikely they can improve their pensionable income by buying extra years in their own pensions.

Well, that is not quite correct in all cases.
Currently, women get SP from age 60 but men not until 65. So, a married woman who has no , or negligible, pension in her own right, will have to wait until her husband reaches age 65 , to get a 60% pension on his contributions.

So, a married woman who is the same age or older than her husband, faces at least 5 pensionless years. If she is able to buy back enough NI contribution years to get a pension in her own right, she will get at least an extra 5 yrs of pension payments
PLUS, when her husband gets his own pension, hers will not be counted as part of his income for tax purposes.
A woman the same age as her husband, who buys back enough years to get a 60% pension in her own right, stands to gain an additional 5 yrs of pension or £15,000 If she is older than him, its even more.
ATM, the maximum permitted buy back years is 10, for which I just paid £3600.

A-M_5

I have today received and activated the e-service forecast service, goody, I can confirm my forecast, get cheque sent off and go on my hols tomorrow. Nope...the service is now not available until 7am on Monday 30 March. So, my question is that if I take a chance and without an official forecaste, send off 3 back years given the (more) favourable figures given by one person at the Pension Service, would I get a refund if I overpaid?


PS: HarryHound I don't recall getting any correspondence with 'untick' to lose the MWA. I was not working, it was not relevant. In fact I've only had 1 shortage forecaste for 1 year in recent years, 04-05, in Dec 2006.

SnowMan

Colly wrote: »

Well, that is not quite correct in all cases.
Currently, women get SP from age 60 but men not until 65. So, a married woman who has no , or negligible, pension in her own right, will have to wait until her husband reaches age 65 , to get a 60% pension on his contributions.

So, a married woman who is the same age or older than her husband, faces at least 5 pensionless years. If she is able to buy back enough NI contribution years to get a pension in her own right, she will get at least an extra 5 yrs of pension payments
PLUS, when her husband gets his own pension, hers will not be counted as part of his income for tax purposes.
A woman the same age as her husband, who buys back enough years to get a 60% pension in her own right, stands to gain an additional 5 yrs of pension or £15,000 If she is older than him, its even more.
ATM, the maximum permitted buy back years is 10, for which I just paid £3600.

Yes, where the husband has sufficient NI to qualify for a full basic state pension it can make sense for a wife who reaches SPA before her husband to pay voluntary contributions to purchase state pension even if her resulting pension is less than 60% of the full basic state pension. This would apply where the amount of state pension paid between her SPA and his SPA is more than the class 3 contributions payable.

In your case the extra pension purchased is likely to be at least £6,191 (= 0.25 x 5 x 95.25 x 52). Note the percentage of extra pension purchased, by a female reaching SPA before 6/4/2010, buying 10 more years without exceeding the 39 year full pension limit is between 25% and 49% (the 49% is achievable in going from 9 years to 19 years) depending on how many existing years she had but I've assumed 25% in the calculation. So buying 10 years for £3,600 is good value. If you are a taxpayer between age 60 and 65 you may need to partly or fully net down the £6,191.

There is no taxation difference after age 65 however. The 60% state pension paid to you from when you reach age 65 is taxed as your income regardless of how much of it is made up of your category A pension and how much of category B pension because of your husband's contributions.



There are a huge number of different scenarios where married people are concerned. The easiest scenario is where the husband has a full NI record and the wife already has enough contributions to qualify for a 60% state pension. Here the wife can make the decision using the same logic as if she was a single person using the Pension Booster calculator to help and ignoring her husband's credits.

But most of the other scenarios like yours are much more complicated. That is why I suspect the Pension Booster calculator is not programmed to allow for the married scenario in general.

It is easiest just to look at each married case on a case by case basis and hopefully people here will help if anyone posts their scenario. Note we would need to know how many NI years both husband and wife are likely to have by SPA (before buying extra years and with details of any HRP years) and their respective SPAs and missing years to give a fullish answer.

SnowMan

A-M wrote: »

I have today received and activated the e-service forecast service, goody, I can confirm my forecast, get cheque sent off and go on my hols tomorrow. Nope...the service is now not available until 7am on Monday 30 March. So, my question is that if I take a chance and without an official forecaste, send off 3 back years given the (more) favourable figures given by one person at the Pension Service, would I get a refund if I overpaid?

Not something I know much about. The HMRC website says at

http://www.hmrc.gov.uk/faqs/vol-conts.htm#12

“What if I pay and then change my mind. Can I have my money back?
Not necessarily. The circumstances in which we can give you back your money are limited; there is no automatic right to refund. So it is important that you consider carefully before deciding to pay, including getting a State Pension Forecast”

If I was sending off the cheque I would send a covering letter to explain what you are doing and why, which you can later refer to if there is a problem.

harryhound

Mrs Hound is 3 years younger than I am and she has just received her booklet pointing out that she is coming up to retirement age.

One of the options is to postpone her start date and get a pension 10.4% bigger for each year she postpones.
Is this a compounding 10.4%?

IE Let us pretend that the state pension is 5000 a year.
So after a year of postponement it would have increased to 5520. After 2 years would it have increased to 6094 or only 5520 + 520 = 6040?

Similarly the deferred amount can be taken as a (taxable) lump sum of 5000 plus bank rate plus 2% (currently 2.5%:rolleyes:). So at the end of year two would that lump sum be 5000 + 125 = 5125 and year two 5125 + 5253 = 10 378 ?

Then of course the state pension is likely to change each year anyway !

Decisions, decisions.

My brain hurts.

SnowMan

Full details of the late retirement option can be found from page 58 of NP46 downloadable from

http://www.pensions.gov.uk/resourcecentre/np46/home.asp

From the examples it seems the pension increase of 10.4% is simple interest (i.e interest on the original capital only) and the lump sum increase of base rate + 2% uses compound interest (i.e. interest on interest as well as the original capital). See below

Pension example
“Anne decides to put off claiming her State Pension for five years from April 2005. When she comes to claim it, the weekly rate she would have been entitled to, if she had not put off claiming, would have been £105. As she put off claiming for five years and chose extra State Pension, the amount of State Pension she will get every week will be £159.60”.

As 105 x (1 + (0.104 x 5)) = 159.60 it is simple not compound interest.

Lump sum example
"(Based on a flat-rate benefit rate and a rate of return of 6.5% as an example for the whole period.) Ahmed’s weekly State Pension is worth £105. When he reaches State Pension age in April 2006, he decides to put off claiming his State Pension for five years. When he claims his pension, if he chooses a lump sum, he will get a lump sum of around £32,100 (before tax) as well as his normal weekly State Pension entitlement."

As 105 x 5 x 52 x (1.065^5-1)/ln 1.065 = £32,087
Whereas 105 x 52 x 5 x (1 + 0.065 x 2.5) = £31,736

So looks like it is compound interest

Perelandra

Does anyone have the details of exactly where I need to send the cheque for buying old years, and what I need to include with it? The website doesn't seem to be available now until 30th March!

I can't remember the exact amount for the year I wanted to buy either. But I imagine it would be safe if I rounded it up to the nearest pound (I can remember the pounds, but not the pence... it wasn't a full year's cost).

Thanks fer the help,

sharjam

I have worked for most of the last 34 years but had several months off after the birth of three children and did not work during this time. I also lived abroad for one year 1993/1994 and didn't make any contributions. Since 1985 I have worked part-time. Does this affect my pension starting 2023?
sharjam

Jane_Doe_2

I have been having similar problems with Pension Service website, and still no pension forecast. Being 99% sure I am heading for a shortfall on the 30 years, I have taken a chance and after speaking to NI contibution enquiries 0845 3021479 where I found out that without a ref number or payslip you cannot pay online/ internet banking, so at their suggestion posted a cheque for the 3 years I am sure no contribs made (by special delivery and enclosed a covering letter explaining my problem). I was told they receive post on Saturdays, so even special delivery friday would do it appears as because of the backlog they are accepting anything received (not cashed) by them as being within the time limit. NI contributions Office, Benton Park View etc. Said in the letter I hoped that if I found when my forecast eventually received that I had paid in error that they would look favourably on any request for refund I may need to make. Fingers crossed.

EdInvestor

sharjam wrote: »

I have worked for most of the last 34 years but had several months off after the birth of three children and did not work during this time. I also lived abroad for one year 1993/1994 and didn't make any contributions. Since 1985 I have worked part-time. Does this affect my pension starting 2023?
sharjam

Yes, get a forecast here https://www.thepensionservice.gov.uk

You may need to buy some missing years if you are below the 30 required.