Shortfall in National Insurance Contributions

EdInvestor

DBH719K wrote: »

Hi

I have 28 years NI but have been 'resting' for three years. I will be of retirement age after 2010 so if the last five years NI is credited free as mentioned in an earlier post am I correct in thinking that I will be entitled to a full pension without having to make any further contributions?

Check with the Pension service.I don't think the 5 free years will continue after 2010.

jancee_2

The automatic credits for men between ages 60 and 65 are being phased out in a similar way to the increase in state pension age to 65 is being phased in for women born between 1950 and 1955.

So, OP, it depends on your date of birth.

jennyjerome1

In simple terms, as I understand it:

With five years NI contributions to make up, an outlay of around £2000 made now in one lump sum will pay for five years voluntary contributions and thus increase my actual pension when I can claim it in 2011 by approximately £15 gross (£12 net) per week.

So if I pay £2000 now, I will break even in about 7.5 years time. (Loss of £2000 in a fixed rate account plus its potential net added interest against a net pension gain of £624 a year which starts to kick in at retirement in 2011).

Any comments would be welcome, as my maths is only roughly calculated.

EdInvestor

Don;t forget the pension income is index linked.

jennyjerome1

Edinvestor, thanks - I'd forgotten the pension would be index linked. So the break even point will be much sooner. It seems worthwhile then to pay the missing years; and before the price of each year goes up by 50% in April.

oldandgrumpy

Why consider write off time? If you leave the £2000 in the bank, it will only make a small interest. Put it in HMRC and it will make 30%+ forever...well, till you snuff it!
And I am not sure how the new legislation due in April will affect back payments such as yours, but the extra six years promised will be at the then current rate, ie £12.05 per week. 5 years at that rate will be £3500+, but still worth the investment. Do it now, to be on the safe side. Edinvestor, is there any further news on that legislation, or are we waiting for yet another hike in NI contributions before they get their fingers out?

EdInvestor

oldandgrumpy wrote: »

Edinvestor, is there any further news on that legislation, or are we waiting for yet another hike in NI contributions before they get their fingers out?

Not seen anything new lately.

Damsonjam_2

Having reached the tender age of 50, Peter Pan here realised 1) that he wasn't as young as he used to be (!) and 2) that he should take his pension planning seriously..

I was in higher education until I was 26 and, although I've been employed (mostly) since then, I always thought I'd have a shortfall in my state pension due to being an eternal student.

However, reading on here, it seems the rules have changed and that if I can reach the 'magic' 30 years, I should be OK? So, being 50, and assuming I find some form of gainful emplyment for, say, more than 6 of the years between now and 65 (70?) I should still qualify?

EdInvestor

How many years have you clocked up already?

Find out and get a forecast here: https://www.thepensionservice.gov.uk

There are two state pensions so you may be set for more than you think.

Damsonjam_2

EdInvestor wrote: »

How many years have you clocked up already?

Find out and get a forecast here: www.thepensionservice.gov.uk

There are two state pensions so you may be set for more than you think.

Thanks.. I've asked for an activation code :rolleyes:

I think I've clocked up about 24/25 years (1 year between school and university, holiday jobs, 23+ years since then)...