Calculating number of years of paying NI for state pension

Turtle

Hello

I've read several times recently on here that 35 years NI contributions are needed to earn full state pension. What I'm unsure about is if a few years in a part time job count towards this?

I got my first job just after turning 16 and worked part time hours for 3 years until I went to university (1 of those years was full time however I was only ever contracted part time - not sure if that makes any difference).

When I graduated at 22 I got a full time job and have worked at the same company ever since, I'm now 39.

Do those 3 years part time count towards the 35 years needed? Or is it counted from when I started full time? Part of me thinks working is working, but then I was only earning a small amount so wasn't sure if it was included. The answer to this is important as I would like to be in a position to take early retirement around 55, so if they don't count I will need more years!

Thanks in advance.

xylophone

http://www.hmrc.gov.uk/ni/intro/check-record.htm

mania112

This year you pay NI once you earn over £153 per week.

I'm not sure what the history of that minimum figure is, so you're best running a check - within Xylophone's link you'll find another - https://www.gov.uk/state-pension-statement/y this is the calculator (and your state pension age is after 6/04/2016 as i'm sure you know!)

jamesd

You'll have to check whether you earned enough in those years for them to qualify. You also seem old enough to have qualified for some "juvenile credits". The record check is the first step. If necessary you can also contact the Future Pension Centre with questions.

Turtle

Thanks very much all, I have ordered a statement to check my qualifying years

MARTYM8`

Not that I am expecting much of a state pension by the time I retire - cos I doubt the government will be able to afford it - I was wondering how the pension entitlements will be worked out for those contracted out due to being in final salary schemes.

Currently I believe the contracted out rate of NI is 10.6% and full NI is 12% - so would my years eligibility be on a pro rata basis to that? So I might need say 40 years of work to get a full pension - vs 35 for those not contracted out?

I do find it a little unfair - as I earn way above average wages so my 10.6% is in pounds and pence will be far far higher than most people's 12%. So I will have paid far more NI than many people in monetary terms - yet get a lower pension from the state? Just a little galling!

jamesd

Under current rules there are two parts to the state pensions, the basic state pension and the additional state pension, which is earnings-related, paying more for high earners. The basic state portion stops increasing after 30 years but the additional state pension continues to increase until you stop working or reach state pension age.

When the flat rate system comes in each person will have a foundation amount calculated. That will be the higher of the current rules or flat rate rules amount. After that there will be no more earnings-related increases, just an increase of about 4.60 a week in state pension for each year worked. That increase will continue until the flat rate state pension reaches £144 under the original announcement or more like £155 once inflation-linked increases are allowed for.

Take two people, one contracted in and the other contracted out all the time. The one who was contracted in will have a higher foundation amount because they will have the earnings-related portion that the one who contracted out didn't have. The one who was contracted in will have to work fewer years until they get to the flat rate level. As soon as they reach that there will be no more increases for them. The one who was contracted out continues accruing more until they too reach the flat rate level. At that point both will get the same flat rate state pension.

If that takes them 35 years and you 40 years, they will still be paying in for the same 40 years but they will get nothing more for the final five years, while your entitlement continues to increase.

As well as the same flat rate state pension the one who was contracted out also gets whatever pension they got from the contracted out money being paid into their pension, whether it's defined benefit or defined contribution/personal pension.

You should forget any thought of it being galling for you. You are probably one of the winners, getting both full flat rate pension and the contracted out part. The person who wasn't contracted out gets only the state pension.

There is something that you might consider galling, though. You will get the same flat rate state pension as a person who spent all of their life in prison or on unemployment benefits. One of the key objectives of the flat rate state pension was to increase the pension payout from the state pension pot to those who would qualify for getting means tested benefits from the general taxation pot. That has been done by taking money that would go to middle and higher earners if the current rules continued.

System

Hi

The government have never afforded it. It is the TAXPAYER who covers it.

penwise

What happens in the following situation:

Person knows that when they retire in 10 years they will have 36 years NI but as they were contracted out they won't get full state pension - can they buy the necessary NI contributions to bring their state pension up to the max

Thanks

jamesd

It's to be possible to buy extra years even for those who won't have any missing or self-employed years that they could use, so yes. Self-employed contributions are likely to be the cheapest option if that won't be for a year when there are also employed NI or credits making the year count anyway.

Thrugelmir

MARTYM8` wrote: »

I do find it a little unfair

You have benefited from contracting out though.