Spouse NI credits towards pension while overseas?

kidmugsy

If her own CAT A pension would be less valuable than her Cat B, she should reclaim her deferred pension now, urgently, as a lump sum. Else won't there be a risk of its vanishing once her Cat B begins?

br1anstorm

JezR wrote: »

There is another thing that could be done to boost her own pension and that would be to pay category 3a voluntary contributions. These could top up a category B pension by up to £25 a week when available in 2015.

They will work out significantly more expensive than what she would have received with a regular contribution had this been made in the past, but may still be worth considering if in good health. Details at: https://www.gov.uk/state-pension-topup

Thanks, JezR - that does look like one possible option for us to consider. The linked webpage is a bit short on detail, but we'll look again when we have the reply on my wife's actual NI record. The tough task is working out whether the gain (pension increase) is worth the pain (hefty upfront Class 3A contributions). Has anyone done the actuarial sums that help decide how long you have to live in order to benefit from this option (ie recoup the Class 3A amount paid in)?

Edit: delving further into those DWP webpages and doing a test-run with their calculator appears to suggest that you may only be able to take advantage of the Class 3A contributions-to-top-up-pension opportunity "if you already qualify for a full state pension"! That seems perverse (to them that already hath a full pension shall be given an option to top-up.... but those who don't qualify for full state pension don't have the chance to bolster what little they may be entitled to). That surely can't be the intention?

Am I misreading it? JezR's post does say that this new Class 3A option, which comes in during 2015, could be used to top up a Cat B pension....

br1anstorm

kidmugsy wrote: »

If her own CAT A pension would be less valuable than her Cat B, she should reclaim her deferred pension now, urgently, as a lump sum. Else won't there be a risk of its vanishing once her Cat B begins?

That's an interesting point. Does anyone know the answer?

I confess I still haven't fully grasped the Cat A versus Cat B pension picture. Is it in effect an either/or situation, or can one augment the other?

Let's assume my wife has - say - 10 years of NI contribs. Almost certainly not enough to give her a worthwhile Cat A pension in her own right. So she's better off seeking a Cat B pension of 60% of the normal rate, based on my full contrib record. Does that mean the contributions she has actually made are disregarded or lost and can't be used towards a pension in any way?

Or does the DWP in effect say, "we'll take account of her 10 years of NI, and then top up the pension amount which that delivers up to the 60% level which the spouse's full record entitles her to"?

Or if she qualifies anyway for the 60% Cat B pension rate on the back of my full NI record, can her 10 years-worth or whatever of contribs then be used to top-up that 60%?

The implication of kidmugsy's suggestion is that she can, and should, grab what she can of her own (Cat A) pension entitlement - which may just be the 25% lump sum; and then look to the DWP to pay her an ongoing Cat B pension based on my NI record?

If either or neither of these scenarios are what applies, then it's not totally clear whether and how paying extra Class 3A contributions as JezR suggests (which would only modestly bolster her own small Cat A pension entitlement) would actually deliver much more pension into her hands....

Paying (say) £4000 upfront as a Class 3A contrib to gain an extra £5 per week on her own Cat A pension of a measly £15 or whatever per week doesn't seem very attractive if the alternative is, for no additional payment, to get a Cat B pension of 60% of the full rate.

Not a simple or straightforward matter, pensions!

greenglide

Class 3A is a one off purchase of an extra entitlement to a pension and is only available to people with a State Pension Date of 5/4/2016 or earlier. It is intended as a "sop" to the people who feel they have been "left out" of the change to nSP.

Generally anyone on a full Basic Pension is better of deferring or suspending for a period which surrenders the same value of pension as this pays around twice the amount - 10.4%.

Deferring is a deferring of whatever entitlement you have. The entitlement is calculated when payment starts and if CAT B from spouse contributions is worth more than CAT A (so you only have less than 60% entitlement) you get the CAT B amount. You have no choice over this (and there is no sense in having a choice).

Deferring does not change this - you defer what you are entitled to wherever it came from.

Class 3A does not change this. You purchase a set amount of weekly entitlement totally separate from you Basic and AP. I am not sure whether you can defer this?

greenglide

Which is totally separate to Class 3A.

Class 3 voluntary contributions can only be paid by people under SPa. Class 3A (top-ups) can only be paid by people over SPa on 5/4/2016 or earlier.

They are very different.

kidmugsy

br1anstorm wrote: »

Thanks to all for replies. I qualify for my state pension in early 2015 (ie before the change in rules)

That is 2015, rather than 2016, is it?

Presumably from that date your wife will be entitled to a category B pension based on your NICs. That will overwrite her own category A pension. But I don't know whether it will overwrite the Extra Pension reward she'll be entitled to by virtue of having deferred: I'd guess not, but haven't looked for the answer. That question wouldn't matter if she had instead requested the Lump Sum reward for having deferred, which would probably be her best plan.

P.S. 1 "The implication of kidmugsy's suggestion is that she can, and should, grab what she can of her own (Cat A) pension entitlement - which may just be the 25% lump sum": there is no 25% about it; if she takes the Lump Sum reward for her deferred pension she gets the lot, plus 2.5% p.a. interest.

P.S. 2 The 3ANICs deal might particularly appeal if she would be taking that pension tax-free; that depends on her other income and her personal allowance: £10,600 for 2015-16.

P.S. 3 "Has anyone done the actuarial sums that help decide how long you have to live in order to benefit from this option (ie recoup the Class 3A amount paid in)?" You'd need to guess at future inflation rates. It may be that you decide that as insurance against future high inflation, and as insurance against her outliving your capital, it's a wise move. Is your wife from a long-lived family? Is her health good? For my wife the answer to both is "yes", but on the other hand she would have to pay tax on the pension bought with 3ANICs. If she didn't have to pay the tax I'm pretty sure we'd go for it. As it is we continue to ponder the question. We have until 5/4/2017 to decide.

greenglide

Presumably from that date your wife will be entitled to a category B pension based on your NICs. That will overwrite her own category A pension. But I don't know whether it will overwrite the Extra Pension reward she'll be entitled to by virtue of having deferred:

She defers the pension she is entitled to. It makes no difference whether it is CAT A or CAT B. It could even be CAT A changing to CAT B during the period of deferral if the spouse reaches SPa during the period.

The sum of the entitlement during the whole period of deferral is calculated.

br1anstorm

I'm trying hard to follow the discussion to which greenglide and kidmugsy are helpfully contributing. But my brain is beginning to hurt!

I think I may have inadvertently clouded the issue by referring to a 25% lump sum. Don't quite know where I got that from. I haven't re-checked. But I suspect I was under the impression that if one deferred a state pension, then when one did seek to claim it, one was allowed to take some of it [25%??] as a lump sum, and then the rest of the pension would go into payment in the normal weekly/monthly way. But maybe I've got that wrong.

Just to recap and to try to keep the discussion on track, the key facts are:

• I have a full NI record, and hit state pension age in Feb 2015. So I qualify for a (full) state pension. I am minded to defer it for at least a year or two, as I have a civil service pension from my employer;
• my wife has a very patchy NI record. We have requested details of how many years' contributions she has, but reckon it's probably less than 10, largely because of no contribs or credits while we were working overseas and because we did not get Child Benefit. So it seems certain that she does not qualify for a full state pension on her own account - we just don't yet know how much, or how little, pension her own NI record would deliver;
• she reached her state pension age in May 2013, but heard nothing then, or since, from the DWP or Pensions Service. By default therefore, whatever pension entitlement she may have, has been deferred.
• incidentally she is a non-taxpayer - has no other earnings, and her income from eg savings interest is well below the £10,600 personal allowance. And (touch wood) she is in good health with, we hope, reasonably good life expectancy!
• we are now trying to clarify (a) what her own entitlement may be; (b) whether there is any sensible way of boosting it; and/or (c) whether it's not worth bothering, and better simply to seek a Cat B pension for her based on my NI record.

So far, it looks as if
- as she was born before 6 Oct 52, she might be able to make up to six years of voluntary contribs to increase her own NI record. But unless this takes her total NI years to more than 18 (the level at which her NI record would deliver more than the 60% Cat B pension she could get on the back of my record), it's not worth doing;
- she might be able to take advantage of the opportunity to pay the one-off Class 3A contribs to boost her pension when this becomes possible in Oct 2015 (although if she does not qualify for a "full state pension" it's not clear if she is eligible to do so);
- if she can indeed pay a Class 3A contrib, but it only goes to boost her own (Cat A) pension, it may still be well below the Cat B pension she could get anyway on the back of my NI record, so may not be worth doing;
- but if a class 3A NI payment could be used to boost a Cat B pension, then it might be worth doing (assuming she lives long enough to recoup the sizeable upfront Class 3A payment).

So far, it seems clear that my wife is entitled to a state pension of some kind (Cat A or Cat with effect from her own state pension age (which she reached in May 2013). What is still not entirely clear is what if anything we can do to increase what she gets.

I am also struggling to figure out whether (a) she can, and should, now claim whatever lump sum she may be entitled to and which has been de facto deferred since May 2013 (her state pension age); and (b) whether she can then also seek, and receive from now on (or from my state pension age in Feb 2015), a Cat B ongoing pension payment based on my NI record.

So much of this puzzle seems to depend on identifying and asking the right questions! I hope I am doing so...

xylophone

With regard to deferring your state pension see https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/372517/dwp024-102014.pdf

as you have not understood the rules.

No doubt you understand what you will receive from your Civil Service pension but if you will need to deal with My CSP, you might need to get your skates on if you require forms etc...

https://forums.moneysavingexpert.com/discussion/5056343


http://www.ageuk.org.uk/Documents/EN-GB/Factsheets/FS19_State_Pension_fcs.pdf?dtrk=true might be worth a look.

kidmugsy

greenglide wrote: »

The sum of the entitlement during the whole period of deferral is calculated.

Do you mean entitlement to a Lump Sum, or to an Extra Pension?