I have my National Insurance record - now what?

Seanymph

I am 48, OH is 53.

I have, recently, developed a healthy interest in our retirement planning. We would like to do it sooner rather than later.

Having done a lot of reading on here I started working out what we would be getting from private pensions. Not enough.

I then looked at state pensions;

I received a statement saying I had 30 years NI credits.
I then asked for my NI statement.

This shows exactly 30 years. I have a year back in the 1990's which is 'too late to pay' - although I was unemployed, and then a new mum during that year, so I'm surprised that the benefit/Child benefit didn't cover me.

Anyway - for 2011 - 12 I can 'buy' another year for £453.60. I have until 5th April 2023 to pay for this year.

My question is this: (thank you for getting this far).

Should I pay it?

I know the rules change next April, but am not sure how this will affect me - bearing in mind I have 30 years 'in the bank' already.

What will the additional £453.80 gain me?

As I have so much time would I be better waiting until nearer 2023 and then reviewing the situation?

In an ideal world the OH and I would like to stop working in five years. I don't know how we will achieve this, but it would affect our NI from there forwards obviously.

Thank you in advance for your time.

patanne

Just a quick response until someone who knows more comes along. You already have 30 years, you need 35 for a full SP and you are going to work for another 5 years. I'd hold onto my money until my plans change if I were you.

atush

I agree. If you carry on working do not add extra years now. As you will most likely get up to 35. Then S2p. What did your statement say about earning related pensions built up to date?

then I would check with DWP about that missing year when off work having a child, If you were in receipt of CB (in your name not your husbands) then you should have a credit for that year. So do check.

Then going forwards, if your foundation amount of SP (ie the basic and any extra pension accured up til next april) is below the flat rate, once you get up to 35 years, then you will accrue a small amt of weekly pension (around 4 quid ) for each year you work past the 35 years. Up until you reach the flat rate.

Then if your private pensions aren't enough, start whacking int he funds.

Seanymph

I don't know what S2p is - could you tell me please?

My statement says:

so far you have 30 qualifying years worth £115.95 a week (the full state pension as at 2015-16).

Additional state pension and graduated retirement benefit based on your NI to date is £13.52 a week.

Total £129.47 a week.

What is the flat rate please? If I'm understanding correctly that will be the figure which tells me whether it is worth paying the extra money.

Thanks - I'm not sure quite where to put any money we have spare at the moment, I know I looked at AVC's with my current provider (LGPS) and didn't like the look of it last year - but I'll review it when I get this year's statement.

HappyMJ

You'll be entitled to the full amount so no need to pay any more.

The additional state pension is your S2p state second pension just different wording.

jem16

Seanymph wrote: »

What is the flat rate please?

£151.25 at the moment.

If I'm understanding correctly that will be the figure which tells me whether it is worth paying the extra money.

As you already have 30 years there is no point in paying anything extra at the moment as you have the full entitlement for the basic state pension under current rules.

As you are in the LGPS you are contracted out at the moment so entitlement under the new rules is going to be less.

from April 2016 you will no longer be contracted out so will begin to build up extra entitlement towards the "flat rate". As you're only 48 you are likely to get there with no problem.

There is no need to pay anything extra into the state pension.

Thanks - I'm not sure quite where to put any money we have spare at the moment, I know I looked at AVC's with my current provider (LGPS) and didn't like the look of it last year - but I'll review it when I get this year's statement.

Why didn't you like it?

There is also the option of Additional Pension - APCs.

If you want to retire early then you could consider a PP/SIPP.

atush

Your additional money and where to put it will largely depend on when exactly you want to retire (ie at your scheme age, SPA or before).

jamesd

Seanymph wrote: »

I am 48, OH is 53.

Your OH is in an excellent position. In just two years the OH will be able to get at money in personal pensions. 25% of it can be taken a s a tax free lump sum without affecting the rest or how much can be paid in future pension contributions. This makes pension contributions on of the best things that the OH can do to make money: the lockup drawback of a pension is about to vanish for them. Taking out more than the 25% tax free lump sum will cause a reduction in permitted contributions to money purchase pensions to £10,000 a year instead of the usual £40,000 (but both no more each year than earned income).

Seanymph wrote: »

This shows exactly 30 years. I have a year back in the 1990's which is 'too late to pay' - although I was unemployed, and then a new mum during that year, so I'm surprised that the benefit/Child benefit didn't cover me. ... Anyway - for 2011 - 12 I can 'buy' another year for £453.60. I have until 5th April 2023 to pay for this year. ...My question is this: ...

Should I pay it?

If you were to buy that year before 6 April 2016 the money would vanish, gaining you nothing. The money buys only basic state pension years until then and since you already have 30 basic state pension years it gets you nothing because 30 is the amount that gets you the maximum possible basic state pension under current rules.

Sometime in the next year or so you should be able to apply for and get a statement of your entitlement under the flat rate rules that apply from 6 April. That amount will be the higher of your entitlement under the current rules or the new rules. For a person who has spent a lot of time contracted out into a workplace pension the old/current rules calculation will be the higher one. The current rules method will probably eliminate all of your additional state pension entitlement due to a deduction for being contracted out, leaving just the basic state pension amount. A new rules calculation can reduce the amount below that, which is why it's usually going to be worse.

So it is likely that your "foundation amount" calculation for the flat rate system will be £115.95 a week.

For years worked starting in 6 April 2016 the state pension entitlement increases by 1/35th of the flat rate per year worked. This is capped at the flat rate level, which will perhaps be around £155 a week. So in (155 - 115.95) / (155/35) = 8.8 years you would have entitlement to the full flat rate amount.

There's no point at all in buying years until you're closer to 2023 because by then it may be clear that you'll get the maximum anyway just through normal working. If not, buying can be done.

Seanymph wrote: »

In an ideal world the OH and I would like to stop working in five years.

Lets start by assuming at your state pension age you'll each get £8,000 a year in state pension. The median average pensioner household income is about £18,000 a year. How much do you need for this rest of life income? How much would be nice to have but not extravagant? You'll also have a defined benefit pension, so that'll probably take you well over the median £18k.

Once you know that you can start to work out how to get there. If that's affordable you can work out how to get to the early retirement target. I illustrate a rough way to plan for this in this discussion.

The approximation I used there for early retirement won't be valid for early retirement in just five years. For that situation you need to plan to accumulate something like your whole planned income for each year of retirement before state pension or work pension age, at least for the first five years. After that you can start to allow for some investment growth to reduce the amount it'll take.

Given that you will have substantial guaranteed income from state pensions and defined benefit pension(s) one of the methods that you may choose to use to fund early retirement is a mortgage that you plan to pay off with the guaranteed income. The money released from the mortgage can then be used to provide "income" during the early retirement period. Alternatively you could consider an equity release mortgage with even longer planned pay off time, if any, to reduce the cost of repaying by spreading it over many more years. Downsizing and/or moving to a lower cost property area might also be an option.

xylophone

So it is likely that your "foundation amount" calculation for the flat rate system will be £115.95 a week.

OP's entitlement under the existing rules is higher than basic state pension

Total £129.47 a week.

because she has some graduated and almost certainly some S2P - see post 5 here

https://forums.moneysavingexpert.com/discussion/comment/69144221#Comment_69144221

jamesd

She's 48. Graduated Retirement Benefit accrual ceased in 1975. I doubt that she did much paid work in the first three years of her life. Her OH might have by age eight but that doesn't seem very likely either.

My assumption was that the deduction for being contracted out will be sufficient to eliminate all of the SERPS and S2P that was accrued, leaving just the basic state pension amount. If some is left that'll be a welcome bonus. Don't know just how much time has been spent contracted out but it is possible that it's little enough that some will remain. Easy enough to find out once the projections with foundation amount become available to them both.

xylophone

OP's post

My statement says:

so far you have 30 qualifying years worth £115.95 a week (the full state pension as at 2015-16).

Additional state pension and graduated retirement benefit based on your NI to date is £13.52 a week.

Total £129.47 a week.

Possibly it would be more accurate if the statement said "and/or" as GBR did indeed end in 1975.

Nevertheless, there seems to be no reason why her Foundation Amount should be less than she is entitled to under the old scheme?

Note that under old rules low to moderate contracted out earners were entitled to the S2P top up.

She will be entitled to build on this from 6 4 16 as explained here

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf