New State Pension Guide

molerat

No point buying pre 2016 years as she already has more than the maximum 35 that can be used in the starting amount calculation. She can only buy 4 post 2016 years, 16-17, 17-18, 18-19 and 19-20, as she reaches SRA in the 20-21 tax year and that cannot count.

xylophone

Your wife's "starting amount" for state pension was calculated at 6 4 16 as the higher of

(old rules) £119.30 (because she had at least 30 years NI) + (SERPS/S2P - Deduction for contracting out)

(new rules) £155.65 (because she had at least 35 years NI) - COPE.

It is virtually certain that old rules calculation was the higher of the two and will be her starting amount.

She already had 36 years full NI at 6 4 16. which was more than required for full state pension under old or new rules.

She will only benefit from buying post 6.4.16 years.

https://www.royallondon.com/Global/documents/GoodWithYourMoney/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf

magicnumber7

Hello. Really helpful thread.

Like Medosh, I'm trying to figure out whether it's worth buying Class 3 NI to top up 3 previously under-paid years.

I've got
* 13 years of full contributions (13/35 years under State Pension)
* 33 years to contribute before April 2050
* 6 years when you did not contribute enough!– of which I can top up 3

I'll probs want to retire 5-10 years before April 2050, so getting to full contributions earlier is preferable.

Does this mean I could essentially retire in 22 years (35 minus 13) and stil get the full £159.55? (exc. law change, inflation, etc)

Dorian1958

Not necessarily magic number, what exactly does your pension forecast say?

If you were contracted out of SERPS your forecast should say exactly how many more years of contributions you need to make to get the new state pension.

molerat

magicnumber7 wrote: »

Hello. Really helpful thread.

Like Medosh, I'm trying to figure out whether it's worth buying Class 3 NI to top up 3 previously under-paid years.

I've got
* 13 years of full contributions (13/35 years under State Pension)
* 33 years to contribute before April 2050
* 6 years when you did not contribute enough!– of which I can top up 3

I'll probs want to retire 5-10 years before April 2050, so getting to full contributions earlier is preferable.

Does this mean I could essentially retire in 22 years (35 minus 13) and stil get the full £159.55? (exc. law change, inflation, etc)

As you have less than 30 pre 2016 years then purchasing pre 2016 part / missing years will add value, whether it is worth it is another question. The NI record will show how much it will cost to buy those years, if you are just a few weeks short then it could be money well spent, extra years banked. Your forecast will give you a current amount accrued figure. Deduct that from £155.65 and divide by £4.45 to show how many more years you need to contribute.

magicnumber7

Thanks Dorian. The forecast says, basically, I have accrued 13/35 years of contributions so far (forecast: ~£55pw) and by April 2050 I'd get to the full (?) amount (~£160pw).

But, of course, April 2050 is 33 years away, whereas I'd only need 23 years to get to the full amount. Whilst I may still work to April 2050, I guess I'm trying to figure out if I need to work until then, or if I can duck out early and still have enough contributions to get the full State Pension...

(The contracting out part of this is also v confusing!)

molerat

The contracted out deduction, an amount deducted for when you paid reduced NI, is only used to calculate your April 2016 starting amount and is never used again. The "old" pension also had a deduction but was not shown separately. Of course, if you purchase those missing pre 2016 years that starting amount will be recalculated. Under current rules all you need to do is pay for the required number of years and you can stop working safe in the knowledge that you will receive the full state pension when the time comes. The only problem could be the moving of goal posts, who knows what is going to happen in the next 30 years.

Dorian1958

Applying molerat's calculation to your figures results in you having paid enough NI contributions to receive the new full state pension in 22 years time, (assuming you contribute throughout that time). Molerat is right, anything could happen before then; time to focus on taking the necessary arrangements to secure your personal pension to enable you to retire early, then if the state pension is still around, it will be a nice bonus. Even though it seems you will not need to buy the extra years, I don't think buying extra years 30 years before you are due to benefit from them is a good idea - horrible thought but if you don't make it to state retirement age that money would be lost.

colsten

magicnumber7 wrote: »

Thanks Dorian. The forecast says, basically, I have accrued 13/35 years of contributions so far (forecast: ~£55pw) and by April 2050 I'd get to the full (?) amount (~£160pw).

But, of course, April 2050 is 33 years away, whereas I'd only need 23 years to get to the full amount. Whilst I may still work to April 2050, I guess I'm trying to figure out if I need to work until then, or if I can duck out early and still have enough contributions to get the full State Pension...

(The contracting out part of this is also v confusing!)

Please be aware that NI contributions are not only used for your state pension entitlement.

Approx 20% of them got directly to the NHS budget, and the rest buys you NI years for the state pension as well as the rights to working age benefits should you become unable to work. Current rules state that if you have not paid NI in the preceding 2 years, you are not eligible for JSA or ESA if you become unable to work.

GunJack

colsten wrote: »

Please be aware that NI contributions are not only used for your state pension entitlement.

Approx 20% of them got directly to the NHS budget, and the rest buys you NI years for the state pension as well as the rights to working age benefits should you become unable to work. Current rules state that if you have not paid NI in the preceding 2 years, you are not eligible for JSA or ESA if you become unable to work.

A lot of people forget about this, it's always been about more than just pension