New State Pension Guide

50Twuncle

jem16 wrote: »

Tax year 2016/17 will increase from 6th April from £733 approximately to £780 approximately. This is the only year that will increase.

You basically have 2 years from the end of the tax year to pay at the price for that year before it goes up to the current year’s price. So 2016/17 goes up April 2017, 2017/18 goes up April 2020 and so on.



If you were eligible then you too would get your NI paid but as you’ve said earlier you’re not eligible so I’m not sure it would be classed as discrimination.

I think you said earlier that you earned about £113pw. Would it not be possible to get an extra hour’s work to take you to £116pw or more where your NI would be credited?

No – I am taking home just £70 per week – average over the year - on top of a non-NI creditable ill health pension
I work for 10 hours per week - paid for 42 weeks a year (in a school)
I have asked my employers for more hours many times and have been told “Sorry – NO !”

jem16

50Twuncle wrote: »

No – I am taking home just £70 per week – average over the year - on top of a non-NI creditable ill health pension

Sorry - I misread one of your earlier posts.

Spiggle

Hi all,

After receiving good advice elsewhere, I have this week checked my State Pension Forecast. I was retired early on ill health grounds in 2013, am in receipt of my LGPS pension @ £9566 pa currently, my late husbands LGPS widows pension @ £2788 pa currently so total per annum now of £12354*.

No dependants, mortgage or outstanding debt and in receipt of a range of interest payments per month too.

My SP will currently become payable in 2027 and while I have paid 35 years of full conts my forecast shows I will not receive the full £164 but will instead achieve £136, so a £28 difference per wk.

There are currently four years (not including 18-19) which I could top up with costs ranging from £722.80 to £741 per year. If I paid up all four it would total £2930.20.

As I am already going to be over the PA for 2019-20TY and my LGPS pensions are index linked, could I ask please for your thoughts on whether it is worth me topping up any or all of the years?

AFAIK no-one would benefit from the top up and it would only increase my tax burden come 2027 if I claimed the SP immediately it became available, is this correct?

Alternatively, could I, in 2027, defer the SP to work back up towards a full SP payment?

As I calculate it, probably wrongly, it will take me two full years claiming SP before I get close to break even for the bought back years**. And that doesn't allow for the tax disadvantages that may be incurred.

Any thoughts on this would be greatly appreciated and guidance if I'm again coming at it the wrong way around to please.

TIA for your response,
Spigs

*As its late in the TY I'm using these as whole year figures to make my brain ache a little less but they will increase in April with index linking.
**Please bear in mind that while I may hope to be alive and kicking in 2027, I am not really a well person.

molerat

Paying voluntary contributions is good value. For each of those £700 odd contributions you will receive each year £195.50 after accounting for a 20% tax deduction, increasing with inflation each year, so takes under 4 years to recoup the capital outlay. Only you can decide if it is worth it in your personal circumstances. Look on it like inverse life insurance which only pays out if you live, you get nothing if you don't. You have got plenty of time to fill those 4 years though as you haven't got any cheap part years open, the full year cost will increase by inflation each year so 19-20 will cost £780.00 and so on. Don't even consider buying any pre 2016 years as they will not add to your pension, your starting point would be 2016-17 at £733.20.

Spiggle

molerat wrote: »

Paying voluntary contributions is good value. For each of those £700 odd contributions you will receive each year £195.50 after accounting for a 20% tax deduction, increasing with inflation each year, so takes under 4 years to recoup the capital outlay.

Only you can decide if it is worth it in your personal circumstances. Look on it like inverse life insurance which only pays out if you live, you get nothing if you don't.

You have got plenty of time to fill those 4 years though as you haven't got any cheap part years open, the full year cost will increase by inflation each year so 19-20 will cost £780.00 and so on. Don't even consider buying any pre 2016 years as they will not add to your pension, your starting point would be 2016-17 at £733.20.

Thanks molerat,

I've sectioned out your answer as my brain hurts.

The gist of the first part of your answer seems to be clear but, please, what do you mean by £195.50 per annum net of tax? Sorry to be dumb but I thought the limit per week is £164 gross of tax.

Your second part answer on inverse insurance makes a lot of sense, thank you.

Now on the third part of your answer, I'm confused (or a neat freak). Why would paying up 2014-15 and 15-16 not add to my pension? And how would I inform HMRC it was e.g. 2016-17 I wanted to pay as the reference given to me by them for online payment has nothing about which years I'm paying off?

Please accept the apologies of a recently widowed airhead if I'm completely missing your point.

Thanks,
Spigs

molerat

For each year you pay contributions for at £733.20 etc you will receive, at today's rate, £4.70 per week extra pension for the rest of your life. That equates to £244.40 per year on which you would have to pay 20% tax so £195.52 net.


You can only benefit from a maximum of 35 pre 2016 years and as you already have that amount adding any more will not count. Post 2016 can add though.


The way we have paid ours is by sending a cheque and letter clearly stating which years we were paying for.

jem16

Spiggle wrote: »

Thanks molerat,

I've sectioned out your answer as my brain hurts.

The gist of the first part of your answer seems to be clear but, please, what do you mean by £195.50 per annum net of tax? Sorry to be dumb but I thought the limit per week is £164 gross of tax.

At the moment adding one more year at £164.30 gives £164.30 divided by 35 which is rougly £4.70pw extra. Multiplied by 52 that gives an annual extra amount of roughly £244.40. If all of that is subject to 20% tax then the net amount is £195.52 so that's the extra amount you will get each year.

Now on the third part of your answer, I'm confused (or a neat freak). Why would paying up 2014-15 and 15-16 not add to my pension? And how would I inform HMRC it was e.g. 2016-17 I wanted to pay as the reference given to me by them for online payment has nothing about which years I'm paying off?

Please accept the apologies of a recently widowed airhead if I'm completely missing your point.

Thanks,
Spigs

Your entitlement was calculated in April 2016 as the better of the old rules vs the new rules. As you've been contracted out your entitlement under the new rules was probably better and as you have at least 35 years paying for pre 2016 years will not improve your pension in any way.

If you are paying voluntary NI, then you should have informed HMRC as to exactly which tax years you wish to pay. The years you are paying for should give you the amount that needs paying so it should be obvious.

Have you been in touch with the Future pension Centre first to confirm which years would benefit you? If you haven't you really should do this first.

Spiggle

molerat wrote: »

For each year you pay contributions for at £733.20 etc you will receive, at today's rate, £4.70 per week extra pension for the rest of your life. That equates to £244.40 per year on which you would have to pay 20% tax so £195.52 net.

You can only benefit from a maximum of 35 pre 2016 years and as you already have that amount adding any more will not count. Post 2016 can add though.

The way we have paid ours is by sending a cheque and letter clearly stating which years we were paying for.

Thank you molerat, now I think I understand your first reply a little better. I used to be so good at all this ... no really, please don't laugh. Thanks for the tip on cheque and letter, a much more civilised and auditable way of dealing with things imho.

jem16 wrote: »

At the moment adding one more year at £164.30 gives £164.30 divided by 35 which is rougly £4.70pw extra. Multiplied by 52 that gives an annual extra amount of roughly £244.40. If all of that is subject to 20% tax then the net amount is £195.52 so that's the extra amount you will get each year.

Your entitlement was calculated in April 2016 as the better of the old rules vs the new rules. As you've been contracted out your entitlement under the new rules was probably better and as you have at least 35 years paying for pre 2016 years will not improve your pension in any way.

If you are paying voluntary NI, then you should have informed HMRC as to exactly which tax years you wish to pay. The years you are paying for should give you the amount that needs paying so it should be obvious.

Have you been in touch with the Future pension Centre first to confirm which years would benefit you? If you haven't you really should do this first.

Thank you jem16, I must have been so out of the loop in 2016 to have missed all of this, your explanation is warmly welcomed too.

At the risk of looking dumb again, what is the Future Pension Centre? I haven't yet made the payments - good thing too - but spoke to the NI helpline number given when I was logged on to my pension forecast. The lady there did tell me to seriously consider whether buying back was worth it and I came back to the forums to get advice. Any link or pointer you may have would be gratefully received.
Edit: I found a link in another thread so thank you for alerting me to it. I'll give them a call tomorrow.

All the best,
Spigs

50Twuncle

I was of the belief (due to being told by the local JCP) that having a "contracted out" works pension limited your maximum SP - and as such, any extra NI payments that were made made no difference to your actual SP received ...
This - it turns out was a deliberate lie to try to make life easier for them - not having to deal with my issue

Hence I asked my MP to get involved - which he is now doing - he has written to the minister - I am currently waiting on a response !

Spiggle

Thanks again molerat and jem16,

You've really saved me £1456 that I would have spent buying pointless pre-2016 contributions, thank you, thank you, thank you. :A

I've spoken to the FPC and the lady I discussed this with was very helpful. You are aware of the rules, changes, etc. and she confirmed all the advice you gave above to be spot-on.

She informed me that it is possible to pay by Direct Debit to HMRC for future years i.e. from 6 April 2019 going forward which I intend to do at least for 2019-20 if not the following year as well. I am about to get form CA5603 from the Gov.uk website to set this up. Please note Direct Debit payment is only for future years not yet started and not for any buy back contributions.

In addition, she explained that I was close to deadline for the 2016-17 missing year so I will pay that and 2017-18 with a cheque and letter explicitly identifying which years I'm buying back. She also advised asking for a written receipt from HMRC for audit purposes (or neatness as I like to call it).

The FPC lady also advised me what the cost for 2018-19 will be (£761.80) though I do have some time to consider this buy back so will not jump straight onto it but await the amended SP forecast once the two years I'm about to settle are added in.

Assuming I pay the DD for the whole of 2019-20 and buy back 18-19 before the option expires, I can then reassess the whole situation in 12 months or so as I would still require a further 2yrs post-2016 contributions to bring my SP up to the max of £164 pw.

Does that sound like the right plan to you knowledgeable people on here please?

TIA and best wishes,
Spigs