Pension top up problems

pafpcg

With two separate Faster Payments sent to the HMRC National Insurance Contributions account, I made my Class3A contributions for a State Pension Top-Up on Friday 19th August. Today, I received a letter from the Pension Service of DWP dated Tuesday 23rd confirming I was now entitled to a £25pw Top-Up. So, eight days from sending the funds to receiving confirmation.

TrevorJ, any news on your attempted contribution?

TrevorJ

Eight days! Wonderful.

It is now nearly two weeks since I was told by HMRC that they are 'chasing it up' and still no news. It is well over three months since I transferred the money. No information from them as to what is actually going on. I think I will try that email address next.

bigfreddiel

Did you know that by deferring your state pension it will 'buy' you an increased pension much more cost effectively than the class 3A stamp, approximately 30% cheaper.

If you can cancel the payment it may be worth while calculating which is better in your case. It's not hard, deferring will increase your state pension by 1% every five weeks, or if deferred for a year it will increase by 10.4%.

Get working on a spreadsheet to see which is better for you.

Good luck fj

TrevorJ

I am over the 90 cooling off period and HMRC are not even accepting that they have my £21,000+. They are not even communicating with me. The possibilities of what I can do with the money is academic when I don't have it.

Silvertabby

deferring will increase your state pension by 1% every five weeks, or if deferred for a year it will increase by 10.4%.

It's only 5.8% for anyone reaching SPA on or after 6 April 2016.

TrevorJ

Sorry, I don't understand the point of these messages about deferring my pension. My problem is that £21,000 has gone missing.

jamesd

Silvertabby wrote: »

It's only 5.8% for anyone reaching SPA on or after 6 April 2016.

Anyone who can buy the top up gets an increase of 10.4% per year of deferral if they choose to defer their state pension instead, something they can do once even if they have started to receive it. Mostly inheritable buy a spouse.

So for example at age 65 the top up pays 5.56% of the money spent so say the state pension starts at £8,000 a year. A person could spend £8,000 by deferring and using the £8,000 of savings to live on for a year and get an increase of £832 a year. Or they could spend the £8,000 on the state pension top up and get an increase of only £444.80 instead.

The top up option beats deferring if one of these applies:

1. the person is at least 81 years old.
2. the person already knows that they are going to defer until at least age 81, so they are going to do both, or they have calculated the number of years it would take to defer and worked out the break even number of years compared to top up and are deferring for that many and using top up for any extra years.
3. the person is ineligible for more deferral.

To compare to the 10.4% per year of deferral here's a table showing the pay rate of the top up choice that illustrates why I wrote age 81 earlier:

63 5.56% (52 / 934)
64 5.70% (52 / 913)
65 5.84% (52 / 890)
66 5.97% (52 / 871)
67 6.14% (52 / 847)
68 6.29% (52 / 827)
69 6.49% (52 / 801)
70 6.68% (52 / 779)
75 7.72% (52 / 674)
80 9.56% (52 / 544)
81 10.12% (52 / 514)
82 10.74% (52 / 484)
85 13.20% (52 / 394)

jamesd

TrevorJ wrote: »

Sorry, I don't understand the point of these messages about deferring my pension. My problem is that £21,000 has gone missing.

The point is in part to help others and in part to help you to know what to ask for.

It's likely that your best financial choice is to ask for your money to be returned so you can instead spend it on living while deferring your state pension. Assuming that you're 65 years old the top up for £21,000 will be buying you an increase of £1,226.40 a year. That same £21,000 used to fund your living while you are deferring the state pension would get you an increase of £2,184 a year. That's 78% more income for the same price.

It's not quite that good because to be comparable you also have to fund the £1,226.40 of increase that you'd get out of the £21k while deferring. Say it would take three years, the £1,226.40 reduces the effective amount to spend by £3,679.20. So deferral would get effectively £1,801 instead. So only 49% more income for the same spend.

TrevorJ

Latest news. Tried the HMRC number again. This time I was told that it was not the right number and was given another. Tried this one and got through to someone who was very helpful - if it works out, that is. While on the phone she quickly found out that my £21,000 had been put into the wrong account. It was in my 'self employed' account. I assume that everyone has a number of accounts during their working life.

I was told that the money would be moved immediately to the 'topup' account and DWP informed of the pension upgrade. They should take less than ten days to upgrade the pension. Also I will be sent a cheque for £50 to cover phone calls. Sounds good. We will see.

Of course the question is, if it was so simple to sort out the problem, why was nothing done in the six weeks since I sent them the original letter?

pafpcg

That must be a relief for you!

Now you need DWP to back-date the Class3A contribution to the original payment date (23 May) so that you get the missing three months of the Top-Up payments and how about some compensation for the loss-of-interest for the delay in payment?

Perhaps this is the time to send an e-mail (with your NINO) to that mailbox for the Top-Up Team to check that you'll not lose out from the problem at HMRC.

Good luck!