Ni gaps in Pensions

MollyV

I have been researching, and now am confused. Basic info. Retirement date 2022

My last NI conts were 2011, up til then i have 33 full years.

UK gov site says full pension will be 155.60
Then it says my breakdown figure is 133.40

Other sites say multiply 4.44 by 33 to caculate what you will get this comes to 155.40

I also have COPE 23.20

I have the option of paying a total of 1427.40 to make up 2 years to get to 35 full years. This make monetary sense to be as the difference between 133.40 and 155.60 is 22.25 thus equals to 64 weeks.

My question is where does the figure 133.40 come from? And am i right in thinking its a good idea to make up the missing 2 years.

Thanks for any replies

Elijah_Bailey

If you are not going to contribute any further NI then the paying for the missing two years is good value as you will be "in profit" after about 64 weeks of receiving your state pension.

I think the £4.44 calculation only applies to NI years after 6th April 2016 so will not be relevant to your NI record.

Silvertabby

Molly - you have 33 full financial years, but not 33 full years, as you have been contracted out at some point, thereby paying reduced NI. I do think DWP could have made this bit clearer!

We are the same age, and I've also retired (earlier this year in my case). I've just obtained my own on-line Statement, any current forecast is £138+. The £155.60 is what I would get if I worked or paid for a further 4 years NI. In your case, as your foundation pension amount is £133.40, you would have to pay for a further 5 years NI in order to accrue the full State pension.

If you only paid 2 years, that would indeed cost you £1427.40 - but your pension would only increase by 2 x £4.45 per week (£8.90). That would take your State pension to £142.30, not the full £155.60.

molerat

£133.40 is what you currently have, £155.60 is your projection if you continue to contribute for another 5 years.

As to making up missing years.

Your starting amount is the higher of the new 35 year calculation or the old 30 year calculation. Yours will be based on the old calculation of 30 years basic of £119.30 + some additional pension.

You currently have 33 years which gives you, under the new calculations, £146.75 - £23.20 COPE = £123.55. If you purchased the missing pre 2016 years the new calculation would be £155.65 - £23.20 COPE = £133.45.
so by purchasing those 2 years for £1427 you will only benefit by 5p per week.

Purchasing post 2016 years is the way to go which will add £4.45 to your £133.40 for each year purchased.

xylophone

http://www.thisismoney.co.uk/money/pensions/article-3535618/STEVE-WEBB-Buying-ups-paying-missing-NI-boost-state-pension.html


Your starting amount is the higher of the old rules calculation (BSP of £119.30 +ASP - a deduction for contracting out - (in your case this seems to be £133.40).

or new rules (33/35 x £155.65) - COPE. This would be £123.45.

Each year from 6 4 2016 adds 1/35 x £155.65. to your starting amount.

You can make voluntary contributions.

https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

MollyV

Thanks for the replies. I have been back to the pension forecast site and noted that it does tell me

33 years of full contributions
6years to contribute before 5 April 2021
11 years when you did not contribute enough

So given i havent got 33 full years, buying 2 years is not going to do it. (2013/4 & 2014/5 @ 700 ish per year)

So an option is to buy 5 years to add 4.45 for each year. Does anyone know how much each post 2016 year will cost?

Obviously I have to calculate if its worth buying years or just investing the equivilent payment.

Thanks again

p00hsticks

MollyV wrote: »

Does anyone know how much each post 2016 year will cost?

It's currently £733 a year - great value for an extra £4.45 a week if you have average life expectancy

see note 7 in this great guide
http://www.royallondon.com/Global/documents/GoodWithYourMoney/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf

molerat

You will have great difficulty in buying anything that will give a better return than class 3 contributions. (class 2 excepted of course)

MollyV

Thats a great link to royallondon, ta!

So have i got this right? Top up 5 years, 5 x £733 = £3665 cost to me, I can do this at anytime between now and 2023.

My start pension at present is £133.40

5 x 4.45 = 22.50

£22.50 plus 133.40 = 155.90. Ie full state pension

52 x 22.50 = 1170

So it will take me just over 3 years to get the benefit of buying the extra years.

molerat

MollyV wrote: »

Thats a great link to royallondon, ta!

So have i got this right? Top up 5 years, 5 x £733 = £3665 cost to me, I can do this at anytime between now and 2023.

My start pension at present is £133.40

5 x 4.45 = 22.50

£22.50 plus 133.40 = 155.90. Ie full state pension

52 x 22.50 = 1170

So it will take me just over 3 years to get the benefit of buying the extra years.

Basically, yes.

but

You must have paid up before your retirement date.
You have 2 years from the end of the year to buy the year at the historical year price, after that they increase to current year price.

Prices are currently £733.20 but increase in line with cpi annually.

MollyV

So i could buy all 5 years now? At £733 per yr

Or buy each year separately, and each year will slightly increasd in price

All before my retirememt date.