When to buy additional post 16 years?

GunJack

sleepless_saver wrote: »

I know it's not what you asked, but at those earnings you should be paying no income tax, not basic rate. Current personal tax allowance is £11500 and you must be well below that. You can claim back up to 4 years overpaid tax from HMRC.

probably already getting TPS pension paid, so any earnings could easily be taxable...

sleepless_saver

Ah, didn't spot the TPS.

relishy57

Thank you for advice on when records will be updated by. I do receive pensions which take me over the personal tax allowance rate. Something that has occurred to me and some of you may have already considered and factored into your calculations is the effect of paying income tax in retirement on adding to your state pension. I know the State pension is not taxed but by buying more years to get up to the full pension after being contracted out will mean more tax taken from other pensions paid. Is there ever a case when this would not be a cost effective plan?

marlot

There is always the danger of a future government making the state pension means tested.

For that reason, I'll defer buying additional years as late as I can.

molerat

relishy57 wrote: »

Is there ever a case when this would not be a cost effective plan?

1. The government move the goalposts - unlikely without at least 10 years notice.
2. Higher income can reduce the cost effectiveness but would likely still be good value just taking longer to reach pay back.

You pay a one off £741 of taxed money to get £238 per year taxable so £190, £143, £131 or £83 per year net depending on your marginal tax rate. A pay back time of 3 to 9 years not taking inflation uprating into account.

relishy57

Thank you Molerat, it had been niggling away in the background as it seems somewhat that you get with 1 hand and then it's taken away with the other. I am grateful, however, to be in a position to be able to do this. Will keep taking the vitamins and exercising.