NI Contributions & early retirement

Undervalued

molerat wrote: »

Signing on is one way of gaining credits. Looking after grandchildren is another. Class 3 voluntary contributions are excellent value with a payback of 3 - 4 years depending on tax, way better than anything an IFA will sell you.

Most defined benefit pension schemes were contracted out. The good thing is that those reduced NI contributions will have made much more in the contracted out pension than they would have in the State Pension.

Surely you can only do that if you are actually seeking work?

p00hsticks

malcolmfowler wrote: »

She worked for Surrey County Council for most of her years, part time hence the low final pension. I can't think that a CC would have been able to contract out.

If she's receiving a pension from them (and you suggest she is) then she would have been 'contracted out' - historically you contracted out (of the various additional state pensions such as SERPS) if your employer offered a pension scheme of their own, and you paid proportionally less NI as a consequence.

The new state pension rules have removed the complexity of contracting in and out, hence the new state pension sometimes being referred to as 'single tier'

p00hsticks

Undervalued wrote: »

Surely you can only do that if you are actually seeking work?

Yes, you do - although to be fair to molerat, the post they were responding to did make it clear that that would be the intention

malcolmfowler wrote: »

Is it an option to 'sign on' and look for a job and have her NI paid that way?

antrobus

malcolmfowler wrote: »

...Is it an option to 'sign on' and look for a job and have her NI paid that way?...

Yes. But signing on is not a requirement, rather 'looking for work'.

There are other ways of getting credits.

https://www.gov.uk/national-insurance-credits/eligibility

The other option is to find a part-time job paying more than £5,824 a year, above the Lower Earnings Limit. You get a credit for that, but only pay NIC on earnings above £8,060; the Primary Threshold.

molerat

Undervalued wrote: »

If you will receive less that the full state pension, you can buy extra up to the maximum, which is more or less the same thing.

I am a similar age to the OP and was quoted a one off payment of roughly £730 now to buy an extra £4.45 per week for life.

So you need to look at what return you would be losing on the £730 before you start getting the a taxable £231 per year back from age 66 onwards.

But it is nothing like the same thing. "Buying back" intimates you can rectify those past years when you cannot. You can only add to your starting amount going forward in exactly the same way as anybody who did not have a full house at April 16. You may not be able to reach that full amount if there are not enough years, as in my case, before SRA and using that term could give false hope to people with only a short time to go.

Undervalued

molerat wrote: »

But it is nothing like the same thing. "Buying back" intimates you can rectify those past years when you cannot, you can only add to your starting amount going forward and you may not be able to reach that full amount if there are not enough years, as in my case, before SRA. Using that term could give false hope to people with a short time to go before SRA.

As I understand it you can "buy" as many lots of £4.45 per week as you like until your reach the full "flat rate" state pension. So, if you are forecast to get less than the full rate, maybe due to having be contracted out, then I think it does amount to much the same thing.

One point though, suppose you are only £2 per week short of the full pension then, although you could still opt to pay the £730, you would only get an extra £2 per week, not £4.55. It is not pro rata and you cannot "buy" more that the full pension.

molerat

You can only buy the amount of years that you have left between 2016-17 and the year before your state retirement year so you may not be able to make the full amount, I can only get to £149.82 due to only having 3 years available to buy. So you cannot "buy back", you can only add to your foundation amount. Using that term implies that those who were contracted out can do something about what happened before 2016, they cannot, that book is closed.