Unlikely to get close to qualifying for pension, best options?

Lungboy

antrobus wrote: »

It depends on what you envisage happening after this chronic deteriorating health issue prevents you from working. Where you to get ESA, you would also get Class 1 credits, and they count towards your state pension.

It's a transplant or death, generally pretty rapidly.

jamesd

Lungboy wrote: »

I'm guessing there's no way to opt out of the state pension in favour of additional payments to my LGPS?

Right, no way. But LGPS already opted you out of most of the earnings-related portion before 2016-17 when the ability to do that was withdrawn. You'll instead get that bit as part of the LGPS pension whenever that pays you. You'll still get the full flat rate state pension as well if you pay in and get credits for long enough.

jamesd

Lungboy wrote: »

Ok, so the LGPS is still a goer, but I should essentially write off my state pension? No point in trying to buy the 6 partial years I'm allowed to buy?

Yes there is a point and they will increase your pre-2016 amount and reduce the number of years you need, GunJack was wrong.

But there's a catch: uncertainty.

I don't know how likely it is that you will live to the age 68-70 that state pension age is likely to be by the time you get there. I don't know if by then there might be options to take it early, particularly due to ill health, there is consideration of such things though no sign of actual change yet.

I bought back years when it was 30, down from 48. Then it was raised to 35. If I hadn't bought years it wouldn't now be possible for me to get to 35 years. I don't know whether the number of years might go up again.

I do know that it's likely to be cheaper for you to buy those past years than to buy years later. But you might get credits fee of charge instead, so it could be wasted money.

So, how far back can you go and what's the cost of each year? Doing any really cheap ones is a decent move, might work out well, might not, but cheap limits the potential loss. If it's getting to the over £700 sort of level the trade off won't be so good. Too much chance of you not living long enough or getting credits. So at that sort of level, not buying is the way that's likely to be best.

Lungboy

jamesd wrote: »

Right, no way. But LGPS already opted you out of most of the earnings-related portion before 2016-17 when the ability to do that was withdrawn. You'll instead get that bit as part of the LGPS pension whenever that pays you. You'll still get the full flat rate state pension as well if you pay in and get credits for long enough.

It's the "long enough" bit that's the issue

Maybe it's worth looking at AVCs, or a LISA. I guess I need to weigh any additional payments to a pension against paying down my mortgage?

GunJack

jamesd wrote: »

Yes there is a point and they will increase your pre-2016 amount and reduce the number of years you need, GunJack was wrong.

I thought since the starting amounts came in in 2016 they were fixed, and pre-2016 years wouldn't add any, or is that only if you had >30 years by then already?

jamesd

Mortgage is unlikely to be a good move unless your LTV is higher than 75%. Is it? If it is, the lower interest rate you can get on the whole remaining balance tends to make getting down to 75% a good move.

LISA is an account you should open but fund only minimally because the earliest age you can take money out without penalty is sixty. The time to fund it is between 55 and 60.

Personal pension money is available from 55 with a tax free lump sum of 25%. That lump sum is the most efficient commonly used way to pay off mortgage capital. Rather than overpaying the mortgage you're likely to be better off extending the term so you pay as little capital as possible until 55.

For money needed before age 55 a S&S ISA is the way to go. As you get closer to 55 you can start to move some of this to the pension.

jamesd

GunJack wrote: »

I thought since the starting amounts came in in 2016 they were fixed, and pre-2016 years wouldn't add any, or is that only if you had >30 years by then already?

Only if you already had at least thirty years. Sometimes those with up to 34 years can benefit. It depends on whether the foundation amount old rules or new rules calculation was higher. Or sometimes it can make a new rules calculation higher than the old rules one between 30 and 35 years.

Above 35 years there's no chance of benefitting.

Usually a person who was contracted out for a long time would use the old rules calculation and not gain for going over thirty years. [STRIKE]Same for those whose record is mostly credits.[/STRIKE] But until it's at 35 you need to consider whether there's still a chance of gain.

Less than thirty is clear cut, always a higher foundation amount under both old rules and new rules calculations. But if it's a long time to state pension age or not much more to get to the maximum they might get to the maximum anyway, so it could still be wasted money.

molerat

jamesd wrote: »

Usually a person who was contracted out for a long time would use the old rules calculation and not gain for going over thirty years. Same for those whose record is mostly credits.

I don't understand your logic on that point. Anyone who has a record made up mostly from credits will most likely be "basic" only and therefore under the new scheme calculation so pre 2016 years will be of benefit to make up to 35 (if no future contributions are made / credited of course).

atush

Lungboy wrote: »

Thanks both. My worry is that my health could drop off a cliff in, say, 10 years. If I get written off on health grounds what happens? I thought you took abig hit if you take your pension early, so paying in to a private pension could be very expensive, is that wrong?

If you are off work on beneifts due to illness, you will get Nics crdits for those years. You should have the full flat rate pension plus any ill health pension.

When it gets bad, dont quit your job. instead apply for ill health retirement

Lungboy

jamesd wrote: »

So, how far back can you go and what's the cost of each year? Doing any really cheap ones is a decent move, might work out well, might not, but cheap limits the potential loss. If it's getting to the over £700 sort of level the trade off won't be so good. Too much chance of you not living long enough or getting credits. So at that sort of level, not buying is the way that's likely to be best.

The 6 years that I can buy back would total a little over £3k.

jamesd wrote: »

Mortgage is unlikely to be a good move unless your LTV is higher than 75%. Is it? If it is, the lower interest rate you can get on the whole remaining balance tends to make getting down to 75% a good move.

LISA is an account you should open but fund only minimally because the earliest age you can take money out without penalty is sixty. The time to fund it is between 55 and 60.

Personal pension money is available from 55 with a tax free lump sum of 25%. That lump sum is the most efficient commonly used way to pay off mortgage capital. Rather than overpaying the mortgage you're likely to be better off extending the term so you pay as little capital as possible until 55.

For money needed before age 55 a S&S ISA is the way to go. As you get closer to 55 you can start to move some of this to the pension.

LTV is sub 60% at the moment. I'll look into an S&S ISA, thanks.