Pension Amount Query

Homeboy_1

Hi, I took early retirement last September at 64, and I am due to claim my state pension at the end of September this year. I have got a pension forecast of £152.78 and it says that this is the maximum amount I can get. (46 years of full contributions). I have just read on another site,(This is money) that if your state pension will be less than £159.55 per week you can top it up by using a little known loophole called Class 3 NI. It states,

Investing just £741 this year could buy an extra £237 a year income for life. What's more, that income is guaranteed to rise every year in line with prices, wages or 2.5 per cent — whichever is higher.

It's equivalent to getting an annual return of 30 per cent a year — that's 12 times more than you could get from an annuity, which turns your private pension pot into a guaranteed lifetime income.

I am confused now as my state pension forecast states that I can't get any more than the stated maximum. I would be happy to pay the £741 to top up my pension if this was possible. I thought I had got all my pensions sorted and now this little query. Any help on this query is much appreciated. Thank you in advance for any help or advice

Dazed_and_confused

What did DWP say when you asked them what difference paying voluntary NIC would make?

Silvertabby

You clearly have some contracted out service, so forget about paying pre 2014 NI contributions.

Where did you get your pension forecast from? If it was on line, have a look at your NI contributions history. As you only worked from April to September last year, is this showing as a full financial year?

What was the date of your forecast? If it doesn't include the 16/17 update then you may find that another £4.50 has been added to your forecast. You don't/can't pay NI for 17/18 as this would be less than a full financial year (April to April) hence the 'this is the maximum you can get' comment'.

Homeboy_1

Hi Dazed and Confused, and Silvertabby, I only went on the gov.uk website this morning, so I haven't been in touch with the DWP as yet. Yes there are some contracted out service (about 10 years) when I checked on line this morning it said full contributions for 46 years and 3 years without. Yes this does include 16/17 update so maybe that's why. Think I will make an appointment with DWP to see if it is possible to do anything. Thank you both for your replies

Silvertabby

Then it sounds like £152.78 really is your maximum amount.

Have you started to draw your contracted out pension yet?

xylophone

Old rules calc at 6 4 16

£119.30 +(SERPS/S2P - deduction for contracting out)

New rules £155.65 - deduction for contracting out (COPE).

It is probable that the old rules calculation was the higher of the two and gave you around £148- you either earned enough /were credited with NI for 16/17 to give you around £152.

You reach SPA in September so cannot buy/be credited with another year so DWP have told you you cannot improve the pension?

Homeboy_1

Thank you Silvertabby and Xylophone, yes I have been drawing my contracted out pension since I retired. Looks like you have got it spot on Xylophone. The way you have explained it makes good sense. Just hoping I could have got slightly more pension. Thank you very much for your help. Much appreciated

greenglide

You can defer it if you have sufficient income for a period.

This is worth almost 5.8% for each complete year and this is index linked to the CPI. An excellent deal for anyone in reasonable health.