NI Confusion!

FredTheFifth

Whats the rules around NI contribution and the Govt pension? I'm in the LGPS so I know I wont get the full amount, the Govt Gateway site website shows that I have contributed for 44 years, I have 4 years to till my NRA yet Govt Gateway is telling me that I need to keep paying to get my full entitlement, of around £148, at the moment its about £20 short.

My wife had 10 years in the LGPS before packing it in when the children came along and is currently a carer for my Mum, reckons the max amount is given at 35 years and is showing on Govt Gateway that her current government pension is about the same as mine and will rise to about £150.

In amongst all this is that I understand that voluntary contributions can be made.

Just confused with it all.

Dazed_and_confused

You look like you're in the privileged position of paying reduced NI for many years but then being able to increase the basic state pension (approx £122/week) to closer to the New State Pension (£159/week) before you finish paying NI.

Each qualifying NI year after April 2016 could increase your pension to a maximum of £159/week.

p00hsticks

It's been discussed here a number of times.

Under the old pension rules, you paid a reduced rate of NI if you were 'contracted out' of the state additional pension and paying into a 'private' company pension (such as the LGPS).

When the new State Pension (nSP) was introduced in April 2016, the Pension Service calculated everyones Pension entitlement under both the old and new rules, with the higher of the two amounts forming your 'starting amount' as at 6/4/16.

The old rules calculation is;

(NI years up to a maximum of 30 / 30) x £119.35
+ any additional state pension (SERPS or S2P) earned by being 'contracted in'

The new rules calculation is;

(NI years up to a maximum of 35 / 35) x £155.65
- a 'COPE' amount for those 'contracted out'.

With the introduction of the nSP the distinction between 'contracted in' and 'contracted out' disappeared - hence the reason why it is sometines referred to as 'single tier'. Going forward, each NI year earns 1/35th of the nSP amount up to the maximum (currently £159.55)

As you've been contracted out your starting amount would likely be based on the old rules, as you are likely to have had a relatively large COPE amount - your wifes will have been lower.

Many would see you as winners under the introduction of the nSP, as you now have the opportunity to receive a higher state pension amount than you would have expected under the old rules, as well as benefitting from a private pension.