Obvious State Pension question (Class 3 voluntary contributions)

cfw1994

We've focussed a lot on my pension payments.
Now we are checking my wife's.
No longer working, it looks like she has 28yrs fully paid, needs 12 more years for full state pension.
The gov.uk site tells us the current payments would lead to £119.14 per week.
The maximum payable is £164.35.

Is it right to assume that paying in previous years (it is cheaper to start with the missing 2010/11!) would be the place to start to make up the shortfall - we also assuming that each missing year paid up would make up an equal portion of the missing amount (ie, 1/12th) - is that correct?

It sounds like a no-brainer to me to pay this just to maximise the SP in the future (which is 11 years off).

I am concerned that one document we found (CA5602) from them states "voluntary contributions do not always increase your state pension". I am guessing that is when you have perhaps already paid enough, but is there anything we are missing?

Many thanks!

Dazed_and_confused

Pre April 2016 years don't necessarily increase the starting amount for the new State Pension so it is possible to pay for an older year and still be stuck at £119.14.

There are no such complications with post April 2016 years, these will add 1/35th of the full new State Pension (£4.70/week) to the amount already accrued.

Earlier years can be cheaper to pay so look appealing but be careful before paying for these as they may not be worth it.

Each individual's circumstances are different so not possible to say what would happen with your wife.

xylophone

See https://www.royallondon.com/global/documents/goodwithyourmoney/topping-up-your-state-pension-guide.pdf

cfw1994

Thx both for replies: that Royal London document looked great....until Chart B on page 6 then refers to "Is your starting amount based on the old system or the new system?", after the earlier page confirmed she was on the new system....hmm.
The 1/35th thing is odd - she has paid 28 years, but the HMRC page tells her she needs 10 more for the maximum amount (which implies 1/38th?!) - surely it should only need a further 7 years!

Looks like a call to Pension Service will be beneficial - thanks!

xylophone

Thx both for replies: that Royal London document looked great....until Chart B on page 6 then refers to "Is your starting amount based on the old system or the new system?", after the earlier page confirmed she was on the new system....hmm.

She will receive her pension in the new system.
Chart B on Page 6.

The question relates to whether her starting amount was based on the old or new system.


It tells you to ring the Pension Service if you don't know.


https://www.prospect.org.uk/help-at-work/pensions-retirement/state-pensions/how-much-state-pension

The calculations at 6/4/16 were

Old Rules

(NI years/ 30 x £119.30) + (Additional State Pension - Deduction for Contracting Out (if applicable))

New Rules

(NI years/35 x £155.65) - Contracted Out Pension Equivalent (if applicable)

The starting amount was the higher of the two.

Dazed_and_confused

The 1/35th thing is odd - she has paid 28 years, but the HMRC page tells her she needs 10 more for the maximum amount (which implies 1/38th?!) - surely it should only need a further 7 years!

The 35 years is only really for people starting on their State Pension journey after the new system came into play.

Your wife is part under the old system and part the new. The general consensus on here is that that makes her a winner. (Probably) 28 years of paying less National Insurance due to contracting out but she still has the ability to make her pension up to the full new State Pension amount.

molerat

If less than 30 pre 2016 years are paid up then topping up to 30 with pre 2016 years will add benefit. Topping up from 30 to 35 pre 2016 years is dependent on individual circumstances.

Linton

Your wife should talk to the Future Pensions Centre to find out exactly which NI years are and are not worth buying in her specific circumstances.