Class 3 voluntary NI contributions - suggestions please to maximise State Pension

aspensky

Hi folks,
I've just checked my SP forecast, and am hoping that some of you could please suggest how best to maximise my State Pension based on the figures provided. My UK work life has been a bit erratic, as many years have been spent overseas. This is a pattern that will perhaps continue, and as I am now 52 years old, I thought it probably best to address some of the NI contributions gaps. My government forecast reads as follows:-

State Pension due in 2033, and based on contributions to date £115.58 per week

If another 11 full year contributions made before 2033 SP will be £164.35

Summary:
26 years of full contributions
15 years to contribute before 2033
10 years when didn't contribute enough

The years not full and top-up amounts are:
2016-2917 £394.80
2015-2016 £493.50
2014-2015 £430.90
2013-2014 £176.15
2012-2013 £689
2011-2012 £655.20 (These all say to be paid by 2023. Figure may increase after 5/4/19)

COPE ESTIMATE £21.63

So basically, the big questions are:
1/ Should I top up a couple of years at a time when I have spare cash?
2/ Does it make any difference if I do it now, or wait a couple of years?
3/ Which years would be best to top up for maximum SP? My inclination of course is to pick the cheapest years, but I have read on here that some years are more important than others.
4/ As I have another 15 years until State Pension age, would It make more sense just to wait another 10 years or so to see what my contribution record is then, before I make any additional payments?
5/ Is it wise to "lock" in extra NI contributions now, in case changes are made to the system again in the coming years.

Sorry for the long post - thanks for reading and hoping that some of you may be able to offer suggestions on how best to proceed. Many thanks

molerat

A lot depends on what is going to happen with your NI contributions in the future. What about 17/18, is that full ? Those pre 2017 years will go up to £15 per week / £780 per year from April 19 so they need addressing soon if you want to purchase them. Only another maximum of 4 (or 5 depending on if 17/18 is full) pre 2016 years can be used to add to your pension due to your COPE amount so with an erratic work future I would be tempted to purchase at least 13/14 and maybe 14/15 and 15/16.

aspensky

Hi Molerat, thanks for the speedy reply.

My 2017/18 and 2018/19 years will also not be full (not yet showing on my forecast)

The whole thing is very confusing regarding COPE. I had thought I was better to purchase post 2016 years to maximise pension, but is it actually the pre 2016 years that help to reduce the COPE amount? Would I be best to purchase a couple of the earlier years before increases in april, and then re-assess in a few years? I can't afford to buy them all at once, so want to try to cherry pick the most helpful.

Thanks for your thoughts

p00hsticks

aspensky wrote: »

The whole thing is very confusing regarding COPE. I had thought I was better to purchase post 2016 years to maximise pension, but is it actually the pre 2016 years that help to reduce the COPE amount?

nothing will actually reduce the COPE amount, but as you have less than 30 full years at present, buying some pre-2016 years is going to increase your April-2016 'starting amount' for the New state pension regardless of whether the calculation was higher under the old or new rules (the former uses a maximum of 30 NI years. the latter 35)

molerat

17/18 should be showing by now.


As you are not showing any post 2016 years your April 2016 starting amount was £109.48 (£115.58/1.03/1.025) so was under the old system as the new 26 x £4.45 - £21.63 = £94.07 which is lower. If you buy all the 5 pre 2016 years then your new system calculation would be £116.32 and your old system calculation would be £125.40 so the old again wins but you would have wasted the money on one year as only 30 can count under the old rules. Each pre 2016 year you purchase, up to the 30 max, will add £4.20 to your current £115.58 and post 2016 will add £4.70.

aspensky

Thank you so much Poohsticks and Molerat - your answers actually made sense to me, unlike anything on the government websites!

As I can only afford to contribute towards a couple of years at the moment, would it make sense to pay 2013-2014 (as it's only £176.15) and 2016-2017 (£394.80). So that would actually be one pre and one post 2016 year? And then hopefully revisit the question in a couple of years and fill some more gaps?

Or am I really not understanding this at all!

Thanks again for any thoughts/suggestions - much appreciated

SnowMan

You are going to need 11 Qualifying Years to get you up to the full new State Pension, of which at least 7 have to be post April 2016 Qualifying Years. As molerat correctly says the 5th pre April 2016 year doesn't increase your State Pension at all (just the first four missing years) hence why at least 7 must be post April 2016.

What prospect have you got of getting some or all of those 11 Qualifying Years from employment/self-employment or national insurance credits in the coming years?

If you are retired and won't get any future Qualifying Years (or part years, bearing in mind part years might be cheaper to top up) going forward then ideally you would buy 2011/2012, 2013/2014, 2014/2015, 2015/2016 and 2016/2017 before the cost goes up on 5th April 2019 (i.e. four pre April 2016 years and one post April 2016 year). But if you can only afford 2 years now then 2013/2014 and 2016/2017 seem like the obvious ones to buy now.

molerat

aspensky wrote: »

Thank you so much Poohsticks and Molerat - your answers actually made sense to me, unlike anything on the government websites!

As I can only afford to contribute towards a couple of years at the moment, would it make sense to pay 2013-2014 (as it's only £176.15) and 2016-2017 (£394.80). So that would actually be one pre and one post 2016 year? And then hopefully revisit the question in a couple of years and fill some more gaps?

Or am I really not understanding this at all!

Thanks again for any thoughts/suggestions - much appreciated

Those 2 would certainly give most bang for your buck and would bring your current figure up to £124.48 leaving you another 9 to make up later. Now if you only had a crystal ball ..............

Linton

You can get the definitive answer by asking the Future Pensions Centre: https://www.gov.uk/future-pension-centre. They will be able to tell you which years contributions would provide any benefit.

drumtochty

Then after taking molerats advice to pay 5 pre 2016 NI contributions or 2 as you can afford, pay Class 2 contributions until the government stops them as from this tax year and for the next 9 tax years to get the maximium state pension. In future when Class 2 contributions are stopped you will have to pay whatever is the new voluntary contribution regeme.


That is assuming you are not working in the UK in the future. If you do pay NI from working in the UK then no need to pay voluntary contributions in those years as you will be paying normal contributions from working assuming you earn over £6,024 a year from one employment.


Therefore from this year on if possible pay another 10 NI years over and above the 2 you plan to pay for previous years in order to get the maximum state pension in future.

molerat

drumtochty wrote: »

Then after taking molerats advice to pay 5 pre 2016 NI contributions,

Only 4 max ! But as op can only currently afford 2 the 2 cheapest they suggested, 1 pre and 1 post, is the current best option.