Yet another voluntary NIC thread

monxton

Yes, I have read the others, but I am still not quite certain of all the issues. How do you know whether your pension forecast is based on the old or the new system? And what are the factors that determine which are the most appropriate years to buy? Somebody implied that buying years on different sides of 2016 could tip you over between the old and new systems and waste your money.

My situation:
- pension year 2022
- 35 years contributions, but many were contracted out
- current forecast £126.34pw, potential maximum £154.41pw
- not currently working, and haven't done for a few years

I think that means I could usefully buy up to six years. Should I just go back as early as I can?

Linton

As you already have 35 years of presumably pre April 2016 NI buying further such years will not help you. As you have yet to accrue the full new SP extra post April 2016 NI will increase your SP. In your case it would seem that if you reach SP age after April 2022 buying voluntary NI for all of the 6 years 2016/2017 to 2021/2022 would be beneficial. NI in the tax year you reach SPA does not count.

If you want extra assurance call the Future Pensions Office.

monxton

Linton wrote: »

As you already have 35 years of presumably pre-April 2016 NI, buying further such years will not help you.

Thanks for your reply.

I read my forecast as saying that if I were to buy pre-2016 years then these would replace earlier contracted-out years and thus improve my forecast. Am I mistaken?

If I were to buy additional years, whether pre- or post-2016, then either way I must be depending on the government taking my "best" 35 years contributions by eliminating the contracted-out years, otherwise there can be no prospect of increasing my forecast.

Asghar

monxton wrote: »

I read my forecast as saying that if I were to buy pre-2016 years then these would replace earlier contracted-out years and thus improve my forecast. Am I mistaken?

If I were to buy additional years, whether pre- or post-2016, then either way I must be depending on the government taking my "best" 35 years contributions by eliminating the contracted-out years, otherwise there can be no prospect of increasing my forecast.

The forcast does not say that, you are totally mistaken.

p00hsticks

monxton wrote: »

If I were to buy additional years, whether pre- or post-2016, then either way I must be depending on the government taking my "best" 35 years contributions by eliminating the contracted-out years, otherwise there can be no prospect of increasing my forecast.

Get rid of the thought that you need 35 years contributions for the full State pension - that's only true for those who are just starting their working lives under the new State Pesion rules.

Those of us who are older may need more or less years to reach the maximum amount - in your case, as you say you have been contracted out for many years, probably more.

Each post-2016 NI year will increase your 2016 'starting amount' by 1/35th of the maximum (currently around £4.70) until you reach either than maximum amount or the year in which you reach state pension age, whichever is first. The number of years that takes will not necessarily take your total to exactly 35.

monxton

Asghar wrote: »

The forcast does not say that, you are totally mistaken.

And there was I thinking I was partly mistaken. Good job you're here to put me straight.

Fortunately there are some people here who are willing to generously engage with the topic and share their knowledge, and even know how to spell important words in the domain too.

monxton

p00hsticks wrote: »

Each post-2016 NI year will increase your 2016 'starting amount' by 1/35th of the maximum (currently around £4.70) until you reach either than maximum amount or the year in which you reach state pension age, whichever is first. The number of years that takes will not necessarily take your total to exactly 35.

Thanks p00hsticks! So the model I should be going with is that the 'starting amount' in 2016 is set in stone, as far as I am concerned. (It may be possible for some people to improve that starting amount by buying pre-2016 years, but it is not possible for me, because my old-style pension is effectively 'full'.) However I can improve my pension forecast by buying additional post-2016 years, up until my SPA in 2022, while making sure I don't throw money down the drain by buying more years than are needed to achieve the maximum on my forecast.

How's that?

monxton

p00hsticks wrote: »

Each post-2016 NI year will increase your 2016 'starting amount' by 1/35th of the maximum (currently around £4.70).

When you say "the maximum" do you mean the full flate-rate pension, and not the maximum on the pension forecast?

monxton

I know I'm risking further derision with this, but here goes. If a person under the old scheme had more than 30 years of contributions, then there must be an algorithm which determined which of those years to base the calculation on if some of them were full and some of them were contracted out. I'd still like to know what this is/was. The best 30, the worst 30, the earliest 30, the latest 30, a pro-rated average of all contributions ...?

Thanks for your patience.

pensionpuzzler

30 years will get you the full basic pension. There is no best years, worst years or any other years.

Think full years. You have 30+ pre 2016 so that is the full whack needed.

You can add additional post 2016 years. This will give you roughly £4.80 for every full year added post 2016 to add to your 30 years basic pension. Tot it all up and thats your pension.

monxton

pensionpuzzler wrote: »

30 years will get you the full basic pension. There is no best years, worst years or any other years.

OK, I'm going to repeat my question, this time with a hypothetical example (not mine, because I don't have my exact numbers to hand). A person has 40 pre-2016 NIC years. 20 of them are contracted-out. 20 of them are full years. What is the algorithm for calculating the reduction to their 2016 'starting value' of their new state pension?

Think full years. You have 30+ pre 2016 so that is the full whack needed.

Yes, for the old scheme, but not for the new scheme which I am now under. I am well short of the full flat rate.

You can add additional post 2016 years. This will give you roughly £4.80 for every full year added post 2016 to add to your 30 years basic pension. Tot it all up and that's your pension.

Yes, already clear from p00hsticks's post above. Is there a fresh point here?