State Pension - NI Shortfall in 2015/16

MikeFloutier

I'm a man just approaching SPA and considering topping up my NI shortfall as my State pension estimate is currently £127.93 (some years CO).

The GOV estimate shows zero NI contributions in 2016/17 & 2017/18, which is correct, BUT "we are checking..." for 2015/16.

It had been saying this for a long while so I phoned them and the nice lady told me that the "we are checking" is a fault in the system and that my shortfall for 2015/16 is £84.60, which makes sense as I retired at the end of February 2016.

I asked her how much difference it would make if I paid that £84.60. She told me that she knew the answer but was not allowed to tell me She lightened up a bit and told me that a change in 2015/16 meant that it probably wouldn't help my pension to fill up my 2015/16 NI record (ie. pay £84.60)

I know it's only £84.60 and not a huge amount in comparison with the £740 odd needed to top up 2016/17 & 2017/18 but I thought I'd ask you guys before chucking it in the pot.

molerat

How many pre 2016 years have you got and how much is your COPE amount ? If you have less than 30 pre 2016 years then buying 2015-16 will add value, 30-35 unlikely and more than 35 definitely not.

MikeFloutier

molerat wrote: »

How many pre 2016 years have you got and how much is your COPE amount ? If you have less than 30 pre 2016 years then buying 2015-16 will add value, 30-35 unlikely and more than 35 definitely not.

Many thanks Molerat, it says I have 46 years of full contributions and my COPE estimate is £70.31 pw

molerat

MikeFloutier wrote: »

Many thanks Molerat, it says I have 46 years of full contributions and my COPE estimate is £70.31 pw

Quite straightforward then, the only way you can add to your pension is with post 2016 contributions.

MikeFloutier

molerat wrote: »

Quite straightforward then, the only way you can add to your pension is with post 2016 contributions.

Ok, thanks for that.

I'm still a little unclear on the 2015/16 shortfall issue though.

Are you saying it won't make any difference if I make up the shortfall in that year BUT it will make a difference by topping up subsequent years?

And, if so, why?

p00hsticks

MikeFloutier wrote: »

Are you saying it won't make any difference if I make up the shortfall in that year ?

Yes

MikeFloutier wrote: »

it will make a difference by topping up subsequent years?

Yes

MikeFloutier wrote: »

And, if so, why?

When the new State Pension was introduced on 6/4/16, a calculation of everyones current pension position was done under both the old rules (which took a maximum of 30 NI years) and new rules (which used 35).

Whichever was the higher became your 'starting amount'. As you had over 35 NI years at that point, another year would have no impact on either of those calcuations.

Each NI year post-2016 will now add around £4.70 a week (1/35th of £164.75) to your pension amount until you either reach the maximum £164.75 or the tax year in which you reach State Pension Age, whichever comes first.



So a one-off payment of Voluntary Class 3 NI of around £750 for 2016-17 would increase your pension by £4.70 a week for life. You can also get NI credits if you are claiming certain benefits or minding grandchildren while the parents are working.

MikeFloutier

p00hsticks wrote: »

Yes

Each NI year post-2016 will now add around £4.70 a week (1/35th of £164.75) to your pension amount until you either reach the maximum £164.75 or the tax year in which you reach State Pension Age, whichever comes first.


So a one-off payment of Voluntary Class 3 NI of around £750 for 2016-17 would increase your pension by £4.70 a week for life. You can also get NI credits if you are claiming certain benefits or minding grandchildren while the parents are working.

Ok, thanks, nearly there. So:

1. No point in filling up 2015/16 since "topping up" only started under the New State Pension - ie. post 5/4/16

2. I can pay my £740 odd for 2016/17, 2017/18 & 2018/19 which will top my State Pension up from £127.93 to £142.02 (ie. 3 x £4.70)

My only remaining question was: "since I get my State Pension on 6 May 2019, can I also top up 2019/20?"

I'm assuming the answer is "No" since, a) it wouldn't be a full year, and b) 4 x £4.70 wouldn't tie up with the GOV forecast.

xylophone

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

Page 11

If your starting amount is below £164.35, each qualifying year from 2016/17 up to the financial year before the one in which you reach State Pension age will increase your State Pension until you reach the full rate.

DairyQueen

MikeFloutier wrote: »

My only remaining question was: "since I get my State Pension on 6 May 2019, can I also top up 2019/20?"
.

No, and see xylophone's post.
Slight correction to poohsticks's excellent post: NI contributions paid in the tax year in which you reach SPA don't count toward your SP.

MikeFloutier

Many thanks all!

MikeFloutier

Hi Guys,

Having applied for my State Pension I'm just about to dip my foot into the water and pay my 2016/17 NIC; just to check that it does actually make a difference in practice

Going on the gov website, it gives me a choice of Class 2 or Class 3 voluntary contributions and I'm not sure which I need to make. Reading each link didn't really help.

I'm currently retired, not paying NIC. Previously, up to March 2016 I was self-employed, paying NIC via self-assessment.

p00hsticks mentioned Class 3 earlier but I wasn't sure if this was specific or just a general reference to topping up.

I don't want to make the wrong one and slip up!