Civil Service Pension - leaving early

Jennie5

Tom99 wrote: »

Are you entitled to £164.35pw on your contributions to date though? If you have been in the Civil Service or similar pension scheme the chances are you will not have earned £164.35pw but can top it up in the remaining 7 years even if you are not working.

Thanks Tom. How would I find that out then as I thought you had to contribute at least 35 yrs to get the full state pension, which I have?

Tom99

Jennie5 wrote: »

Thanks Tom. How would I find that out then as I thought you had to contribute at least 35 yrs to get the full state pension, which I have?

Check here:
https://www.gov.uk/check-state-pension

The 35yrs is full NI, not contracted out at the lower rate, which you would have been in the Civil Service prior to 2016.
The above forecast will say how much you have earned to April 2018 or April 2017 and what your max pension will be if you continue to contribute.
I have 44 years contribution but was only entitled to c £125pw before topping up.

Jennie5

Tom99 wrote: »

Check here:
https://www.gov.uk/check-state-pension

The 35yrs is full NI, not contracted out at the lower rate, which you would have been in the Civil Service prior to 2016.
The above forecast will say how much you have earned to April 2018 or April 2017 and what your max pension will be if you continue to contribute.
I have 44 years contribution but was only entitled to c £125pw before topping up.

Oh dear, just as I think I have cracked it something else crops ups!
This is what my forecast is telling me:
Estimate based on your National Insurance record up to 5 April 2018
£139.54 a week
Forecast if you contribute another 6 years before 5 April 2025
£164.35 a week

So when I get my pension I will be paying NI then anyway wont I, doesnt this count?
Sorry about all the questions but this is a mind field!

Audaxer

Jennie5 wrote: »

Just checked my NI contributions - it says I have 43 yrs of full contributions and 7 yrs to contribute before 5 April 2025 so I think I am well covered for the state pension, unless the government move the goal posts again!

I think you'll find that means that you are likely to get the full £164 per week if you make NI contributions for the next 7 years. It should say on the online statement your current estimate, i.e. if you don't make any further contributions. I also have over 40 years of full contributions, but as I am retired I need to make voluntary contributions for the next 6 years to get to the maximum £164 per week when I am due to get the State Pension.

As regards your Civil Service pension, if you leave 10 months early you won't have to take the actuarial reduction if you don't actually take the pension until you are 60. If you can fund yourself for these 10 months from your redundancy payment then your pension should be almost as much as it would be if you worked to 60. If you can afford it that to me would seem the better option than taking the pension 10 months early.

Tom99

Jennie5 wrote: »

Oh dear, just as I think I have cracked it something else crops ups!
This is what my forecast is telling me:
Estimate based on your National Insurance record up to 5 April 2018
£139.54 a week
Forecast if you contribute another 6 years before 5 April 2025
£164.35 a week
So when I get my pension I will be paying NI then anyway wont I, doesnt this count?
Sorry about all the questions but this is a mind field!

No you don't pay NI on your pension. You will have to make voluntary class 3 payments if you stop working this year to get to £164.35.
Each full year give you £4.965 per week so you will get £139.54 + £4.70 for your 2018/19 and if you stop working part way through 2019/20 then topping up that year may be a bit less than the £760 odd a year costs.
You need 5.3yrs post April 2018 to get to £164.35 so paying for 5 yrs will get you to £163.01. The 6th yr will still cost £760 odd but will only add the remaining £1.34pw as you cannot exceed £164.35.

Audaxer

Tom99 wrote: »

No you don't pay NI on your pension. You will have to make voluntary class 3 payments if you stop working this year to get to £164.35.
Each full year give you £4.965 per week so you will get £139.54 + £4.70 for your 2018/19 and if you stop working part way through 2019/20 then topping up that year may be a bit less than the £760 odd a year costs.
You need 5.3yrs post April 2018 to get to £164.35 so paying for 5 yrs will get you to £163.01. The 6th yr will still cost £760 odd but will only add the remaining £1.34pw as you cannot exceed £164.35.

Good point Tom99, as probably not worth paying for the last year if OP is only going to get an extra £1.34 per week.

Jennie5, if you can afford it is it definitely worth paying the £760 a year for the 5.3 years, as you will recoup that expense within about 4 years of receiving your State Pension.

BobQ

Jennie5 wrote: »

Just checked my NI contributions - it says I have 43 yrs of full contributions and 7 yrs to contribute before 5 April 2025 so I think I am well covered for the state pension, unless the government move the goal posts again!

Your state pension can go up if you continued to work until State Retirement Age unless you have reached the maximum. This is because for much of your Civil Service you were contracted out. Contracting Out no longer exists so you can gain about £5 a week on your state pension for each qualifying year.

If you plan to retire you can still make voluntary NI contributions by a lump sum to get the extra state pension for life.

https://www.prospect.org.uk/blog/index/2016/November/11/Are-voluntary-national-insurance-contributions-you

Jennie5

Tom99 wrote: »

No you don't pay NI on your pension. You will have to make voluntary class 3 payments if you stop working this year to get to £164.35.
Each full year give you £4.965 per week so you will get £139.54 + £4.70 for your 2018/19 and if you stop working part way through 2019/20 then topping up that year may be a bit less than the £760 odd a year costs.
You need 5.3yrs post April 2018 to get to £164.35 so paying for 5 yrs will get you to £163.01. The 6th yr will still cost £760 odd but will only add the remaining £1.34pw as you cannot exceed £164.35.

Thanks Tom and everyone for your advice, I am learning something every day!

Tom, how did you work out I would need to pay £760 ish per year, I can’t seem to work out the formula?

Tom99

Jennie5 wrote: »

Tom, how did you work out I would need to pay £760 ish per year, I can’t seem to work out the formula?

The cost of a Class 3 NI is £14.65pw this year 2018/19 and, I think, £15pw next year 2019/20. But if you don't retire until May 2019 then filling in the year 2019/20 might be a bit cheaper than the 52x£15=£780. Each full year will add £4.695 per week to you state pension subject to a max of £164.35pw (the £164.35pw is index linked to CPI and will go up in again in April 2020)

https://www.gov.uk/voluntary-national-insurance-contributions/rates

BobQ

Tom99 wrote: »

The cost of a Class 3 NI is £14.65pw this year 2018/19 and, I think, £15pw next year 2019/20. But if you don't retire until May 2019 then filling in the year 2019/20 might be a bit cheaper than the 52x£15=£780. Each full year will add £4.695 per week to you state pension subject to a max of £164.35pw (the £164.35pw is index linked to CPI and will go up in again in April 2020)

https://www.gov.uk/voluntary-national-insurance-contributions/rates

So if you have not reached the maximum state pension, by paying £15 a week in 2019/20 you gain about £5 a week in every year of your retirement (plus any increases for inflation). This means provided you live for 3 years you have got your money back. (Tom do you agree?)