Help. Doubts on paying voluntary payments for NI

thinfatwhiteduke

Hi there friends. I really need your precious advice here.
Hi have gaps in my National Insurance record. It says on the tax.service.gov.uk website that you can make up the shortfall paying a voluntary contribution.(About 3 years gaps/ contributions required would be around 1k or a bit more). Then clicking on 'Find out more about voluntary contributions.' and it also says 'Paying voluntary contributions may not be your best option when planning for your retirement.' (Really? Why?)
I called an adviser (on the telephone number suggested) and even if I expressed my desire to pay for the missing years, she said that I don't have to pay the voluntary contributions, because I have time.
But isn't in my interest to have the highest number of years with NI contributions? Of the 35 years I have to work, the more the years with NI contributions, the less the number of years remaining to work....or is my understanding bad?
Also, it says that from April 2019, the current amount (of each year missing in my record) could increase. So again, isn't in my interest to pay for the gaps before the price becomes much higher?
She also said that I need at least 10 years to start building my pension. What does that mean? Don't we start building our pension from our very first working year?
Your help is very much appreciated.
Cheers!

xylophone

How old are you?

What exactly does your state pension forecast say?

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

Dazed_and_confused

She also said that I need at least 10 years to start building my pension. What does that mean? Don't we start building our pension from our very first working year?

You do "start building" your pension from year one.

But under the new rules you have to have ten years before anything is payable. So building 9 years would get you £0.

It is difficult to understand your situation when you haven't said how old you are or what your State Retirement age is.

Or said what your current State Pension forecast is.

Or how many more years you plan to earn qualifying years.

If you are in the transitional period i.e. had built up some qualifying years prior to the rules changing in April 2016 then it can be tricky to know whether buying years is good value or even worth considering.

Having 35 years doesn't entitle you to the full State Pension unless you are entirely under the new rules i.e. quite young.

thinfatwhiteduke

I'm 32 (33 this year).
On the the tax.service.gov.uk website it says that I have :
3 years of full contributions
5 years when I did not contribute enough
(Of those 5 years, 3 years show the amount I can pay, and 2 years still have to update informations and see if they count towards my pension).

Also, copying and Pasting :
'Your State Pension summary
You can get your State Pension on 29 March 2054. Your forecast is
£164.35 a week
£714.63 a month, £8,575.55 a year
Your forecast
is not a guarantee and is based on the current law
is based on your National Insurance record up to 5 April 2018
assumes that you’ll contribute another 32 years
does not include any increase due to inflation
You currently have 3 years on your record and you need at least 10 years to get any State Pension.

molerat

You need another 32 years
You have 36 years to years to achieve this so 4 years spare.
How much are those years to buy ?

thinfatwhiteduke

Of these 5 incomplete years :
3 years show the amount I need to pay (overall a bit more than 1K)
the other 2 years (more recent, and hopefully cheaper) are still updating.

From my understanding, if I buy these 3 years, I go from 32 years to 29, and maybe later if I will have to buy the other 2, I can reach 27. To me seems illogic not to buy them.

tacpot12

It is in your interests to have the highest number of years of NI contributions, and if your quote of about £1000 is correct to buy you three years, then this looks good value. The reason that website and the advisor say that it may not be in your interests to pay now, is that you might contribute automatically in later years, or receive NI credits because you are unemployed, or even die before you reach state retirement age, so you might be paying money now when you don't need to.

While this is correct, I would agree with you that it is better to bank as many years as early as you can, to give you more flexibility in later life. However you might feel cheated when you are 62 and haven't got enough savings to stop working (and can't draw the state pension because you are not old enough), and so have to carry on working and NI for a further five years.

Buying now while the years are cheapest also seems sensible. If you can afford the £1,000, I would get these years added to your record while you can still do so. But make sure you save and invest for an early retirement so that you can retire early and get the benefit of having bought these years now.

thinfatwhiteduke

tacpot12 wrote: »

It is in your interests to have the highest number of years of NI contributions, and if your quote of about £1000 is correct to buy you three years, then this looks good value. The reason that website and the advisor say that it may not be in your interests to pay now, is that you might contribute automatically in later years, or receive NI credits because you are unemployed, or even die before you reach state retirement age, so you might be paying money now when you don't need to.

While this is correct, I would agree with you that it is better to bank as many years as early as you can, to give you more flexibility in later life. However you might feel cheated when you are 62 and haven't got enough savings to stop working (and can't draw the state pension because you are not old enough), and so have to carry on working and NI for a further five years.

Buying now while the years are cheapest also seems sensible. If you can afford the £1,000, I would get these years added to your record while you can still do so. But make sure you save and invest for an early retirement so that you can retire early and get the benefit of having bought these years now.

Thanks for your answer.
Isn't 65 the oldest you can work before you retire? So when you say 'when you are 62...and have to carry on working for further 5 years'....so it should be 3 more years, right?

I thought that you could receive your pension as soon as you completed your 35 years. So what is the minimum age to start receiving it?

I'm 32, and it says that I need 32 years, so I should retire at 64. But If I'm able to pay for those 5 years, I should be fine at 59/60. You say that I would be too young to retire and receive the pension? (Unless I have my own savings). So I will have to work until the age of 65/66 for that?

Thanks

molerat

Currently the state pension age for someone born after April 1978 is 68 and will likely rise, I would consider getting it before 70 a bonus !

thinfatwhiteduke

molerat wrote: »

Currently the state pension age for someone born after April 1977 is 67 and will likely rise, I would consider getting it before 70 a bonus !

So when they say that you need to make 35 years of contribution it's a lie. It's way more than that. Unless you're wealthy and can afford to live for other 6-8 years without working. Impossible.

molerat

You only need to make the required number of contributions to receive the pension at the appropriate time. How you plan what happens before then is all down to you, it is easily doable if you want to make it happen, you don't need to be wealthy.