Pre April 2016 Pension Value

drumtochty

A person has new pension statement as at mid January 2019, they have earned £138 a week state pension and have 17 years to live before state pension age, therefore, plenty years to pay 6 years voluntary NI contributions to maximise their state pension as they have decided to stop working and are not disabled in any way.



As at 6 April 2016 they had paid 28 out of 30 NI contributions for a basic state pension and had earned a state pension at that date of £125 a week, therefore in excess of the old style state pension at that date of £119.30. They had a small amount of additional state pension at that time. They were contracted out for many years.



Two schools of thought here.


1) As they had earned a state pension above £119 at 6th April 2016, they cannot pay pre 2016 voluntary NI and increase their state pension. The have to pay 6 post 2017 voluntary NI contibutions.



2) The fact that they have earned more than £119.30 in state pension at 6 April 2016 is over ridden by they fact that the can pay these two missed pre 2016 years payments and 2 years voluntary contributions of their missed years can earn them around £8.00 on their pre April 2016 pension and they then only need to pay 4 further post 2017 voluntary to maximise their state pension.


Can anyone point to a DWP online guidance that specificaly clears up this issue as everyone I can find is as evasive as ever.


Please do not get into were they looking after children / carer etc., the question is only asking about whether pre 2016 voluntary contributions are able to increase their pre 2016 pension value or will all the voluntary contributions need to be post 2017 to add value to their state pension.

molerat

If they have less than 30 pre 2016 years then making up to 30 cannot fail to add value whichever calculation was used for the starting amount. The upper limit on pre 2016 pension is, at today's rate, £293.21.


The 2016 figure is the higher of up to 30/30ths of the old basic pension plus additional pension or 35/35ths of the new pension - COPE. If they had 28/30ths of the old plus additional pension they can still add those 2 missing years. In fact if they had a small COPE figure and/or small additional pension figure there is the possibility to switch to the new scheme calculation and use the 35 years if available. Another thing to bear in mind if purchasing after April 2019 is that an old pension 1/30th year is worth about 50p less than a new pension 1/35th year.


I think the best explanation is in the Royal London document.https://www.royallondon.com/media/good-with-your-money-guides/topping-up-your-state-pension/

drumtochty

[FONT=&quot]Yes, that site advises that the two remaining pre 2016 years voluntary contributions will add to their pre April 2016 state pension.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]One missing pre 2016 year only requires a half years payment to get an extra years pension contribution, the other pre 2016 year is less expensive than a post 2017 year but as you say the increase in the weekly state pension is a little lower by paying a pre 2016 year.[/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]Doing the numbers 2 pre 2016 and 4 post 2017 voluntary payments is less expensive than 1 pre 2016 and 5 post 2017 voluntary payments. [/FONT]
[FONT=&quot] [/FONT]
[FONT=&quot]In both cases the final state pension at 2018 2019 rates is over funded and they are limited to £164.35, therefore 2 pre 2016 voluntary contributions and 4 post 2016 voluntary contribution’s is the least expensive route apart from going the Class 2 route but I will leave that to them to investigate.[/FONT]


Thanks for pointing out that document.

molerat

The nitty gritty of it is here
https://www.legislation.gov.uk/ukpga/2014/19/schedule/1 (see 3.7)
which refers to http://www.legislation.gov.uk/ukpga/1992/4/section/22/enacted (see 5)
which basically states that any contributions made after April 2016 but for previous years are treated as if they were made in the year they apply to so the foundation amount must be recalculated.