45 years contributions v 35 years?

iCloud

Can anyone explain why, as I have 45 years national insurance pension contributions I do not quality for a full pension, only receiving £133.68? The Gov.com website clearly states that 35 years NI contributions are required to obtain a full pension. When I queried this I was told it was due to contracting out and if I pay £2236 (payments to cover 3 years 2016-2019) I will receive a pension of £147.78. I will receive my state pension in July 2019. I elected to retire at 60 yrs of age and was 65yrs in February this year. It doesn't seem to make sense to me. Thanks.

p00hsticks

It's because the '35 years for a full State pension' rule only applies to those whose entire working life will have occurred since the new State Pension was introduced in 2016.

Anyone who also accumulated years under the old system is subject to transitional rules, to account for the fact that those previously contracted out paid a lower rate of NI than those contracted in.

These saw an individual 'starting amount' being calculated for you as at 6/4/16, which was the higher of the two amounts worked out under the old and new rules.

Old rules:
(NI years to a max of 30) / 30 x £119.35 + any additional (SERPS/S2P) pension

New rules:
(NI years to a max of 35) / 35 x £155.65 - 'Contracted Out Pension Equivalent' (COPE) amount

Having determined everyone's starting amount', every year from 2016-1 onwards adds 1/35th of the new state pension amount to your total, until either the maximum amount or the year in which you reach state pension age is reached, whichever is sooner.

Dazed_and_confused

The 35 years doesn't apply to you.

Strictly it is only for those starting out on their State Pension journey from April 2016.

You are under transitional rules. You have had the benefit of paying less NI whilst contracted out and will get the State Pension you were always expecting to get.

Plus you now have the opportunity to add an extra 3 qualifying years boosting your pension from the £133.68/week you were expecting to £147.78/week.

It is a personal decision but if paying £2,236 would get you £14.10/week (£733/year) from July 2019 it is an investment worth considering.

Assuming you will be having to pay basic rate tax on the State Pension you will be c£586/year better off so after 4 years your investment will have paid for itself and you will be in profit.

Given you could be getting your State Pension for 30+ years it's generally seen as an investment that's hard to beat.

p00hsticks

iCloud wrote: »

The Gov.com website clearly states that 35 years NI contributions are required to obtain a full pension.

I've had a look to see if I could find where it said this on gov.uk (NOT gov.com), and couldn't. Out of interest, could you post a link ?

The gov.uk State Pension pages do actually say that the amount you'll get wil depend on your individual NI record, and do go through the explanation that I've given above with regard to contributions earned prior to 6/4/2016.

https://www.gov.uk/new-state-pension/how-its-calculated

xylophone

https://forums.moneysavingexpert.com/discussion/5972526/help-understanding-state-pension-forecast
See post 12 above and read links.