HELP! Paying Voluntary Contributions for State Pension

Malibusmash

I would appreciate some advice on whether or not I should pay over £4k worth of Class 3 voluntary contributions to my State Pension (intending to pay them before April 5th2019).

I have spoken to the Future Pensions Dept. but still fail to understand (I need someone to explain it to me as if I'm a dummy)

I am 50 years old and I understand that we need to build up 35 years of paying NI to be eligible for the full SP.

They have told me that I have 14 years already, with 16 left to contribute until SP age. (15 years where I haven’t contributed enough.) So currently I will get a SP of £74 per week. If I continue to contribute until pension age I can build up to £149.84 per week.

However my aim to obtain as close to the full SP as I can and to the end, I am able and happy to pay VCs now, plus I intend to continue to pay NI every year until SP age (whether or not I am working, which I intend to fund from other income).

They’ve also told me that if I pay VCs now, I don’t need to pay for 3 years out of 16 and that I need to pay 13 out of the next 16 years to get the full state pension and this is the bit I don’t understand.

I’d also like to understand whether or not my voluntarily paying for the years that I am able (2006 to 2014) will increase the amount of pension I receive in the future as I don’t want to pay VCs now, only to discover that this will not make any difference to my pension because I will already have the requisite number of years when I retire.

Please can someone help me to understand how it works?

xylophone

Have you obtained a state pension statement?

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

What exactly does it say?

Is your "starting amount" based on the old or the new state pension scheme?

Now see this

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

Does the above help?

molerat

If you have less than 30 pre 2016 years then topping up to a maximum of 30 with any available pre 2016 years cannot fail to add value. But, as above, precise details of everything your forecast states is needed. Three figures are usually presented - forecast amount going forward, current amount and amount going forward plus filling prior years.

Malibusmash

Thanks. Is the below the info that you mention:-

Forecast: £149.84
Estimate based on NI record up to 5 April 2018: £74.71
The most can increase forecast to is: £164.35

molerat

Is your forecast showing a COPE amount ? You need another 19 years of contributions to get a full pension and you have 16 years available going forward so need another 3 previous years minimum. Are there any part paid cheap years from 2006 onwards as they are obvious targets as a starter. You need to decide what you want to do in the future, obviously buying old years now will be cheaper but is wasted money if you get a job and earn NI credits that way.

Malibusmash

molerat wrote: »

Is your forecast showing a COPE amount ? You need another 19 years of contributions to get a full pension and you have 16 years available going forward so need another 3 previous years minimum. Are there any part paid cheap years from 2006 onwards as they are obvious targets as a starter. You need to decide what you want to do in the future, obviously buying old years now will be cheaper but is wasted money if you get a job and earn NI credits that way.

No COPE amount is shown.

Sorry but I don't understand what you mean when you say I 'have 16 years available'. Do you mean I need to pay another 3 years NI contributions minimum?

The years I can VC for are 2006 to 2014 inc., all of which are part-paid years. Is this the right thing for me to do?

It is highly unlikely that I will continue to work until pension age, however I am happy to pay my NI out of savings if it means I can get to the full SP amount.

molerat

You have 16 years available to fill going forward from now but you also need 3 prior years to make the full amount.



Only you can decide if paying more than the 3 needed prior years is the right thing to do. They will all add value to your pension amount but note that each one may add 50p less than a post 2016 year. Do you have any post 2016 years filled ?

Malibusmash

molerat wrote: »

You have 16 years available to fill going forward from now but you also need 3 prior years to make the full amount.



Only you can decide if paying more than the 3 needed prior years is the right thing to do. They will all add value to your pension amount but note that each one may add 50p less than a post 2016 year. Do you have any post 2016 years filled ?

Thanks for your help molerat - yes I have all of the post-2016 years filled. The gaps are 2006 to 2014 inc. and these are the ones the Pension people have told me I can VC towards.

Do you mean that I don't need to VC towards all of these years (2006 to 2014) and that I should only VC towards three of them?

molerat

You cannot achieve the maximum amount without purchasing at least 3 pre 2016 years. Any further pre 2016 years you purchase will add value and will reduce the number of post 2016 years you need to purchase / fill going forward. Only you can make the decision on the cost benefit of buying more of the cheaper (up until April 2019) pre 2016 years or buying all the more expensive new years as you go along.

Malibusmash

I understand - thank you so much for your help.

Malibusmash

molerat wrote: »

Is your forecast showing a COPE amount ? You need another 19 years of contributions to get a full pension and you have 16 years available going forward so need another 3 previous years minimum. Are there any part paid cheap years from 2006 onwards as they are obvious targets as a starter. You need to decide what you want to do in the future, obviously buying old years now will be cheaper but is wasted money if you get a job and earn NI credits that way.

Here is a breakdown below of the years I can VC - are there any here that you would recommend not worth paying?

2006/7 - £689.00
2007/8 - £689.00
2008/9 - £689.00
2009/10 - £689.00
20010/11 - £626.60
2011/12 - £214.20
2013/14 - Class 3 £392.95 / Class 2 £62.10