New State Pension vs Old Pension

stamboy

Morning,

I've read quite a lot on the net about the confusion around paying voluntary NICs and the pros and cons.

Scenario 1.

Am I correct in assuming that if someone began working in 2010 (retirement due 2053) but stopped working in 2013, they would be classified as being better off under the new scheme.

If so I'm assuming again that they should not seek to pay voluntary NICs for years prior to 2016 (as I gather these night not increase their pension pot) and to instead start from 2016 onwards.

Thanks in advance.

jamesd

Probably not. The old scheme usually pays workers more than the new one. The old rules calculation is the one that would normally be used to set the 2016 foundation amount for workers. Not always, at the lowest pay end of earnings.

You're right about years after 2016 being better for non-workers. And usually worse for workers.

The old rules were basic state pension plus earnings-related part that increased for every year worked, no 30 or 35 year cap, to get too around 190 total a week for a low earner with full working life. The new one pays such workers less to increase the payments to those with a more limited work history, stereotypically homemakers and the long term unemployed.

Paul_Herring

Am I correct in assuming that if someone began working in 2010 (retirement due 2053) but stopped working in 2013, they would be classified as being better off under the new scheme.

Given the 2016 scheme introduced a minimum period of 10 years' contributions required[1], which didn't exist under the old scheme, I'm guessing that they'd have been better off under the old scheme, since 3 years is insufficient contributions to receive anything under the new scheme (whereas they'd have at least got something under the old[2].)

This does of course presume they don't earn credits by other means (unemployment benefits, entitlement to child credit, etc.)


[1] https://www.southampton.ac.uk/finance/services/national-insurance-changes-april-2016.page §3
[2] https://www.ageuk.org.uk/information-advice/money-legal/pensions/state-pension/basic-state-pension/#eligibility

xylophone

Your wife is now around 33 years old and started work in the UK ( having always lived in the UK?) at age 25?

She ceased employment in 2013 when you both moved abroad?

What does her State Pension Forecast show?

You might want to check yours as well?

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

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

molerat

stamboy wrote: »

Morning,

I've read quite a lot on the net about the confusion around paying voluntary NICs and the pros and cons.

Scenario 1.

Am I correct in assuming that if someone began working in 2010 (retirement due 2053) but stopped working in 2013, they would be classified as being better off under the new scheme.

If so I'm assuming again that they should not seek to pay voluntary NICs for years prior to 2016 (as I gather these night not increase their pension pot) and to instead start from 2016 onwards.

Thanks in advance.

Pre 2016 contributions are only worthless if you already have more than 35 years. With 30-35 years they may or may not have value and with less than 30 they will be of value but may be worth less than a post 2016 year due to any contracting out, additional pension and the way the starting amount was calculated. Before April this year they were definitely worth considering as many were considerably cheaper than current. Now they are the same price there is no real point unless you cannot get the full pension with contributions going forward or some of them are already part filled.