Is it worth paying for missed NI years on my state pension ?

Clare43

Hello,

I would appreciate any advice on if it is worth me paying to cover some missed years in my NI record so that I get full state pension. I’m currently 46 and work in the NHS as a nurse. I am a member of the NHS pension and have special class status and at the moment plan to retire at 55 due to family circumstances. I also have a couple of other small private pensions
My NI record shows I need to contribute for another 11 years to get full pension of £168.50. I have 27 years of full contributions currently . Currently would get £119.91 based on record up to April 2019. I have 4 years gap in my record.
The 2 cheapest years to make up would cost me about £1400. These plus the 9 years left I plan to work would mean I should ( under current rules ) get the full pension. Is it worth it ? Would my state be much less if I was 2 years short of full amount ? Any thoughts appreciated. Thanks

Dazed_and_confused

Each extra year would be worth an extra £4.81/week upto a maximum of £168.60.

So if you had 10 extra years that would take you to £168.08 (£119.91 + £48.17).

So the eleventh year would only add a further £0.52/week.

At today's rates you will probably be liable to 20% tax on that so maybe £0.42/week after tax. It would take a very long time to recoup the £700 you say it would cost.

If you only add 9 years then your State Pension would be £163.26/week, £5.34/week less than the maximum you could get.

A lot can happen in the next 9 years so it might be prudent to wait till nearer the time and buy an extra year (or two) nearer to retirement.

Also, pre April 2016 years are not guaranteed to increase your starting amount.

Clare43

Dazed_and_confused wrote: »

Also, pre April 2016 years are not guaranteed to increase your starting amount.

That’s interesting. My missing years are 2010 - 2014

jamesd

Clare43 wrote: »

I have 27 years of full contributions currently . Currently would get £119.91 based on record up to April 2019. I have 4 years gap in my record.

Dazed_and_confused wrote: »

Also, pre April 2016 years are not guaranteed to increase your starting amount.

For a person with 27 years it's guaranteed that at least three pre 2016 years will produce an increase. Getting up to 30 always does when old rules will be used. Clare43 being in NHS special class means she's been contracted out of the earnings-related part a lot so we can be confident that old rules are and will be used for her foundation amount.

But those if purchased at full rate may well not be the best choice because each adds 1/30th of the basic state pension, £4.19, while post 2016 add 1/35th of the single tier, £4.69. For at least 3 years it's mainly about buying the income most cheaply.

The current 2019-20 full rate is £15 a week, so £780 a year. We've been told that the [STRIKE]three[/STRIKE] two cheapest of the four available only cost £1400 so they can't be full price.[STRIKE] If all three are pre 2016 that'd be £12.57 for £1400 while[/STRIKE] two full rate post 2016 would get £9.38 for £1560. [STRIKE]So initially it appears that those three years are the better deal.[/STRIKE]

Clare43, please tell us the exact years available and the price for each so we can look at the value for money of each of them individually. We'll also need to know how many full years you have starting in 2016-17 so we can check if more than three pre-2016 years will help, and whether that'd be good value for money.

With 11 years needed and at least 22 to go there's plenty of opportunity to get the extra years so it's about getting a good deal on cheap years vs investing the same money and buying close to your state pension age. [STRIKE]£1400 does initially look like a good buy.[/STRIKE] Full price pre 2016 probably not and post-2016 at full price better to do later because you've plenty of time.

When you come to do it you can phone in and the NI people will double check, telling you not to buy any pre-2016 years that won't produce an increase. We've seen consistently good to excellent feedback on them.

Linton

The NI people you would need to talk to are: https://www.gov.uk/future-pension-centre. As James said they provide an excellent service.



They will be able to tell you exactly which years, if any, would improve your pension. If you plan to retire at 55 it may be sensible to wait until then when you have a full picture of your situation - you may end up working an extra year anyway. You will have plenty of extra years available before you reach State Pension Age.

Clare43

jamesd wrote: »

Clare43, please tell us the exact years available and the price for each so we can look at the value for money of each of them individually. We'll also need to know how many full years you have starting in 2016-17 so we can check if more than three pre-2016 years will help, and whether that'd be good value for money.

Thanks Jamesd - very helpful reply

The years I have available to top up if wanted according to my record are

2010 - 2011 voluntary contribution of £705 by 5th April 2023
2011 - 2012. Voluntary contribution of £780 by 5th April 2023
2012 - 2013. Voluntary contribution of £780 by 5th April 2023
2013 - 2014. Voluntary contribution of £690 by 5th April 2023

I had 22 full years before the gaps and from 2014 - 2015 I have been back to full years contributions again

So far I have 3 full years starting in 2016 - 17 and this year and all years until I plan to retire in 2028 will be full years as well.

Thanks to everyone who’s replied so far - all very useful information

xylophone

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

molerat

You have 21 years left to get the required 11 so 10 spare. Probably not worth worrying about those missing years as at least 2 of them are full price anyway, the only increase in cost is inflation so will have the same effective price in 10 years time. May have been worth buying those 2 part ones before April but that boat has sailed.

squirrelpie

Clare43 wrote: »

The years I have available to top up if wanted according to my record are

2010 - 2011 voluntary contribution of £705 by 5th April 2023
2011 - 2012. Voluntary contribution of £780 by 5th April 2023
2012 - 2013. Voluntary contribution of £780 by 5th April 2023
2013 - 2014. Voluntary contribution of £690 by 5th April 2023

As others have said, it's worth calling the future pension centre first if you do decide to buy any of those years, to check that they will actually increase your pension. The mere fact that they're listed on your record as being available to top up does not mean that doing so will help you necessarily.

Clare43

molerat wrote: »

You have 21 years left to get the required 11 so 10 spare.

I don’t as I plan to retire at 55 so only 9 years left. That’s why I’m wondering if it’s worth paying to get the extra 2

molerat

You can buy what you need any time up to your state retirement age so you will have plenty of time after you leave work. There is little financial advantage to buying them now and you may get run over by a bus before then