Is it worth paying a NI deficit?

onejontwo

My OH has a shortfall of 6 years NI deficit because she took a redundancy package and finished work early at around the age of 52. Now after turning 60 we have been looking at her forthcoming state pension (age 66) and discovered that there is a shortfall of 6 years and an option to pay some or all of this shortfall. The question is whether it is worth paying any or all of the deficit? Advice greatly appreciated.

Dazed_and_confused

People are more likely to give an informed answer if you tell us what her State Pension forecast says. In full, not just the likely headline of £168.60.

xylophone

What exactly does her state pension forecast say?

And read this carefully

https://www.royallondon.com/media/good-with-your-money-guides/topping-up-your-state-pension/

drumtochty

After you answer the other posters and have taken their advice.


She can do some ebay selling or knitting or dog walking or whatever.


Say turn over £100 a year and do a tax return, as long as the amount earned is under £1,000 per year there is no tax to be paid. She can pay a years class 2 NI which costs around £150 a year. As long as that avenue is available, that is the one she should take. She can do that for 2018 2019 and for the next 6 years.

jamesd

We also need to know whether household income may be low enough to qualify for means tested state benefits like pension credit.

Is she paying 2880 a year into a personal pension to get the free 720 a year tax gain (assumes all within personal allowance)? Are you?

onejontwo

Sorry for the delay in answering. Anyway I now have the figures.
The summary quotes:- 32 years of full contribution, 6 years to contribute before April 2024, 12 years when you did not contribute enough.
Estimate based on your National Insurance record up to 5 April 2018
£153.76 a week
Forecast if you contribute another 4 years before 5 April 2024
£168.60 a week.
You can make up the shortfall by paying
a voluntary contribution of £780 by 5 April 2023.

xylophone

Your wife had 32 full years when she retired in 2011? She was a member of a contracted out pension scheme?

At 6/4/16 her starting amount would have been calculated as the higher of

30/30 x £119.30 + (SERPS/S2P - Deduction for contracting out) Old system.

(32/35 x £155.65) - COPE. New System

See Chart B in link in post 3 above.

It seems that she needs to pay four more years contributions to qualify for a full new state pension.

She can check this by phoning the Future Pension Centre.

https://www.gov.uk/future-pension-centre

Dazed_and_confused

3 years will take her to £168.19 so paying £700+ for the fourth year may be false economy.

If she is going down the self employment route outlined by drumtochty then the fourth year might still be worth considering.

dave_ave

drumtochty wrote: »

Say turn over £100 a year and do a tax return, as long as the amount earned is under £1,000 per year there is no tax to be paid. She can pay a years class 2 NI which costs around £150 a year. As long as that avenue is available, that is the one she should take. She can do that for 2018 2019 and for the next 6 years.

This was a great revelation to me. Can I ask how it works exactly please? Say this year now 2019-20 tax year. Could I ring NI and say I want to pay Class 2 NI Contributions as I will turn over £500 from some buying/selling? Can you back date NI Contributions? I guess I then submit a tax return after 6 April 2020 for this current tax year?