Do I pay National Insurance if I retire before SRA

Mutton_Geoff

If I retire before my state retirement age (66), do I pay NI on my pension income (combined from a DB scheme and Drawdown SIPP)?


I can't find a definitive answer on the HMRC site. I'm currently 61 and thinking of retiring on my 62nd birthday and drawing a pension that keeps me just under the higher rate (40%) tax bracket but as NI on that level of income is around £5,000 a year, I wondered whether I am exempt if income comes purely from a pension even though I have not reached state retirement age.

JoeCrystal

You do not pay NI on your pension income.

Mutton_Geoff

Thanks Joe.

BoGoF

Do you have enough contributions to qualify for full state pension?

Mutton_Geoff

BoGoF wrote: »

Do you have enough contributions to qualify for full state pension?

Yes, I do. Interestingly I was non resident between 1990 and 1997 and when I returned to the UK asked for a statement on how much to pay for missing contributions and it was around £6,000 which I couldn't afford at the time so didn't bother.


The criteria was then changed and apart from the 7 year non res period above, have been in continuous UK PAYE employment from 1974 to date and the HMRC website shows I will now be entitled to the full state pension (currently £8,902.19 a year) even though I never paid the additional amount they wanted 20+ years ago.

AlanP_2

Just take a moment to double check what the .gov site is telling you.

The headline number shown is what you COULD get given your age, previous contributions, calculations from old to new SP in 2016, and an assumption that you will carry on paying for the requisite number of years.

Quite a few people have missed that and assumed they WOULD get the amount stated, but in fact need to make a few more years contributions to get there.

Mutton_Geoff

AlanP wrote: »

Just take a moment to double check what the .gov site is telling you.

The headline number shown is what you COULD get given your age, previous contributions, calculations from old to new SP in 2016, and an assumption that you will carry on paying for the requisite number of years.

Quite a few people have missed that and assumed they WOULD get the amount stated, but in fact need to make a few more years contributions to get there.

Thank you for that tip. I checked again and it says I have 40 years of full contributions, 4 years to contribute before 5 April 2023 and "6 years when you did not contribute enough".


My understanding is that I (currently) need 35 qualifying years so I wouldn't need to make any more contributions "before April 2023" to obtain a full state pension in 2024 when I am 66.


Let's hope the goalposts aren't moved again in the next 4 years!

molerat

Mutton_Geoff wrote: »

Thank you for that tip. I checked again and it says I have 40 years of full contributions, 4 years to contribute before 5 April 2023 and "6 years when you did not contribute enough".


My understanding is that I (currently) need 35 qualifying years so I wouldn't need to make any more contributions "before April 2023" to obtain a full state pension in 2024 when I am 66.


Let's hope the goalposts aren't moved again in the next 4 years!

That is not quite how it works. 35 years is only for those starting out from April 2016, everyone with a prior history is on a hybrid scheme and may need more or less than 35. I have 42 and will still not get the full amount next month. The forecast should show how much you are expected to receive going forward, how much you currently have and how much you could receive if back years are available. Many have been taken in by reading just the headline number and not going any further down the page . It will clearly state, by showing only that figure and repeating it further down the page, if that is the case. It will also clearly state if you need to make more contributions. If you want a sanity check post up all the numbers.

Mutton_Geoff

molerat wrote: »

That is not quite how it works. 35 years is only for those starting out from April 2016, everyone with a prior history is on a hybrid scheme and may need more or less than 35. I have 42 and will still not get the full amount next month. The forecast should show how much you are expected to receive going forward, how much you currently have and how much you could receive if back years are available. Many have been taken in by reading just the headline number and not going any further down the page . It will clearly state, by showing only that figure and repeating it further down the page, if that is the case. It will also clearly state if you need to make more contributions. If you want a sanity check post up all the numbers.

You can get your State Pension on XX XXX 2024. Your forecast is

£170.61 a week | £741.85 a month | £8,902.19 a year

Your forecast is not a guarantee and is based on the current law is based on your National Insurance record up to 5 April 2019 does not include any increase due to inflation.

£170.61 is the most you can get. You cannot improve your forecast any more.

NI Summary

40 years of full contributions

4 years to contribute before 5 April 2023

6 years when you did not contribute enough


Anywhere else I should be looking to see if my NI contributions need to continue to receive full benefit?

xylophone

£170.61 is the most you can get. You cannot improve your forecast any more.

This is already (slightly) in excess of a full NSP. The contributions you are currently making will not improve your state pension (although while working and earning a certain amount NI must still be paid up to SPA).

NI is not paid on pension income.

At 6/4/2016, two calculations were done - on the basis that you had in excess of 35 full years at 6/4/2016

(Old) £119.30 + (Additional State Pension - deduction for contracting out)

(New) £155.65 - Contracted Out Pension Equivalent.

The starting amount was the higher of the two.

It would seem that at that date, the old calculation gave you an amount just slightly higher than a full new state pension so that you could not improve your pension any further. It would only increase by triple lock (on £155.65) and CPI on any amount above.

Thus at SPA, you can expect whatever a full NSP is in 2024 plus a small "protected payment" which has been increasing by CPI since 2016.

Audaxer

Mutton_Geoff wrote: »

You can get your State Pension on XX XXX 2024. Your forecast is

£170.61 a week | £741.85 a month | £8,902.19 a year

Your forecast is not a guarantee and is based on the current law is based on your National Insurance record up to 5 April 2019 does not include any increase due to inflation.

£170.61 is the most you can get. You cannot improve your forecast any more.

NI Summary

40 years of full contributions

4 years to contribute before 5 April 2023

6 years when you did not contribute enough


Anywhere else I should be looking to see if my NI contributions need to continue to receive full benefit?

You are in a very good position as despite having 6 years when you did not contribute enough, you seem to be able to get slightly more than the full SP at SP age, without having to make any further contributions when you retire early. I am in not such a good position as I also have over 40 years contributions with only one year when I did not contribute enough. I retired early but still need to make 6 years of voluntary contributions to get the full SP at SP age.