Shortfalls in your National Insurance record

MrDF

My mothers' state pension forecast says:

You have:

• 18 years of full contributions
• 10 years to contribute before 5 April 2029
• 21 years when you did not contribute enough

There is an option to fill in years:

You can make up the shortfall

Pay a voluntary contribution of £761.80 by 5 April 2025. This shortfall may increase after 5 April 2021.

What are the pros and cons of doing this? She does not work and has been making £2,880 (net) of personal pension contributions. Should she make voluntary contributions if she can afford it? If she got the full state pension she would still have income less than the personal allowance in retirement so the income would not be taxable. However, she may retire outside of the UK to a country where the state pension will not receive increases.

drumtochty

First step is to advise us from her pension statement what value her pension is at the moment and what it advises is the maximum it can be in April 2029.

Also the £761.80 is per year for all the years she has not contributed.

Get back with the info first to allow us to advise the next course of action.

Is she working and does she earn more than £6,500 a year.

Does she look after grandchildren or is a looking after an ill relative, that may be a way to get NI contributions.

xylophone

Have a look at P6 here
https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

Apodemus

As I understand it, she may not be able to contribute enough to get “full” state pension.  I think it would depend on whether the missing years are recent or further back.  My NI statement shows that I have completed all the recent years but have a patchy record at the start of my career - and no method of recouping these.  As a consequence, It shows a reduced maximum possible pension payable by retirement date.  Happy for this to be corrected if I am wrong!

Linton

MrDF said:

My mothers' state pension forecast says:

You have:

• 18 years of full contributions
• 10 years to contribute before 5 April 2029
• 21 years when you did not contribute enough

There is an option to fill in years:

You can make up the shortfall

Pay a voluntary contribution of £761.80 by 5 April 2025. This shortfall may increase after 5 April 2021.

What are the pros and cons of doing this? She does not work and has been making £2,880 (net) of personal pension contributions. Should she make voluntary contributions if she can afford it? If she got the full state pension she would still have income less than the personal allowance in retirement so the income would not be taxable. However, she may retire outside of the UK to a country where the state pension will not receive increases.

The main pro is that is very much more lucrative than putting the same money into a pension.  The maths works out so that the £761 will pay for itself in extra State Pension in 3-4 years after which it is all free additional income for the rest of her life.

Freecall

Linton said:

MrDF said:

My mothers' state pension forecast says:

You have:

• 18 years of full contributions
• 10 years to contribute before 5 April 2029
• 21 years when you did not contribute enough

There is an option to fill in years:

You can make up the shortfall

Pay a voluntary contribution of £761.80 by 5 April 2025. This shortfall may increase after 5 April 2021.

What are the pros and cons of doing this? She does not work and has been making £2,880 (net) of personal pension contributions. Should she make voluntary contributions if she can afford it? If she got the full state pension she would still have income less than the personal allowance in retirement so the income would not be taxable. However, she may retire outside of the UK to a country where the state pension will not receive increases.

The main pro is that is very much more lucrative than putting the same money into a pension.  The maths works out so that the £761 will pay for itself in extra State Pension in 3-4 years after which it is all free additional income for the rest of her life.

The main con (other than the obvious one that she needs to live long enough to collect - but that applies to all of us) is that she needs to consider the effect on any benefits she is receiving.  Again, you need to do the arithmetic.

MrDF

drumtochty said:

First step is to advise us from her pension statement what value her pension is at the moment and what it advises is the maximum it can be in April 2029.

Also the £761.80 is per year for all the years she has not contributed.

Get back with the info first to allow us to advise the next course of action.

Is she working and does she earn more than £6,500 a year.

Does she look after grandchildren or is a looking after an ill relative, that may be a way to get NI contributions.

It says:

You need to continue to contribute National Insurance to reach your forecast
Estimate based on your National Insurance record up to 5 April 2019 £90.10 a week
Forecast if you contribute until 5 April 2029 £140.16 a week
You can improve your forecast
You have shortfalls in your National Insurance record that you can fill and make count towards your State Pension.
The most you can increase your forecast to is £175.20 a week

Then it suggests she can pay voluntary contributions back to 2006-07 (but then also says this is normally only possible going back six years?)

Noted that it is per year.

She does not work/earn income. She receives disability benefits which are not taxable or means-tested. No caring responsibilities (she actually needs someone to look after her).

The main concern is as Freecall mentions about life expectancy as she has been ill recently.

jamesd

First part is easy: it's likely to be best to buy all years from 2016-17 until the year she reaches her state pension age.

Is there any mention of COPE? Did she work much in the public sector or in jobs with final salary pensions? Those answers plus the individual years and their prices should let us make good suggestions.

xylophone

You say that your mother is receiving disability benefits.
Are you sure that she is not receiving NI credits?
https://www.gov.uk/national-insurance-credits#:~:text=Overview,benefits%20including%20the%20State%20Pension.

MrDF

jamesd said:

First part is easy: it's likely to be best to buy all years from 2016-17 until the year she reaches her state pension age.

Is there any mention of COPE? Did she work much in the public sector or in jobs with final salary pensions? Those answers plus the individual years and their prices should let us make good suggestions.

She has never held a job which paid into a private pension (employment was before AE came into force) so no COPE, the majority of NI credits come from when she received child benefit I assume. All the years from 2016-17 are around £761 to £795 each to buy.

xylophone said:

You say that your mother is receiving disability benefits.
Are you sure that she is not receiving NI credits?
https://www.gov.uk/national-insurance-credits#:~:text=Overview,benefits%20including%20the%20State%20Pension.

She receives Personal Independence Payment (formerly Disability Living Allowance) which is not one of the benefits mentioned as providing NI credits.

molerat

She will be able to pay any years back to 2006-07 until 5 April 2023 under the transitional arrangements, all years 06-07 to 16-17 are treated as 16-17 for the back payment timescale, so if there are any part paid years in there it would be beneficial to buy those.  What are the 3 amounts on her forecast - the headline going forward, the current held and the maximum achievable ? It is important to understand what those figures mean.  The "looking after grandchildren" question posed by drumtochty is a very important and possibly lucrative question to be answered.