State Pension & NI Contributions Query

molerat

Were you in a contracted out pension - does your forecast show a COPE amount ?  I suspect yes.

In April 2016 you were given a starting amount of the higher of x/30 old pension + S2P or x/35 new pension - COPE. If you were contracted out the deduction would likely take the new pension well below the old - with 39 years mine was below £90 - so the old pension, what you had already earned, was higher.  You now have the ability to top that up with post 2016 contributions and that means you need 3 more years to achieve that.  The seven years simply means that is how many NI earning years are available to get that 3 years.

Although another 3 years will take you to the full amount the third will only get you £1.22, 2 will take you to £173.98, so if buying will take a lot longer to recoup.

Suseka97

Thanks molerat, for helping to clarify things (again) - much appreciated.

Yes, as you surmised I do have a COPE amount of something around £52 and understand that means during that contracted out period I would have been paying less NI as a result.   I guess I'm lucky I only have 3 years to make up for and I will be applying for the new style JSA, if only for the NI credits, as has been suggested 

This NI and pension stuff does get complicated and so I'm grateful I have a forum such as this to help me understand things better.

Linton

Suseka97 said:

molerat said:

Suseka97 said:

.......  Also, whilst I'm happy to turn the clock back, I think you meant to say in theory I could have a full SP by aged 61 (not 51) ........

I meant people in general could reach full entitlement by 51, work from age 16 then 35 years contributions = age 51 after your comment about being surprised you only needed 3 years.

I have a further question on this particular point, because my NI record confuses me...

Looking at the information on the HMRC website it tell me this under my state pension forecast:-
Estimate based on NI record up to 5 Apr 2020 = £163.96 a week
Forecast if you contribute another 3 years before 5 April 2027 = £175.20 
(and then goes on to say that £175.20 is the most I get, which I understand because this is the max SP).

But when I look at my NI contributions it tells me this:-
You have 44 years of full contributions
7 years to contribute before 5 April 2027
You do not have any gaps in your record

(1)So if I have no gaps and 44 yrs worth of contributions why am I still 3 years short of the max SP?  (2)Also why does it say I have 7 years to contribute before 5 April 2027?   I'm confused.. 

(1) Because 35 years only applies to people who spent their entire career under the 2016 system.  For people who started work before then there are transitional arrangements which ensures that up to the point when the new system came ih they accrued the higher of what they would have accrued under the old or new systems.
In your case you must have had a significant period when you were contracted out of SERPs probably because you had a DB pension.  if you were contracted out you paid less NI or your NI was diverted to a separate pension depending on time and circumstances.  In your case you are one of the lucky ones in that you can make up for this by paying extra NI beyond the 35 years.
(2) Presumably because you are due to start State Pension in 2027/28 and NI in the tax year of starting SP doesnt add to your SP. This missing NI can be acquired from employment or NI credits up to the tax year before SP age or can be bought by a voluntary contribution.

balbs

Just a point about JSA - its right that you can apply for JSA and be granted it, not actually get any money (for example you have an existing pension income) but receive credit contribution credits - however the converse is that the Job Centre will still expect you to prove you are searching and applying for jobs (the money doesnt come into it) and even though no-one is going into Job Centres at the present time they are ringing people up.  Sadly how they will cope over the next few months is another story.

balbs

And if the original OP is thinking of doing some part time work they could register as self employed and then just pay class two contributions at a cheaper rate and achieve the same result.

Suseka97

Thanks both Linton and balbs.

Linton, yes - you are correct.  I was contracted out for a lengthy period of time having worked in the public sector since I was 17yo, contributing for the majority of those years into a DB pension which I am lucky to be in receipt of it soon (so no complaints there).  It's helpful to know that I am one of those lucky ones that can either purchase NI credits or if make up the difference through work in the next 7 years.

balbs, I expect not be be eligible for any JSA payments due to my pension income, but am quite happy to register as looking for employment because that's what I will be doing.  I'm not quite ready to retire yet and any additional income earned will be of benefit.  I note the comment about registering for s/e and would consider that too.

Either way its clear I have choices and the information gleaned from this post has given me much to consider and has been very enlightening.  

Tassie_Devil

Suseka97 said:

molerat said:

Suseka97 said:

.......  Also, whilst I'm happy to turn the clock back, I think you meant to say in theory I could have a full SP by aged 61 (not 51) ........

I meant people in general could reach full entitlement by 51, work from age 16 then 35 years contributions = age 51 after your comment about being surprised you only needed 3 years.

I have a further question on this particular point, because my NI record confuses me...

Looking at the information on the HMRC website it tell me this under my state pension forecast:-
Estimate based on NI record up to 5 Apr 2020 = £163.96 a week
Forecast if you contribute another 3 years before 5 April 2027 = £175.20 
(and then goes on to say that £175.20 is the most I get, which I understand because this is the max SP).

But when I look at my NI contributions it tells me this:-
You have 44 years of full contributions
7 years to contribute before 5 April 2027
You do not have any gaps in your record

So if I have no gaps and 44 yrs worth of contributions why am I still 3 years short of the max SP?  Also why does it say I have 7 years to contribute before 5 April 2027?   I'm confused.. 

You should call Future Pensions, who will explain what years you need to make contributions  in order to increase your final SP amount.

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

Suseka97

Thank you Tassle_Devil - I've sent them an email.

Sorry to keep being a pest about this, but can someone just clarify something regarding the COPE amount shown on my HMRC account.  My understanding was that this doesn't affect the SP amount I could qualify for (£175.20) if I continue to make contributions until 2027.  But on reading a news article on the MSE pages it says this....



Its the bit where it says "To this end, the Government will deduct a sum from your new state pension.... that although you'll get less than the full £175.20 retirees will still be paid what they would have got under the old state pension...."

So, will the £52+ it tells me is my COPE amount be taken from that £175.20 (assuming I achieve that)?

The more I read, the more confused I get - but I am slowly catching up on the dedicated NSP thread on this forum  

molerat

The COPE was only ever used once and that was in the calculation to determine your starting amount in April 2016. After that it has no further effect and all illustrations of your state pension are what you will / can actually receive providing you comply with the statements attached to those figures.

Suseka97

Is there a way to find out what the April 2016 value was?  I've looked at the HMRC website pages and its not obvious to me.  I'm just curious and trying to understand how all this works.  It doesn't matter I guess because I can rest easy in the knowledge that the COPE amount has already been included (as you say) and the forecast is what I will, or can, actually receive if I comply with the statements attached to the figures.