Is it worth paying extra into state pension?

thriftytracey

My partner reaches state retirement, aged 66 in March 2021.  To get an additional £10 a week on his state pension he needs to pay £2336 (three years NI).  He has quite a number of missing years due to opt out and retiring early but the only years he can pay are 2017 - 2020.  His opinion is that it isn't worth it as either his diabetes (insulin) or covid will shorten his life and it would take 4 years six months to break even!  He says he is being a realist....it would be a no brainer without high risk underlying conditions but I suppose the fittest person can die from unforeseen circumstances or accident etc.  I suppose the £2336 is better spent on State Pension than earning practically nothing in a cash ISA.

Stubod

Under normal conditions it is usually considered a good idea to purchase extra years of SP if you have the opportunity.

It would always be a priority for me as it is probably a better return than any other savings / investments, it is "safe" and index linked...so a bit of a no brainer if you have spare funds available...IMHO.

molerat

That is the gamble you take. Generally voluntary contributions are a no brainer as they provide such a good payback but even in good health you could step in front of a bus. You should get £5 per post 2016 year so the third year is likely not producing the full amount so possibly not worth paying. It should only take 3yrs 9mths to get it back after 20% tax. Post the full forecast figures up and someone will comment.

Terron

If you can qualify to pay class 2 contributions (rather than the class 3 you seem to be describing) it is certainly worth it. Class 2 are ridiculously cheap - about 20% of class 3. The government were going to abolish them but stopped for some reason.

thriftytracey

£152.77 a week at SRA March 2021 with no contributions
£157.78 a week at SRA start contributing now
£167.79 a week paying 3 years NI
So I guess it would actually be slightly more £15.02 a week better off £781.04 pa £2336/£781 = 2.99 years. Or £624 after 20% tax
£2336/£624 = 3.74 years
As per molerat.
I am going to pay it.  As you say index linked as well (for the time being), and hopefully "safe".
Thanks

Takedap

Basing your future on a feeling that you are gong to die early isn't usually considered to be good financial planning.  I know of several colleagues who have cashed in very good DB pensions based on the same assumption.  A  fair number of these are likely to regret this later.

Albermarle

To buy an annuity to pay £15 a week inflation linked , would cost about £20K . To put it in perspective.

minty777

thriftytracey said:

£152.77 a week at SRA March 2021 with no contributions
£157.78 a week at SRA start contributing now
£167.79 a week paying 3 years NI
So I guess it would actually be slightly more £15.02 a week better off £781.04 pa £2336/£781 = 2.99 years. Or £624 after 20% tax
£2336/£624 = 3.74 years
As per molerat.
I am going to pay it.  As you say index linked as well (for the time being), and hopefully "safe".
Thanks

National insurance paid in the tax year that you reach state pension age doesn't count towards the amount you get. I think. 

Linton

minty777 said:

thriftytracey said:

£152.77 a week at SRA March 2021 with no contributions
£157.78 a week at SRA start contributing now
£167.79 a week paying 3 years NI
So I guess it would actually be slightly more £15.02 a week better off £781.04 pa £2336/£781 = 2.99 years. Or £624 after 20% tax
£2336/£624 = 3.74 years
As per molerat.
I am going to pay it.  As you say index linked as well (for the time being), and hopefully "safe".
Thanks

National insurance paid in the tax year that you reach state pension age doesn't count towards the amount you get. I think. 

To avoid confusion NI paid for the tax year in which you reach SP age does not count towards your pension.  You can pay for previous years (back for a specified number of years, currently 6) at any time.  So you can pay missing NI after retirement if you wish.  The OP' husband could delay for a small number of years and if he hadnt died in the meantime buy the missing years.  The extra SP would be paid as from SP age and so he would receive an additional lump sum.