State pension. Total novice.

caper7

Hi, 
I am 44, unmarried and have never worked.
I'm afraid I've never given any thought to pensions. 
I sort of assumed as a tax payer I would be eligible for the state pension, but then started hearing talk of NICs and wasn't so sure. 
Having been forced to do my tax return online for the first time, I can now see my pension situation. 
I have 3 full years of tax credits from 1991-1994.
I am forecast £125.15 a week, assuming I now make 22 years of contributions.
Many questions:
How much is a year's contribution? Set amount or based on my tax returns? 
How do I pay them, particular form to request? 
I believe I can catch up on 6 years, should I? 
Someone on the savings forum made a random passing comment about whether the state pension would become means tested. As I have savings, would contributing at all be foolish? Should I start a personal pension and ignore the state one completely? 
Any guidance gratefully received, this is a subject I know nothing at all about. 

Dazed_and_C0nfused

You have never "worked" so I guess the need for a tax return was high levels of investment income?  Is this correct?

If so the only option to you (assuming you don't intend working or becoming self employed) is to pay Class 3 voluntary National Insurance.

That is generally seen as an excellent investment as c£750 will buy a qualifying year which adds £5/week to your State Pension.  So even after basic rate tax you get your £750 back within 4 years of State Pension age but could continue to receive State Pension for 30+ years.

Teh above assumes you will have a minimum of 10 qualifying years (less equals no State Pension).

If you post the full details of your State Pension forecast then others will no doubt comment on the possibility of making contributions in previous tax years.

caper7

Thanks for answering.
I'm a basic rate taxpayer. Income was from savings interest. 
What further details regarding the pension forecast? 
I have only the 3 full years, nothing else. 
£125.15 a week forecast if I contribute for the next 22 years. I have 26 years in which I did not contribute. 

Dazed_and_C0nfused

It sounds as though any years either pre 2016 or post 2016 would be beneficial them.

It would be worth you reading the Royal London guide to State Pension.  A comprehensive guide for those under the transitional rules.

molerat

caper7 said:

£125.15 a week forecast if I contribute for the next 22 years. I have 26 years in which I did not contribute. 

It states a lot more than just that.

Likely you will be able to buy all the way back to 2006-07 at a cost of £795.60 per year so quite a large sum.  Those back years, 06/07 to 16/17 are only available to purchase until April 2023.  Buying them represents excellent value, similar to a 30% annuity, but has a downside in that if you have an unfortunate meeting with a London bus it is all lost.

caper7

You're right! 
When I click on 05/06 I'm no longer allowed to make it up. It does say you can usually only make up 6 years, how come I'm allowed 14 years?
Would it be deemed a "no brainer" by most to make up all of this shortfall?
@Dazed_and_COnfused suggested each year would add about £5.
14 years would then actually exceed the current maximum New state pension of £175.20 though, wouldn't it? 

caper7

I thought you had to have 35 years to receive the maximum full state pension, I must have misunderstood something because I'd be there, if not over on just my 3 years plus making up 14?
I'm obviously missing something here. 

Dazed_and_C0nfused

You are under transitional rules so the 35 years is irrelevant to you.

Dazed_and_C0nfused

caper7 said:

You're right! 
When I click on 05/06 I'm no longer allowed to make it up. It does say you can usually only make up 6 years, how come I'm allowed 14 years?
Would it be deemed a "no brainer" by most to make up all of this shortfall?
@Dazed_and_COnfused suggested each year would add about £5.
14 years would then actually exceed the current maximum New state pension of £175.20 though, wouldn't it? 

If your current amount accrued is only c£15 the can additional 14 years takes you to £85.

22 years takes you from £15 to £125.

molerat

35 years is only for those that start their working life post 2016.  Everyone else is on a hybrid scheme but as you have no contracted out or S2P history you do need 35 years to reach the full amount.  The state pension forecast / NI history shows what is available to buy, not what you need to buy. Your forecast shows if you add another 22 years you will get £125.15 which divided by (175.20/35) is 25 years - 22 going forward plus the 3 you already have.  To make up to the full amount you need 175.20 - 125.15 divided by (175.20/35) which gives 10 more years and will be from the earlier gap years.  3+22+10 = 35. You are allowed to buy back to 2006-07 under the transitional arrangements so that everyone had the opportunity to get the minimum 10 years required to receive a state pension - your 3 years on their own are worth £0.

caper7

OK, so if I'm getting this:
I have 3, if I pay the next 22 years I have 25 and the forecast they gave. 
For the maximum I need 35 years, so must make up 10. Which I can still do till 2023.
I have noticed the annual amount is £795.60 until the last two years
19/20 is £780
18/19 is £761.8
Initially I was going to suggest it might be wise to pay all 14 and then only pay 18 rather than 22 years given things usually go up in price and I imagined this £795.60 might change in the future. Upwards. 
However the last two years are cheaper, so it isn't a flat rate?
So how is the amount arrived at, and what are your thoughts regarding catching up on the 10 years required or the full 14 available? 
Secondly, am I right in thinking that I'd only need to claim this pension for a couple of years to get back the 10-14 year lump sum I'm contemplating paying?
Also, is the state pension adjusted to keep up with inflation? 
Would I be potentially inflation proofing this money?