Increasing State Pension

bigfer

So after reading the above comments am I correct in assuming, if I am 4 years short of getting the maximum pension, as advised on my pension statement, I should contact HMRC to purchase 4 years of future contributions? I am 59, retired (SP at 67). I do not need to bother the Future Pension Department? TIA

p00hsticks

bigfer said:

So after reading the above comments am I correct in assuming, if I am 4 years short of getting the maximum pension, as advised on my pension statement, I should contact HMRC to purchase 4 years of future contributions? I am 59, retired (SP at 67). I do not need to bother the Future Pension Department? TIA

You can't purchase future years now - you'd have to buy them as they arise - either as a one off payment or you can set up a monthly direct debit or get billed quarterly (but remember to stop it when you've got the necessary years). When I set mine up (pre-pandemic) the chap at HMRC simply processed my request to pay (they'll give you a reference number and details to make a faster payment or set up a direct debit), but I understand that some people are now being asked if they have checked with the future pensions centre that they are doing the right thing and if not told to speak to them first. If you are confident thta buying the extra years will increase your state pension (and if your forecast says you are four years short and you are not earning or getting NI credits then I don't see how buying post-2016 years can't fail to do that) then I suspect they'll accept your payment straight away, especially if you say that you can;t get through on the phone to the Pensions centre.

https://www.gov.uk/pay-voluntary-class-3-national-insurance

molerat

As long as you are certain that is what your pension forecast shows, and that you actually need 4 full years as the last may only add pennies, then yes you can contact HMRC to set up a DD for paying future contributions.  You cannot pay future years in a lump sum, only past years.

Silvertabby

I wasn't asked if I had spoken to Future Pensions Centre when I rang to request my 18 digit payment code.

However, I have no pre 2016 gaps or partial years, and was only asking to buy post 2016/17 years.

soulsaver

molerat said:

No, you cannot "replace" years as years are not lost, a full year is a year in which 52 weeks of basic national insurance contributions have been credited, but you can top up your pension amount.  If you already have in excess of 35 pre 2016 years then that topping up can only be done with post 2016 years.

What's the rationale behind that? (FTAOD I'm not inferring you're incorrect).
It creates an anomaly with anyone who reached retirement age in 2016 with 35+ years, as no 'missing years' would be available post 2016. 

In my case (SPa 2016) I had 40 years full NICs but mostly, if not all, contracted out.
I had years missing, 2004 - 2013 when I wasn't in corporate employ and didn't claim benefits. I didn't buy NICs because with 40 years contributions I was already past the minimum for full SP (old). 

AIUI someone with the same NICs history but 3/4/5 years younger (so less missing years) could have bought voluntary nics (or kept working) to improve their SP, where 2016 SP agers couldn't.

molerat

Anyone retiring just after April 2016 did draw a bit of a short straw. They got what they were promised under the old system so didn't lose out but did not have the advantage of topping up under the new system. I managed to get 3 years post 2016 but not enough to reach the full amount, still more than I thought I was going to retire with when I stopped work in 2009 though.

Under both the old post 2010 and new systems you are limited to how many years you could use for basic pension, 30 for old and 35 for new, no matter how many years you had worked.

jem16

j.p said:

molerat said:

The point being made is that pre 2016 gaps, depending on individual circumstances, may have no value whatsoever which is why people are being warned about them.  This is especially relevant to those nearing retirement as they often already have in excess of 35 pre 2016 years and are still below the maximum new pension.

And one such individual circumstance and detailed calculation is what I'd like to come across, showing also an open gap post-2016 that, unlike the pre-2016 one, would work (to increase the pension), and with that my belief that they're equivalent will be proven wrong, and at that I shall stop. But because I haven't seen it, I still don't believe it.
Only before you ask, "And why would anyone go through some work, just in order to convince you?" (a perfectly valid question), I'd ask you ask instead, "Why would anyone go through some work, just in order to convince anyone who cares?" Basically anyone who's in a position to close either old or new gaps -- which is actually the majority. Because if anyone of them had been convinced with a good proof they can share (calculations, not a 'magic' result or a personal quote they can't explain), by looking at that proof everyone else could be convinced, including me. But it's because that shareable proof hasn't been produced that it can't be presented to me today, and we have to rely on the authoritativeness of well-known web sites, or the experience of forum members (or their willingness to help), which in my opinion it ought not be sufficient, for a scientific or exact-numeric method.

Here is my calculation done in April 2016 so figures based on 2016/17. I have a gap 2015/2016 which I have no intention of filling as it won't increase my pension.

So for me with 41 years of NI, my 2 calculations were done like this.

1. 30/30ths ( as under the old rules 30 qualifying years were needed ) which gave me a full Basic State entitlement of £119.30. As I have always been contracted out I have no SERPS/S2P.

2. 35/35ths ( as 35 years are now required ) giving me a new State Pension entitlement of £155.65. However as I paid a lower rate of NI, a contracted out deduction is applied. This is referred to as a COPE ( Contracted out pension equivalent). My COPE is £75 approximately. So this meant my entitlement would be £155.65 minus £75 giving me £80.60.

My Starting Amount was therefore £119.30 in 2016 as that was the higher of the two calculations. If I filled 2015/16 I would have 42 years of NICs but neither of my calculations would have changed as I was already higher than 30 years and 35 years.

as I have been paying voluntary Class 3 or getting NI credits since 2016, I will be able to add on another 6 years before reaching SPA in 2022. My forecast is therefore for £165.20. I cannot get to the full nSP amount as I would need another 2 years and don't have that. I'm happy with that as I'm basically getting £30pw more than if the changes had not taken place.

Does that help you?

molerat

But that still has not proved that the pre 2016 year would not have made a difference

jem16

molerat said:

But that still has not proved that the pre 2016 year would not have made a difference

Short of paying for it ( which I'm not stupid enough to actually do ) I doubt anything will prove it.

molerat

jem16 said:

molerat said:

But that still has not proved that the pre 2016 year would not have made a difference

Short of paying for it ( which I'm not stupid enough to actually do ) I doubt anything will prove it.

And therein lies the problem for poster j.p .  There will not be a calculation available that proves the point.  It is all down to an understanding of how the system works and how all the different elements interact rather than calculations.