Increasing State Pension

molerat

The buying back 10 years under the new scheme is only a limited time offer and for the specific years of 2006-07 to 2015-16 available until April 2023 giving everyone the opportunity to have the minimum 10 years required to get a pension, all other years are still on the 2 yr / 6 yr rule.

One poster here did have a confusing forecast where the figures did not add up by a couple of pounds and I postured, correctly as it transpired, that it may have been that buying the correct number of pre 2016 years would change the starting amount to the new system meaning his previous £4.48 years were then worth £5.00 but at the cost of their existing additional pension amount so all is not as straightforward as a simple calculation, every additional pre 2016 year added needs a recalculation of the starting amount.

After sorting my own and MrsM's I did at one time start to construct a spreadsheet to work it all out, just inputting a few key figures to save a load of individual calculations.  It started well and worked in a few instances but there were too many variable factors to make it work in many cases so I gave up.

Looking after grandchildren is a nice little class 3 earner to boost the pension, saved MrsM (me!) just short of £3K

Once you get a grip of how the system works, little bits of information gleaned from many sources, it slowly becomes clear and is (can be ?) quite straightforward to work out he various options. Having a forecast just prior to the start of the new system certainly helped in making things clearer.

p00hsticks

j.p said:

I've also learned that under the old pension system you could only buy up to 6 × Class 3 contributions top up years, and under the new system only up to 10 such years (pending verification), so that anyone wishing to buy a larger number of years would need to find a vehicle other than Class 3 contributions to do it.

I'm not sure this is right.

As far as I'm aware there is no restriction on how many 'top up' (Class 3 voluntary contribution) years you can buy, as long as you buy them at the time (i.e. in the current year). 

However, there IS a restriction on how many historic years you can buy voluntarily. Usually you are only allowed to buy the past six years. However, when the new State Pension was introduced in 2016 this rule was temporarily relaxed (until April 2023) to allow people the opportunity to purchase any incomplete years from 2006 onwards.

https://www.gov.uk/voluntary-national-insurance-contributions/deadlines

xylophone

I postured,

Postulated..........

xylophone

One poster here did have a confusing forecast where the figures did not add up by a couple of pounds and I postured, correctly as it transpired, that it may have been that buying the correct number of pre 2016 years would change the starting amount to the new system meaning his previous £4.48 years were then worth £5.00 but at the cost of their existing additional pension amount so all is not as straightforward as a simple calculation, every additional pre 2016 year added needs a recalculation of the starting amount.

If j-p were to study this (2016/17 version)

https://www.dpf.org.uk/explorer/files/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf

in connection with the above, on page 14 in the footnote

4 Just to add to the complexity, whether your starting amount is based on the old rules or the new rules could ‘flip’ following the payment of voluntary contributions. For example, if you pay a pre-2016 year which makes no difference to your old rules pension (because you already have 30 qualifying years) it could make a difference to your new rules pension (because you can have 35 qualifying years). In some cases this means your starting amount would now be based on the new rules. The ‘Check your State Pension’ website will ultimately guide people through these complexities.)

2018-19 edition below

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

See also  (useful examples)

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/gwymg-8-new-state-pension.pdf

xylophone

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.

This may not be the case in respect of S2P.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/210299/single-tier-valuation-contracting-out.pdf 

https://en.wikipedia.org/wiki/State_Second_Pension

S2P gives all employees earning up to £32,592 a year (in 2011/12) a larger pension than SERPS, regardless of whether they are "contracted out" or not - with most help going to those in the '"lowest"' earnings (up to £14,400 a year in 2011/12) - known as the "LET" or '"Low Earnings Threshold"'. The accrual rates within each band of earnings are:

xylophone

Till I discovered simply that because at the time I wasn't working, the system thought that going forward I wouldn't be working, so it wasn't factoring in all the years left to work in the forecast, whereas for my partner because they were working, it thought going forward they'd keep on working, and was factoring that in the forecast.

This was a post 6/4/2016 forecast?

What exactly did it say?

xylophone

guide people through these complexities…"

The rare case to which molerat referred

https://forums.moneysavingexpert.com/discussion/comment/78047955/#Comment_78047955

molerat

If your pension amount is below the new maximum then the whole amount will increase by the triple lock. The additional pension was done away with as a separate entity when it was amalgamated into the 2016 starting amount.  There is of course some disparity between the inflation uplift % and the actual pension, £175.20 + 2.5% is £179.58 but the new pension amount is £179.60.

The triple lock / CPI split is only for those with an amount above the new maximum, the full new pension amount increasing by the triple lock and the remaining "protected amount" by CPI.

xylophone

 I know some components will increase by the triple lock and others by CPI. I've got a couple of theories of which amounts I've got there, but no confirmation. 

No need for theories.

Let's suppose the forecast is for £185.20 a week.

This is £10 more than a full NSP.

£175.20 increases (currently) under the "triple lock"  arrangement - (Earnings/CPI/2.5% whichever is highest.

£10 increases by CPI in the previous September.

https://www.ifs.org.uk/publications/15132

p00hsticks

j.p said:

Interesting… So one could work just one year in Britain, and then set out a monthly or quarterly Direct Debit to pay Class 3 contributions synchronously, and let it run for 34 years (as long as he'll always be a tax resident) and that'll take care of it. A 100% pension, no 10-year limit. That'd be a handy way to buy a state pension for dependants, or say, if you won £27k at the lottery, drip-feed it into the pension system over 35 years, and at retirement age they'll pay you back the whole amount every 3 years, adjusted for inflation, no questions asked, for as long as you can live. What's not to like? (unless someone would argue that's system abuse; I think it's certainly a system vulnerability - or meant to help but there's always those who help themselves)

I imagine the argument would be that if people can theoretically stay on benefits such as Universal Credit for all of their (non?) working lives and therefore get Class 3 NI credits to get a full state pension by doing so, why shouldn't people be able to pay to get the same ?