Understanding state pension forecast

ProDave

Using the check my pension forecast, at the beginning of this year it told me I needed to contribute 4 more years to achieve a full state pension.  Fair enough, I understand that, I was contracted out of SERPS for a while.

Since I checked at the beginning of the year, I have submitted my tax return for 2020/21 and paid the tax that was due for that.  That was a mixture of self employment and property income.

I just checked my pension forecast again and 2020/21 year is now showing as 53 weeks self employment contribution.  So it has registered the tax and NI that I have pad for that year.

But it is STILL showing that I need to contribute 4 more years to get a full pension.  WHY?  I would have expected that to have gone down to 3 years now that another year has been paid?

Is it a question that I am expecting too much and expecting a joined up system and I might find the 4 years drops to 3 years when it "works through the system"?

Or did I not pay the right sort if NI?  I paid whatever was asked for, I can't remember if it was class 2 or class 4.  I did not tick to opt out of paying any and I did not tick to pay extra.  Should I have?

p00hsticks

when your forecast tells you that you need to continue paying, it should say something like 'Estimate based on your National Insurance record up to 5 April 2021'  - is that date showing as 2021 or still set at 2020 ?

As I understand it, your NI record is maintained by HMRC, which then has to pass the info over to the Pension Service (part of DWP) at year end for them to update the pension forecast, so it's perfectly possible that the forecast may not include the latest year yet.

ProDave

Thank you.  It does indeed say "Estimate based on your National Insurance record up to 5 April 2020"  so is not yet counting the tax and NI I have just paid for 2020/21 tax year. even though it now shows that contribution on my tax record.

So it will take perhaps until the end of the year before it "works through the system" and then it should drop to 3 years.

I was concerned I had not paid the right sort of NI and it was not counting down and I might run out of years to correct that if I had done something wrong which was why I asked.

p00hsticks

ProDave said:

I was concerned I had not paid the right sort of NI and it was not counting down and I might run out of years to correct that if I had done something wrong which was why I asked.

Class 2 payments would count - class 4 won't. You have six years to make voluntary contributions so that the year counts if it turns out you have only paid Class 4 and the extra year is needed.

Dazed_and_C0nfused

Most people won't pay their 202:21 Self Assessment liability (including any Class 2 NIC payable) until 31 January 2022 so I wouldn't be surprised if it wasn't until a month or two after that before forecasts are updated.

ProDave

Dazed_and_C0nfused said:

Most people won't pay their 202:21 Self Assessment liability (including any Class 2 NIC payable) until 31 January 2022 so I wouldn't be surprised if it wasn't until a month or two after that before forecasts are updated.

So how would it work if my retirement date happened to be 6th April.  And my last working year ended the day before I retired on 5th April and I needed the contribution from that very last year to get a full state pension.

would they start paying a reduced state pension and then increase it with the missing back pay a year later when the system eventually caught up with that final years contribution?

Not a situation i expect to be in, but it is perfectly possible for some with a system that does update your contributions until as much as a year after you have finished working in a particular qualifying period.

p00hsticks

ProDave said:

Dazed_and_C0nfused said:

Most people won't pay their 202:21 Self Assessment liability (including any Class 2 NIC payable) until 31 January 2022 so I wouldn't be surprised if it wasn't until a month or two after that before forecasts are updated.

would they start paying a reduced state pension and then increase it with the missing back pay a year later when the system eventually caught up with that final years contribution?

Yes, my understanding is that this is exactly what would happen.