Voluntary NI contributions to maximise state pension

old_fogey

Hello, Please can I have some advice about paying voluntary NI to maximise my state pension. I don't fully understand the new rules.

Figures from my current pension forecast:
Est based on NI record to 5 April 2021 £139 pw
If contribute to 5 April 2027  £169.79
The most you can increase your forecast to is £179.60

I havent worked for a while and I do not intend to work again. I did have 30 years under the old system, but most was contracted out.

So I think I need to buy 6 post 2016 years to get to the 169.79, is this correct.?

I don't know if the 179.60 is achievable,
I got a pension forecast last year, the figures on that were
Est on NI to 5 Apr 2020  £135.59
If contribute to 5 Apr 2027 £170.63
Max £175.20

So I thought I would buy some post 2016 years, and then see what the forecast looks like after that?
Advice welcome, thank you.

af1963

The 169.79 estimate is based on continuing to pay for this year and all subsequent tax years up to 2027, i.e. you need 6 more tax years from somewhere, either from the years up to 2027 or by buying previous incomplete years..

And you could top up to a higher level by also paying for *additional* recent previous years where you don't already have full contributions. Each extra year adds just over £5, so a couple of extra years on top of the six could get you to 179.60.

You can go back six years.

If you have any recent previous years where you have paid some NI but not enough to count as a qualifying year, those would be the cheapest to 'top up' first.  

You can also get NI credits in some circumstances, for example if you are providing childcare for grandchildren, or are eligible to receive carers' credits for other reasons.  If that happened - you wouldn't need to buy the year(s) that it covered.  

It looks like in your case, it's worth buying TWO of the previous incomplete years anyway, because whatever happens from now on, that would increase your pension by £10 per week. 

It *might* be worth buying other "cheap" past years if there are any - especially if they are a few years back and you won't have the option to buy them later because they will drop out of the six year limit.

Then you can just look at it a year at a time - each year, if you haven't received credits, you can either pay for the 'current' year. or ( maybe better ) pay for the cheapest or earliest past year.

old_fogey

Thank you af1963 for your clear and comprehensive answer, very helpful

xylophone

You need to check your personal situation with the Future Pension Centre.

Who knows, now that we are supposedly post restrictions and the government is supposedly making employees return to the office, proper service may return.

https://www.gov.uk/future-pension-centre

Have a look at Note One page 7 here

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

Just because you can fill gaps in your record, it doesn’t necessarily mean you should. Check your ‘Personal Maximum’ figure on the ‘Check your State Pension’ website. This is the most you can get in State Pension if all the gaps in your record were filled and all the years from 2016/17 counted towards your State Pension

It would appear that you may have some pre 2016 years which you could fill but check first.

p00hsticks

af1963 said:

You can go back six years.

Usually the case, but temporarily following the introduction of the new State Pension in 2016, until April 2023 you are allowed to got back to 2006. This extended time period ends in April 2023. HOWEVER, years prior to 2016-17 may or may not increase your state pension, depending on your individual circumstances.

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

The Future Pension Centre will be able to advise on which years would be beneficial, and HMRC apparently will ask if you have checked with them to see if additional contributions are worthwhile.

https://www.gov.uk/future-pension-centre

You'll need to pay previous years as lump sums by contacting HMRC - going forward you can either pay asa lump sum or set up a monthly direct debit

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

If you are registered self-employed in a small business (e.g ebay selling, dog walking etc) then you can pay the cheaper Class 2 rather than Class 3. And, as af1963 has said, there are also ways you can get credits (e.g. childminding grandchildren whilst the parents work, or being on certain benefits).

old_fogey

Thank you xylophone and p00hsticks.
I will try and phone the Future Pension Centre, I was putting it off as I am quite deaf, and it is easy to misunderstand - but I need to just get on and do it. But I do have a better understanding now, thanks

Notepad_Phil

old_fogey said:

Thank you xylophone and p00hsticks.
I will try and phone the Future Pension Centre, I was putting it off as I am quite deaf, and it is easy to misunderstand - but I need to just get on and do it. But I do have a better understanding now, thanks

You may want to consider sending them a letter as they are open to receiving quite complex queries via that means.

p00hsticks

old_fogey said:

Thank you xylophone and p00hsticks.
I will try and phone the Future Pension Centre, I was putting it off as I am quite deaf, and it is easy to misunderstand - but I need to just get on and do it. But I do have a better understanding now, thanks

They offer a 'relay' service for the hard of hearing , which I believe works a bit like online messaging - you type your questions to an agent in real time and they type their replies.

https://www.gov.uk/future-pension-centre

old_fogey

Thank you all. I called them today, it really helped knowing what the range of responses could be!
This is the result- it may be of some use to someone else searching the threads.

Only 2016-17 and later years would help in my case.
I would need 8 extra years of contributions to raise my pension from 139 to 179.60
The first 7 years I would get the full amount, the 8th year £4.68pw, still worth doing
There are 5 years available to purchase now. I shall pay  now for the 4  that will go up in price after 5th April this year. The rest later.

And I can see why I was confused to start with, I was thinking old system 30 yrs new system 35 yrs, so 5 years to pay....not so, totally different system! 
Easy to let yourself think you are being hard done by, with having to top up,  but on reflection, this is just a brilliant offer. My base of £139 WAS the full standard rate, and is what many people recieve. To be able to add an extra £40 pw, index linked for such a relatively small amount (compared to buying an annuity) is just great. 
Thanks again