Pension forecast confusion

CaptSlog

Dear All,

Mrs Slog and I are confused about our State Pension forecasts.

We retired in Aug 2019, me at 63, Mrs Slog at 58.  During our years of employment and according to our NI records from the Gov .UK website, we have..

Capt Slog 46 years of full contributions
Mrs Slog   40 years of full contributions.

All the sources I see say that to receive a full state pension, one has to have 35 years of contributions.  (yes?)  

So, the bit I don't understand is on the pension forecast...

       Estimate based on your National Insurance record up to 5 April 2021

       £171.75 a week

       Forecast if you contribute another 3 years before 5 April 2024

       £185.15 a week

       £185.15 is the most you can get

And my question is...

IF I have "46 years of full contributions", how come I have to contribute for another 3 years?

(BTW. I understand that some of those years from our full contributions are ones in which we received "credits" (in full time education etc.)  But I've checked and the total of the years where we were employed and paid still exceeds 35 years.)

Thanks

Jonty6262

Experts will explain later, I know but can't put it across like our resident experts

Thrugelmir

MSE has a guide

https://www.moneysavingexpert.com/savings/state-pensions/

molerat

35 years is only for those starting out after 2016 despite how the tabloid press like to sell it.  Everyone with a pre 2016 NI record is on a hybrid scheme where you may need more or less than 35 years to achieve more or less than the full new pension - I have 42 years and do not receive the full amount.

The main reason for needing more than 35 years is being in a contracted out final salary pension where you paid a lower rate of NI.  Your 2016 starting amount would have been based on the old scheme - you received no more or less than you had already earned - and with a long contracted out record your S2P would have been quite low.  Your pension forecast should state that you were contracted out and have a click link that shows a COPE amount.

"Full year" only means you earned the basic pension, not the add on S2P.

Making up those missing years will likely be one of the best investments you could buy, the equivalent of a 30% annuity.  Buying 2 years will take you up to £182.33 at £5.29 each, the 3rd will only add another £2.82 but still likely worth buying. Check if that final year of work is part full so could be a cheap buy.

JGB1955

CaptSlog said:

Dear All,

All the sources I see say that to receive a full state pension, one has to have 35 years of contributions.  (yes?)  

No.  Wait for an expert to come along and explain why......

Dazed_and_C0nfused

All the sources I see say that to receive a full state pension, one has to have 35 years of contributions. (yes?)  

Not on gov.uk it doesn't.

https://www.gov.uk/new-state-pension/how-its-calculated

xylophone

 At 6/4/16, two calculations were done for each of you under the old and new schemes.

Old scheme

£119. 30 (Full Basic because you had at least 30 years) + (Additional State Pension - Deduction for Contracting Out)

New Scheme

£155.65 (Full NSP because you had at least 35 years) - Contracted Out Pension Equivalent.

Your starting amount was the higher of the two.

It is clear that for each of you the starting amount was lower than a full NSP and each of you had a number of years to go before reaching SPA.

You were each able to improve your starting amount  up to the Full NSP by further contributions or credits before you reached SPA.

You each added  at least16/17, 17/18 and 18/19 before ceasing employment which brought each of you around £15 closer to the full amount.

However you each need  another three years NI to bring you up to full.

You can make voluntary contributions.

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

See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

squirrelpie

Thrugelmir said:

MSE has a guide

https://www.moneysavingexpert.com/savings/state-pensions/

Yes but it's wrong! It's another place that propagates this 35-year myth. So why link to it?

CaptSlog

Thanks for the answers above, makes sense and much clearer now.  I thought I'd have to keep paying, but couldn't quite square it with the 35 years bit.

I'd checked out some of this when I was due to retire, but forgotten the details.  I estimated that it's something like £2500 in Class 3's, which will take about 3.5 years to get back as extra pension.  I know I'm hoping to live longer than that.     

I'm especially keen that Mrs Slog is comfortable.  She has a smaller gap between the maximum and the estimate at 2021, and so it would take her longer to see the return.



It's not just tabloids that propagate the 35 year thing.  I think I read something similar whilst on a Gov.uk website this afternoon!
also...
Before I left work, I had the opportunity to attend a 'retirement course' and whilst there we were given talks by experts in pensions.  I asked about the discrepancy between my Max pension and the amount I would get "now", but they INSISTED that what I was saying about having to make class 3 contributions for the missing years was wrong and that as I had 35+ years, I was already entitled to the full whack. Amazing. 

molerat said:

Making up those missing years will likely be one of the best investments you could buy, the equivalent of a 30% annuity.  Buying 2 years will take you up to £182.33 at £5.29 each, the 3rd will only add another £2.82 but still likely worth buying. Check if that final year of work is part full so could be a cheap buy.

We both seem to have paid what was needed for that final part year to Aug 2019, the first gap we have is for 2020-2021
Very interesting what you say about the 3rd year only making £2.82.  That makes quite a pay-in for a small return.  Thanks.

Dazed_and_C0nfused

CaptSlog said:

Thanks for the answers above, makes sense and much clearer now.  I thought I'd have to keep paying, but couldn't quite square it with the 35 years bit.

I'd checked out some of this when I was due to retire, but forgotten the details.  I estimated that it's something like £2500 in Class 3's, which will take about 3.5 years to get back as extra pension.  I know I'm hoping to live longer than that.     

I'm especially keen that Mrs Slog is comfortable.  She has a smaller gap between the maximum and the estimate at 2021, and so it would take her longer to see the return.



It's not just tabloids that propagate the 35 year thing.  I think I read something similar whilst on a Gov.uk website this afternoon!
also...
Before I left work, I had the opportunity to attend a 'retirement course' and whilst there we were given talks by experts in pensions.  I asked about the discrepancy between my Max pension and the amount I would get "now", but they INSISTED that what I was saying about having to make class 3 contributions for the missing years was wrong and that as I had 35+ years, I was already entitled to the full whack. Amazing. 

molerat said:

Making up those missing years will likely be one of the best investments you could buy, the equivalent of a 30% annuity.  Buying 2 years will take you up to £182.33 at £5.29 each, the 3rd will only add another £2.82 but still likely worth buying. Check if that final year of work is part full so could be a cheap buy.

We both seem to have paid what was needed for that final part year to Aug 2019, the first gap we have is for 2020-2021
Very interesting what you say about the 3rd year only making £2.82.  That makes quite a pay-in for a small return.  Thanks.

True but it is an inflation proofed £2.82 that could be paid for a couple of thousand weeks after your State Retirement age 🙂

Audaxer

squirrelpie said:

Thrugelmir said:

MSE has a guide

https://www.moneysavingexpert.com/savings/state-pensions/

Yes but it's wrong! It's another place that propagates this 35-year myth. So why link to it?

Yes, very confusing as there was a new guide specifically about buying NI years, uploaded to MSE last week, which myself and others commented on about the reference to 35 years, and they then amended it to say that you may now need more than 40 years of NI contributions. See below:
Voluntary national insurance contributions (moneysavingexpert.com)
"Many will likely need about 35 qualifying NI years, though for those who started their NI record before 2016 – which would be pretty much everyone aged 45 to 70 now – it's not quite that simple. How many years you need is based on your age and NI record up to now – which could mean you need more than 40 NI years."

So they should be ensuring that the State Pension guide is also correct, or else combine them into the one guide.