When to buy extra years for State Pension

Rheumatoid

I am wondering if there is any hurry to do this. Can I wait until I am 65/66 and keep the money in the bank in the meantime? If so, are there disadvantages to doing this?

How many years do I need to buy - presumably 4?

I am 60 and retired at 57 after a career in health and education so was contracted out.

My record shows

• 40 years of full contributions
• 7 years to contribute before 5 April 2028
• 4 years when you did not contribute enough (student in 1980's)

Estimate based on your National Insurance record up to 5 April 2021 £165.19 a week

Forecast if you contribute another 4 years before 5 April 2028 £185.15 is the most you can get

Contracted Out Pension Equivalent (COPE)

Your COPE estimate is £76.65 a week

Thanks

R.

Albermarle

You should contact these people for specific advice on your situation.

Contact the Future Pension Centre - GOV.UK (www.gov.uk)

molerat

There is no rush, as long as it is paid before your retirement date then you will receive the full pension.  3 years will take you up to £181.06 at £5.29 per week for each year, the 4th will add another £4.09 taking you up to the max.  Voluntary contributions only increase in line with inflation each year so in effect stand still.  The problem with buying them too early is that you could fall under a bus and all is lost.

Rheumatoid

molerat said:

The problem with buying them too early is that you could fall under a bus and all is lost.

Thanks. That was my other fear :-)

Shedman

You would currently get £5.29 a week extra for each year of voluntary contributions so if you bought 3 years that would take you to around £181.06.  Buying the 4th year would only gain you another £4.19 a week so may not be worth doing.   How many missing post 2016 years have you currently (I'm assuming none of them are short contibuted as you say your only years where you didn't contribute enough were in the 80{s).  You say you retired at 57 and are now 60 so possibly you only have 2 or 3 post 2016 years so couldn't pay for 4 years yet anyway?  I'm presuming non of the post 2016 years are just part contributed years as they would be the cheapest to make fully contributed? 

Its an interesting decision at the moment compared to the last few inflation benign years as to when to pay whatever post 2016 years you are currently able to pay in this high inflation period as by paying now you would get the likely above average increase in the weekly pension amount based on this Sept's inflation possibly up to 8% (depending on whether they fudge the triple lock again) but at a lower cost than if you waited a year or two.  So although you've paid your lump sum earlier you're effectively earning a good rate of return on it (likely far better than in the bank).   But, on the flip side, the later you leave it to pay the extra contributions the less the chance you'll pop your clogs before you can claim the state pension.  

If you can afford it now and you reckon you got a good chance of getting past 66 and at least 3-4 years after (payback on extra contributions is around that time frame) then if it were me I think I make the contributions for whatever post 2016 years you need to fill now, but its your decision as only you know your circumstances,  As Albermarle consult the FPC to doublecheck your record and make sure what years contributions would actually add benefit.

Rheumatoid

Thanks @Shedman
I retired October 2019 and 2019-20 was my last full year. So I guess at the moment I could only buy 20-21 and 21-22 anyway. I have no part contributed years except those in the 80's.

Some useful food for thought thanks. If only we could know when we might expire!

nigelbb

Shedman said:

You would currently get £5.29 a week extra for each year of voluntary contributions so if you bought 3 years that would take you to around £181.06.  Buying the 4th year would only gain you another £4.19 a week so may not be worth doing. 

Of course it's worth paying about £800 to get a pension of £4.19/week (£217.88/year). Average life expectancy at retirement is about twenty years which means an index linked pension totalling £4,357.60. It just takes 4-5 years to get your investment back.

Ibrahim5

I am in a similar position. Problem is that I am not sure whether I fancy a bit of self employment or if I really can't be bothered.

CheekyMikey

I’ve just turned 60 and have just this week bought my 4 missing years simply to get it done whilst I have the cash to do so..was still able to get a few years under £800 and two at £824, but it’s only likely to rise in future. How good an investment it will be is dependant on how long you live of course…but living to 80 would give an absolute minimum return of £13k on a £3k initial investment, so makes sense.

Rheumatoid

Would it make sense to do it early in case I don't make it to retirement age in terms of my wife receiving increased benefit? Just a thought.

molerat

Rheumatoid said:

Would it make sense to do it early in case I don't make it to retirement age in terms of my wife receiving increased benefit? Just a thought.

No.  There is nothing, with very limited exceptions, to inherit under the 2016 pension.