Buy NI years or invest in SIPP Stocks and Shares

EdJohn

Hi,
I'm 44 years old. I am on track to have 17years of contributions. I have 5,000 to move out from savings. Am I better off to buy 5years of NI contributions which will be paid with state pension when I am over 68 or put into SIPP account stocks and shares cheap index tracker fund which I could access when I am 55 or could keep invested until 68?
I just finished reading the article on here by Clare Casalis about urgently considering buying national insurance years.
Thank you for your help.

Dazed_and_C0nfused

Do you mean you have already accrued 17 years or do you expect to only accrue a total of 17 by the time you reach State Pension age?

If the latter a lot can happen in 24 years!

National Insurance years are one of the next investments money can buy.  But only if you really need to buy them.

Albermarle

Buying extra years of NI contributions to get more state pension is an absolute bargain and would be a much more of a priority than investing the money .
As an example , 5 years of NI top ups will cost just over £4000. For that you will get over £25 pw ( £1600 pa) guaranteed income going up with inflation ( or even more ) To buy that income in the open market at age 68 today would cost today around £40,000 .

£4000 in a SIPP with tax relief will become £5,000 and after 13 years is likely to be in the region of £7,000 to £8,000 ( in todays money )  depending on how it is invested and how the markets are.

Linton

Won't you get the extra NI years you need through employment? Or have you stopped working?

Daliah

Without having further details, it is impossible to say one way or the other. 

Could you answer the following Qs:

1. have you got the 17 years already, or do you expect to get them in future, or a combination of both?
2. have you got any gaps in your NI years since 6 April 2006/7?
3. how many more NI years are you expecting to get in the next 24 years?

eskbanker

EdJohn said:

I just finished reading the article on here by Clare Casalis about urgently considering buying national insurance years.

That article takes you through the steps needed to assess whether or not it's sensible to do this, so what is the end result of each of those steps?

Step 1: Check how much of the full state pension you're on target to get

Step 2: If you have gaps in your record, see if you can plug them for free with NI credits

Step 3: Should you pay to boost your state pension?

Step 4: Use our calculator to see what topping up could be worth

Step 5: WARNING – don't pay until you've called the Government's pension helplines

Step 6: A few buts... not everyone will be better off if they buy more NI years

Section62

Albermarle said:

Buying extra years of NI contributions to get more state pension is an absolute bargain and would be a much more of a priority than investing the money .

Isn't that just a reflection of risk though...  the risk that by the time you claim state pension the 'returns' may be far lower than pensioners currently experience?

A future government could reduce the amount of pension paid (in specific circumstances) by simply making a policy decision to alter the arrangements (e.g. no 'state pension' for anyone with savings above £'X'k)

Of course a future government may also change the SIPP rules, or impose windfall taxes on the cheap index tracker - but if I were a gambling person I'd think a reduction in access to/value of the state pension is likely to be more of a risk.

Albermarle

As above, in fact state pensions have actually been slowly improving ( Triple Lock etc ) to court the grey vote. 

Isn't that just a reflection of risk though...  the risk that by the time you claim state pension the 'returns' may be far lower than pensioners currently experience?

You can only base the calculations on what you know today, not what might be in future. The current benefit of buying extra NI years if you have not got enough ( and I realise the OP needs to clarify their exact position on this, by answering some of the questions in the other posts) , is so great that it would take a massive upheaval of the system to make investing the money a better bet.
Perhaps a more real 'threat' is that they make buying extra years more expensive, as currently it is ridiculously cheap.

Pdman

You can only fill gaps in your NI history. You can not buy "extra" years above your working life.

Dazed_and_C0nfused

Pdman said:

You can only fill gaps in your NI history. You can not buy "extra" years above your working life.

Of course you can.  Plenty of people stop work at say 60 and pay voluntary NI to reach the standard new State Pension amount.

Pdman

Dazed_and_C0nfused said:

Pdman said:

You can only fill gaps in your NI history. You can not buy "extra" years above your working life.

Of course you can.  Plenty of people stop work at say 60 and pay voluntary NI to reach the standard new State Pension amount.

Sorry I meant working life as defined by state pension age. So in your example you are filling the NI gap between 60 and then.