State pension forecast with full contribution record - confused

canary2211

So, I'm checking on my state pension forecast and have got the forecast from the government gateway etc.  But I confess to not understanding! 

I'm 66 in two years; I was contracted out for all my working life, and have 42 years of NI contributions, with full contributions in more than 35 years. For the past 4 year I have gaps having stopped working in 2017/18. 

The forecast says I am forecast to get full £185 a week, but "estimate to 5.4.21" is only £169 and I should make voluntary contributions to fill the gaps of the last 4 years.   But I had always thought that 35 year full contribution record meant I would get £185?  

What am I missing please?  I have spent a lot of time in the phone queue to the Future Pension Centre: I'm sure they will answer one day. 

Thank you in advance

Dazed_and_C0nfused

But I had always thought that 35 year full contribution record meant I would get £185?  

Where have you read that?  A tabloid newspaper?

You are under transitional rules so having 35 years is irrelevant.

Try the official source for a start.

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

Purchasing 3 years will add £15.87 and probably be the best investment your money can buy.  A fourth year might only add pennies as in your situation you can't exceed £185.15.

If you want more detail try the excellent Royal London guide to topping up your State Pension.

Linton

35 years only applies to people who spend all their working lives under the new system.  So currently  nobody.  Other people would have spent some under the old system and some under the new.

Depending on cirtcumstances this could result in fewer than 35 years NI years if contracted in and well paid or possibly significantly more than 35 years if contracted out.

Very roughly (and this is very roughly) what happened is that under the old system you paid NI + SERPs and received a "basic state pension" + Additional State Pension.  Iff you were contracted out of SERPs you just got the basic state pension.

When the new system was bought in ASP was merged into the "standard" state pension.  But if you were contracted out you did not have any ASP and so were only due something less than the standard State Pension.  But you were entitled to increase this up to the standard state pension by extra NI years.

So yes you do have to pay extra NI years.  If not working ,voluntary NI costs £800/NIyear. It works out that this money is repaid in extra SP in about 3 years so it really is a very good deal.  The FPC when you get through to them will be able to tell you exactly which years you should pay for.

Dazed_and_C0nfused

I don't think FPC will tell you which years you "should" pay for.

That is your decision and assuming your £169 figure is exact then each extra year will add the following,

1 = £5.29
2 = £5.29
3 = £5.29
4 = £0.28

chapea

if if that amount is upto April 2021 then only just over 2 years needed not 3 

Linton

Dazed_and_C0nfused said:

I don't think FPC will tell you which years you "should" pay for.

That is your decision and assuming your £169 figure is exact then each extra year will add the following,

1 = £5.29
2 = £5.29
3 = £5.29
4 = £0.28

Pedant! They will tell you which years will benefit you and which wont.

Dazed_and_C0nfused

chapea said:

if if that amount is upto April 2021 then only just over 2 years needed not 3 

That would surely only reflect the fact that no NI record is held, not that the £169 needs updating.

xylophone

A long answer

https://forums.moneysavingexpert.com/discussion/6357868/not-getting-full-amount-of-new-state-pension/p9

In short, at 6/4/16 two calculations were done

Old Rules

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

£119.30 + (Additional State Pension - Deduction for Contracting Out).


New Rules

Full New State Pension  because you had at least 35 years (max) - Contracted Out Pension Equivalent.

£155.65 - Contracted Out Pension Equivalent.

Your COPE is shown on your forecast and was used once only in this calculation.

Your starting amount (almost certainly given by old rules) was the higher of the two.

You were able to improve this starting amount up to (but not exceeding) a full NSP by  contributions for years between 2016 and your SPA.

You have made no contributions after 17/18 but can make up the shortfall in voluntary contributions as explained above.

canary2211

Thank you for all the excellent responses! Genuinely helpful and I shall go off refreshed with new knowledge and look at the detail again ;  then I will top up appropriately. 

canary2211

And yes its a great deal especially when we consider the impact of triple lock madness and inflation at somewhere between 9 and a squillion percent.