State Pension vs Early Retirement

Qyburn

Hi,

Quick question I hope, I couldn't find the answer stated outright anywhere.  If I have sufficient full years of NI contributions now, will the State Pension be affected if I retire a few years before State Pension Age, so there are no NI contributions in those last few years?  The forecast on HMRC says I have 42 years full contributions up to and including 2021/2022.

Thanks,

jem16

42 years May still not be enough if you have been contracted out at any point. What exactly does your forecast say? Is there more than one figure on it? 

Fyldian

When looking our our forecasts I recall seeing something like “This is the maximum amount you can get”, or words to that effect.

Qyburn

I guess there's no harm showing the actual figure.  What it says is ..

"Your forecast
    is not a guarantee and is based on the current law
    is based on your National Insurance record up to 5 April 2022
    does not include any increase due to inflation
 £199.18 is the most you can get
You cannot improve your forecast any more. "

NI history says I have 42 years full contributions up to and including 2021/22 and six part years.

Fyldian

Such as this: 

jem16

Qyburn said:

I guess there's no harm showing the actual figure.  What it says is ..

"Your forecast
    is not a guarantee and is based on the current law
    is based on your National Insurance record up to 5 April 2022
    does not include any increase due to inflation
 £199.18 is the most you can get
You cannot improve your forecast any more. "

NI history says I have 42 years full contributions up to and including 2021/22 and six part years.

Nothing you do now will change that figure as it’s already more than the full new state pension. It will increase through index linking but will not decrease whether you pay NI or not. 

Dazed_and_C0nfused

And not paying any more NI won't reduce it.

Qyburn

Dazed_and_C0nfused said:

And not paying any more NI won't reduce it.

Perfect. Thanks.  I'm drawing up cash flow forecasts just now, even though they will only be rough estimates it's still better than a completely wild guess.

By the way, why do forecasts for different people show different figures?  The missus reaches state pension age seven months later than I do, and her forecast shows a lower figure than mine.  The figure shown by Fyldian is different still, less than mine and more than the missus.

NedS

Qyburn said:

Dazed_and_C0nfused said:

And not paying any more NI won't reduce it.

Perfect. Thanks.  I'm drawing up cash flow forecasts just now, even though they will only be rough estimates it's still better than a completely wild guess.

By the way, why do forecasts for different people show different figures?  The missus reaches state pension age seven months later than I do, and her forecast shows a lower figure than mine.  The figure shown by Fyldian is different still, less than mine and more than the missus.

Because we are under transitional rules, moving from the old state pension to the new state pension. In 2016 when the old state pension ended, they would have calculated your entitlement under the old rules, and then from 2016 they have been adding to that starting amount using the new rules. Everyone's value calculated under the old rules in 2016 will be different based upon their circumstances up until that point.

xylophone

By the way, why do forecasts for different people show different figures? 

At 6/4/16 (introduction of NSP), an individual calculation (under old and new rules) was done for all those under State Pension Age.

This was to establish a "starting amount" (  which was the higher of the two).

Old Rules

NI years/30 (max) x £119.30 (full basic) + (Additional State Pension - (if applicable) Deduction for Contracting Out)

New Rules

NI years/35 (max) x £155.65 (Full NSP) - (if applicable) Contracted Out Pension Equivalent.

In your particular case, the higher of the two was already more than a full NSP and therefore although you will have been paying NI (if  working and earning the relevant amount) and will continue to pay it up to SPA (if working and earning the relevant amount), it will not improve your SP.

Your SP will revalue, the amount equivalent to full NSP under the "triple lock" and the balance, your "protected payment" by CPI measured the previous September to the April when the increase is applied.

See this fact sheet (produced for the general public a couple of years before introduction of NSP).

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

Audaxer

Qyburn said:

I guess there's no harm showing the actual figure.  What it says is ..

"Your forecast
    is not a guarantee and is based on the current law
    is based on your National Insurance record up to 5 April 2022
    does not include any increase due to inflation
 £199.18 is the most you can get
You cannot improve your forecast any more. "

NI history says I have 42 years full contributions up to and including 2021/22 and six part years.

You are in a very good position in that your forecast is already over the maximum new State Pension which is currently £185.15. I have 46 years full contributions and still have 3 years voluntary contributions to make to get to the maximum.