National Insurance - Why am I not being paid the full rate?

Tim_and_Me

After working a lifetime in which I have paid NI all that time or received NI credit and getting more than the minimum amount of qualifying years (44); I am NOT receiving a full state pension. I've tried having a go myself in understanding it, but it seems like you need a degree in HMRC complexities. My NI record shows 'Payment Not Needed' for the years 1975-76 to 2014-15. I then retired (at age 60) in 2015-16 and did no pay any NI thereafter. My State Pension Age (66) was reached in 2020-21. However, the NI record appears to say that I am required to pay £824.20 for each of the 5 years 2015-16 to 2019-20 and then £795.60 for 2020-21 for the full State Pension; yet; I have 44 qualifying years so I should in theory be receiving the full State Pension, but I am not. Please can anyone advise what it is that I am missing. Thank you.

itsoliversdad

I’m in a similar position. I’ve paid 40 years but will not get the full pension. I phoned HMRC and told me because I worked in local government they ‘opted out’ what ever that mean so they paid less NI on my behalf so I get less. I don’t really understand it.
you need to find out if you company ‘opted out’

JoeCrystal

Well yes itsoliversdad. That is because it is LGPS that is paying that element of SP included within your LGPS. You paid less NI contributions overall as well.

Dazed_and_C0nfused

It is because you fall under transitional rules, having 35 years of NI is irrelevant to you.

It is only people starting to pay from 2016 who will reach the standard new State Pension with 35 years contributions.

It is covered here on gov.uk.

https://www.gov.uk/new-state-pension/your-national-insurance-record-and-your-state-pension

If you post your actual award details it should be clear which years are worth buying.  Generally it's a hard to beat investment however the final year is sometimes not worth it as it might only add pennies.

Also, if you reached State Pension age in 2020:21 you cannot normally pay for that year and get a qualifying year.

My State Pension Age (66) was reached in 2020-21. However, the NI record appears to say that I am required to pay £824.20 for each of the 5 years 2015-16 to 2019-20 and then £795.60 for 2020-21 for the full State Pension;

Basically you are a winner under the new system, you paid less NI for a long time but now have the opportunity to add to your pension 🙂

Silvertabby

The oft quoted '35 years' refers to those who started work after April 2016.  The rest of us are under transitional arrangements, each with our own individual calculations.

The transitional protections set in place ensure that we won't get any less than we would have received under the old scheme, but they don't include getting something that we haven't paid for.

Those of us who were in contracted out (not opted out - that's something quite different) pension schemes paid reduced NI.  This gave us our (old) basic State pension but not the additional SERPS/SP2.  Instead, the equivalent amount is paid with our occupational pensions.

In my own case, having been contracted out for the maximum 38 years (1978 to 2016) I needed 48 years of NI contributions to qualify for the full single tier pension.  I racked up 44 years before I retired, and count myself as a winner under the new scheme as I had enough time before SPA to pay 4 years of voluntary Class 3 NI.

If that's an option for you, then it's well worth doing.  Even as a BR tax payer in retirement, you will get your investment back after less than 4 years.  After that, it's all profit.

p00hsticks

itsoliversdad said:

I’m in a similar position. I’ve paid 40 years but will not get the full pension. I phoned HMRC and told me because I worked in local government they ‘opted out’ what ever that mean so they paid less NI on my behalf so I get less. I don’t really understand it.
you need to find out if you company ‘opted out’

I don't wish to be pedantic, but sometimes you have to be to avoid people being misled. The correct term isn't 'opted out' (which refers to when someone doesn't join the pension scheme offered by their employer) but rather 'contracted out' - the employee DID join an employers pension scheme and paid a lower rate of NI as a result. Contracting in and out was done away with as one of the changes introduced with the New State Pension (nSP) in April 2016. 

The transitional rules referred to by Dazed and Confused saw everyones entitlement under both the old and new rules being calculated at the point the nSP was introduced, and the higher of the two taken as your 'starting amount' at that time - so you've not lost out on anything.

As Dazed says, you (like me)  are one of the winners - you have the opportunity, for comparatively very little outlay, to purchase additional years in order to get a higher State Pension amount than you would have been expecting for the majority of your working life.

The topic has come up a number of times on this board; if you have a search you should find a number of threads that include details of the calculations done to work out your starting amount. If you post up details of your state Pension forecast figures and Ni record there are also knowledgable people here who can let you know if you can improve on it, if it will be worth you buying missing years and if so which ones (pre-2016 years won;t always increase your forecast).

xylophone

Please can anyone advise what it is that I am missing. Thank you.

After working a lifetime in which I have paid NI all that time or received NI credit and getting more than the minimum amount of qualifying years (44);

I then retired (at age 60) in 2015-16 and did no pay any NI thereafter. 

Were you in a "contracted out" pension scheme?

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

which was produced as a guide for the general public a couple of years before the introduction of the new state pension.

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 (foundation) 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

 The individual would have been in one of three positions -   foundation amount  equal to NSP/more than NSP/less than NSP.

You were in the third position and were some years under SPA.

You had the opportunity to improve your pension up to (but not in excess of) a full NSP by means of voluntary contributions for  2016 - 17 up to the last full tax year before you reached SPA.

What exactly did your State Pension Forecast show?

t0rt0ise

Silvertabby said:

The oft quoted '35 years' refers to those who started work after April 2016.  The rest of us are under transitional arrangements, each with our own individual calculations.

The transitional protections set in place ensure that we won't get any less than we would have received under the old scheme, but they don't include getting something that we haven't paid for.

Those of us who were in contracted out (not opted out - that's something quite different) pension schemes paid reduced NI.  This gave us our (old) basic State pension but not the additional SERPS/SP2.  Instead, the equivalent amount is paid with our occupational pensions.

In my own case, having been contracted out for the maximum 38 years (1978 to 2016) I needed 48 years of NI contributions to qualify for the full single tier pension.  I racked up 44 years before I retired, and count myself as a winner under the new scheme as I had enough time before SPA to pay 4 years of voluntary Class 3 NI.

If that's an option for you, then it's well worth doing.  Even as a BR tax payer in retirement, you will get your investment back after less than 4 years.  After that, it's all profit.

This is what confuses me. I was contracted out from 1997 to 2016 and 48 years full NI wasn't enough to get me to full pension, so how come it was enough for you who were contracted out for longer? They don't tell how it's all worked out so I'm just left wondering if it's right.

MallyGirl

The post above tells you how it is worked out.

Dazed_and_C0nfused

t0rt0ise said:

Silvertabby said:

The oft quoted '35 years' refers to those who started work after April 2016.  The rest of us are under transitional arrangements, each with our own individual calculations.

The transitional protections set in place ensure that we won't get any less than we would have received under the old scheme, but they don't include getting something that we haven't paid for.

Those of us who were in contracted out (not opted out - that's something quite different) pension schemes paid reduced NI.  This gave us our (old) basic State pension but not the additional SERPS/SP2.  Instead, the equivalent amount is paid with our occupational pensions.

In my own case, having been contracted out for the maximum 38 years (1978 to 2016) I needed 48 years of NI contributions to qualify for the full single tier pension.  I racked up 44 years before I retired, and count myself as a winner under the new scheme as I had enough time before SPA to pay 4 years of voluntary Class 3 NI.

If that's an option for you, then it's well worth doing.  Even as a BR tax payer in retirement, you will get your investment back after less than 4 years.  After that, it's all profit.

This is what confuses me. I was contracted out from 1997 to 2016 and 48 years full NI wasn't enough to get me to full pension, so how come it was enough for you who were contracted out for longer? They don't tell how it's all worked out so I'm just left wondering if it's right.

But that's not quite what @Silvertabby said.

The sooner your State Pension age was after 2016 the less chance you have to make up the extra years needed to reach the standard new State Pension.  So if you reached SPa in say 2017:18 you could only add 2 extra years.

and count myself as a winner under the new scheme as I had enough time before SPA to pay 4 years of voluntary Class 3 NI.

xylophone

This is what confuses me. I was contracted out from 1997 to 2016 and 48 years full NI wasn't enough to get me to full pension, so how come it was enough for you who were contracted out for longer? They don't tell how it's all worked out so I'm just left wondering if it's right.

See my post above (and link) and also 

https://www.gov.uk/government/publications/new-state-pension-if-youve-been-contracted-out-of-additional-state-pension/the-new-state-pension-transition-and-contracting-out-fact-sheet

The Full Basic for the year 2015/16 was £115.95. It increased to £119.30 for the 2016/17 tax year.

The (presumably estimated) NSP for 15/16 (as it didn't start until after 6/4/2016) was £151.25 -the actual NSP was £155.65 at inception.