Only contribute a few more years of NI to get full state benefit?

wotsmyname

Not entirely sure where I should post my enquiry, but assume this board is the most appropriate.

I'm a bloke in his mid-40s, have 20+ years of fully paid years of NI under my belt but am not currently working due to personal reasons.

I'm not claiming any benefits.

Checking my HMRC account, my state pension forecast (for sometime in 204x) estimates my pension to be around £150 based on contributions to the most recent tax year for the forecast.  It then goes on to say I'm on track to get the full state pension (currently £185 and based on current law) if I contribute another 5 years of NI before 204x.

Does this mean I could voluntarily make NI contributions to satisfy this, or would I need to be in work?

Also, apparently there's also a change coming in April 2023 whereby voluntary NI contributions will become more expensive to make after this date?

 

Marcon

wotsmyname said:

Not entirely sure where I should post my enquiry, but assume this board is the most appropriate.

I'm a bloke in his mid-40s, have 20+ years of fully paid years of NI under my belt but am not currently working due to personal reasons.

I'm not claiming any benefits.

Checking my HMRC account, my state pension forecast (for sometime in 204x) estimates my pension to be around £150 based on contributions to the most recent tax year for the forecast.  It then goes on to say I'm on track to get the full state pension (currently £185 and based on current law) if I contribute another 5 years of NI before 204x.

Does this mean I could voluntarily make NI contributions to satisfy this, or would I need to be in work?

Also, apparently there's also a change coming in April 2023 whereby voluntary NI contributions will become more expensive to make after this date?

 

See https://www.moneysavingexpert.com/savings/voluntary-national-insurance-contributions/ which should answer all the above.

wotsmyname

Thanks Macron.

What I don't quite grasp is even if I contribute another 5 or so years between now and SPA, I still won't have 35 years of NI contributions? 

So if I stopped completely paying NI, I assume the lower estimated figured (based on my record to April), that'll be what I will get?

NannaH

Have you got children that you could claim NI credits from Child benefit? 

The lower amount is the estimate if you don’t make or claim any more contributions. 

For example,  mine says £160 so I’m missing 5 years, which I’m making up by claiming specified adult credits ( for looking after my Grandson). 

p00hsticks

wotsmyname said:

Thanks Macron.

What I don't quite grasp is even if I contribute another 5 or so years between now and SPA, I still won't have 35 years of NI contributions? 

So if I stopped completely paying NI, I assume the lower estimated figured (based on my record to April), that'll be what I will get?

Forget the 35 years - that only applies to those who only started their working lives after the introduction of the new State Pension in April 2016. Those of us who are older than that fall under transitional rules and may need more years (as I do) or less (as it sounds as if you do) to reach the maximum depending on their individual records prior to 2016 (whether they were contracted in or out, how much SERPS/S2P they had accumulated etc).

If you pay no further NI, you will get what your current estimate says.

However, buying additional years represents great value for money if you have average life expectancy and can afford it - a one-off outlay of around £800 for a year will earn you a pension increase of over £5 a week for life, until you reach the maximum.

molerat

When the new pension came in in 2016 you were given the higher of the new pension or old pension calculations.  If you had a reasonable amount of S2P you could have beaten the equivalent number of years of new pension.  35 years is only relevant to those starting out after 2016.  At today's rates you get £5.29 for each extra year you contribute so I suspect your "£150" current amount is nearer £160.

Yes, that current amount is what you will get if you stop contributing.  Class 3 contribution rates increase every year with inflation so expect them to cost around £17.45 from next year.

MX5huggy

No point making voluntary contributions if you will be working in the future or receiving credits from elsewhere (children or benefits). You still have to pay NI even if you entitlement has reached the maximum. 

Secret2ndAccount

I wouldn't buy anything right now. You have time to accrue the required years naturally if you go back to work. If you end up having to buy them, you can do it nearer to retirement. The current year, and the previous year are available at their original price. Older years are priced at the current price. In other words the price goes up every April, but only in line with inflation.

wotsmyname

Thanks everyone for addressing various points.

I currently only have one incomplete year from 2006 (last tax year), so is it recommended I fill this gap before April 2023 for under £800?  What is it likely to increase by if I buy later?  Is it just going to increase by inflation year on year?

Or is it because it;s only going to be limited to last 6 years, hence the recent recommendation by MSE to get in now (so you could plug in all gaps back to 2006)?

For those who fall under the transitional rules and started working lives prior 2016, why is it some will need less or more than 35 years' NI ('depending on personal record')?  Is it because of the amount paid?  Assuming you've just been in normal employment and collected under PAYE?

p00hsticks

wotsmyname said:

For those who fall under the transitional rules and started working lives prior 2016, why is it some will need less or more than 35 years' NI ('depending on personal record')?  Is it because of the amount paid?  Assuming you've just been in normal employment and collected under PAYE?

It's broadly speaking because some people were contracted out of the additional state pension (SERPS / S2P) because their employer prvided a comany pension scheme, and so they paid a lower rate of NI.

When the new State Pension was introduced, a calculation was done for every individual using their record at that point using  both the old and the new rules, and whichever figure was the higher became a persons 'starting amount'. Each calculation includes specific adjustment depending on a persons specific record. From that point every NI year earned since 2016 adds 1/35th of the maximum amount (currently around £5.29) to that starting amount until the maximum amount or the last full year prior to State Pension Age is reached, whichever comes first.

wotsmyname

Thanks p00hsticks - appreciate you taking the time to explain.

So as it stands, if my circumstances change, I could work at least a further five full years to be able to qualify for the full state pension, or I could voluntarily pay it in the future?  Any NI paid beyond six years will not reap any benefits?