Voluntary contributions to state pension

epdt

I am 1 year short of National Insurance contributions to receive a full state pension. The government's Future Pensions department have told me that it would cost £800.80 to top up my pension contributions to qualify for a full state pension. This would increase my pension by £1.42 per week. It would take 10 years before I break even if I make the extra payment. I am obviously hoping to live long enough to reach that age.
But I am also wondering whether I need to take possible future pension increases into account? So, my main question is whether any pension increase in the future will be lower if I am 1 year short of of full pension contributions? In other words, if I get get less increase plus a slightly lower pension, it would then take less than years to break even and I should consider making the extra contribution?

tightauldgit

Pension increases are done by a percentage so yes if you are getting a fixed percentage increase on a smaller amount the increase will be smaller too and that will compound. 

How much of an impact 1 year makes on the sums I don't really know. 

Dazed_and_C0nfused

It won't make any difference.

Say the triple lock is implemented then whatever you are entitled to will be increased by 10.1%.

And the £1.42/week you wouldn't be getting would also increase by 10.1% so in year 2 you would be missing out on £1.56/week.

And so on each year.

So your 10 years is probably a bit pessimistic when inflation is included.  But have you factored in tax?  In reality that £1.42 might only be worth £1.14/week in your pocket.

On-the-coast

Are you sure it’s only £1.41/wk?
that doesn’t sound like a full year’s credit. 

The payback period on buying additional years of NI contributions is normally around 4 years, but in your case it’s close to 11 - and a few more than that if you’re being taxed on your marginal pension income. 

For 11-14 years payback period I wouldn’t bother - but if you have plenty of spare cash & good health prospects it’s still just about worthwhile. 

calcotti

On-the-coast said:

Are you sure it’s only £1.41/wk?
that doesn’t sound like a full year’s credit. 

The final year of contributions can only increase the SP by the amount that is the difference between the existing entitlement and the maximum amount.