Better to make voluntary contributions to state pension sooner or later?

InvesterJones

I will only just qualify for full state pension if I continue making contributions every year until my state pension retirement age. Since I'm unlikely to be working in my final years before collecting a state pension I will need to make some voluntary contributions. I therefore have a choice:

a) make the contributions when I am no longer working

b) make the contributions now to fill some missing years (greater than 6 years ago, but a few years are covered by option to buy until April 2023)

Is there any advantage to doing one over the other? I guess by doing it early I am saving on inflation (so question of whether I think my assets will beat or lose to inflation over the time period), while doing it later might cost more but there's always the remote possibility I have some kind of employment?

Marcon

InvesterJones said:

I will only just qualify for full state pension if I continue making contributions every year until my state pension retirement age. Since I'm unlikely to be working in my final years before collecting a state pension I will need to make some voluntary contributions. I therefore have a choice:

a) make the contributions when I am no longer working

b) make the contributions now to fill some missing years (greater than 6 years ago, but a few years are covered by option to buy until April 2023)

Is there any advantage to doing one over the other? I guess by doing it early I am saving on inflation (so question of whether I think my assets will beat or lose to inflation over the time period), while doing it later might cost more but there's always the remote possibility I have some kind of employment?

Have you worked through https://www.moneysavingexpert.com/savings/voluntary-national-insurance-contributions/

p00hsticks

So -

You have some back years that are available to fill - it sounds like you;ve realised that as they are more than six years ago you only have the opportunity to fill them until April next year.

What you don't say is whether they are pre- or post-2016 years ?

And if the former, are you confident that filling them is actually going to increase your forecast ?

InvesterJones

Marcon said:

InvesterJones said:

I will only just qualify for full state pension if I continue making contributions every year until my state pension retirement age. Since I'm unlikely to be working in my final years before collecting a state pension I will need to make some voluntary contributions. I therefore have a choice:

a) make the contributions when I am no longer working

b) make the contributions now to fill some missing years (greater than 6 years ago, but a few years are covered by option to buy until April 2023)

Is there any advantage to doing one over the other? I guess by doing it early I am saving on inflation (so question of whether I think my assets will beat or lose to inflation over the time period), while doing it later might cost more but there's always the remote possibility I have some kind of employment?

Have you worked through https://www.moneysavingexpert.com/savings/voluntary-national-insurance-contributions/

Thank you, yes, I have, it didn't address the question of filling in gaps early vs later, but I'm aware that I only have until April to do the early option.

p00hsticks said:

So -

You have some back years that are available to fill - it sounds like you;ve realised that as they are more than six years ago you only have the opportunity to fill them until April next year.

What you don't say is whether they are pre- or post-2016 years ?

And if the former, are you confident that filling them is actually going to increase your forecast ?

Yes. They are pre-2016 years. They won't increase my forecast if I make enough contributions every single year until state retirement age, but as I don't expect to be working at that age I will have to make additional contributions then - however I could make additional contributions now to save me from doing so - hence my question about whether it might be advantageous to do so since the contribution cost will be going up quite steeply (per inflation).

Deleted_User said:

InvesterJones said:

I will only just qualify for full state pension if I continue making contributions every year until my state pension retirement age. Since I'm unlikely to be working in my final years before collecting a state pension I will need to make some voluntary contributions. I therefore have a choice:

a) make the contributions when I am no longer working

b) make the contributions now to fill some missing years (greater than 6 years ago, but a few years are covered by option to buy until April 2023)

Is there any advantage to doing one over the other? I guess by doing it early I am saving on inflation (so question of whether I think my assets will beat or lose to inflation over the time period), while doing it later might cost more but there's always the remote possibility I have some kind of employment?

I already have full contributions but hubby was a few years short due to being opted out for 10 years or so.

We've been self-employed for years and in very recent years semi-retired with only a small amount of money coming in. We didn't need to pay NI, but did so voluntarily for a couple of years on his tax return only. But now we've stopped - he's only 3 years short I think.

But quite frankly, I'm not convinced we're going to get pensions - my retirement date jumped from 60 to 67. The country is in dire straights financially. So for that reason I choose to leave any voluntary contributions as late as possible.

So that's a factor - how much faith do you have that pensions will be available as promised? A lot of people had the rug pulled out from under their feet just months from retirement. 

This is a good point - so maybe worth taking the inflation hit and waiting to see. What I can't really afford to do is have them increase the number of qualifying years required at such a point where I can no-longer buy missing years.

InvesterJones

p00hsticks said:

So -

You have some back years that are available to fill - it sounds like you;ve realised that as they are more than six years ago you only have the opportunity to fill them until April next year.

What you don't say is whether they are pre- or post-2016 years ?

And if the former, are you confident that filling them is actually going to increase your forecast ?

Oh, reading this again, together with the MSE guide, is your question really about the contracted out situation and hence whether filling in there is going to help? Good point - I don't rightly know - I was contracted out of the additional State Pension way in the past, but I don't believe this applies to my missing years 2011-2016 (was effectively working outside the UK so don't think there was any contracting out).

p00hsticks

InvesterJones said:

p00hsticks said:

So -

You have some back years that are available to fill - it sounds like you;ve realised that as they are more than six years ago you only have the opportunity to fill them until April next year.

What you don't say is whether they are pre- or post-2016 years ?

And if the former, are you confident that filling them is actually going to increase your forecast ?

Oh, reading this again, together with the MSE guide, is your question really about the contracted out situation and hence whether filling in there is going to help? Good point - I don't rightly know - I was contracted out of the additional State Pension way in the past, but I don't believe this applies to my missing years 2011-2016 (was effectively working outside the UK so don't think there was any contracting out).

Not directly do to contracting out, but more relating to how many full years you had prior to the introduction of the new State Pension in April 2016. At that point an individual 'starting amount' was cacluated for everyone under both old and new rules and the higher of the two taken as your starting amount. The old rules use a maximum of 30 years, the new 35 years.

So if you had less than 30 years pre-2016, filling in some pre-2016 gaps will definitely be beneficial, more than 35 definitely won't. If you had between 30 and 35 then it will depend on the details of your forecast as to whcih calculated figure was higher (for many people who were contracted out for a reasonable time the old rules figure will have been higher).   

Audaxer

InvesterJones said:

p00hsticks said:

So -

You have some back years that are available to fill - it sounds like you;ve realised that as they are more than six years ago you only have the opportunity to fill them until April next year.

What you don't say is whether they are pre- or post-2016 years ?

And if the former, are you confident that filling them is actually going to increase your forecast ?

Oh, reading this again, together with the MSE guide, is your question really about the contracted out situation and hence whether filling in there is going to help? Good point - I don't rightly know - I was contracted out of the additional State Pension way in the past, but I don't believe this applies to my missing years 2011-2016 (was effectively working outside the UK so don't think there was any contracting out).

It is best to phone the Future Pension Centre first to check whether filling gaps before 2016 will definitely increase your State Pension at the current rate of £5.29 per week for each year you pay.

molerat

It is pretty straightforward to work out if you give us all the details.

Your current amount to April 2022

Your number of pre 2016 years held

Your number of post 2016 years held

Your COPE amount - available through a click link in the you have been contracted out bit.

The financial year in which you reach state retirement.

Buying them early removes the inflation factor but you could hedge that a bit with a decent savings account.  The negative factor is getting run over by a bus - it is like a reverse life insurance policy, only pays out if you live otherwise the premiums are lost.

InvesterJones

molerat said:

It is pretty straightforward to work out if you give us all the details.

Your current amount to April 2022

Your number of pre 2016 years held

Your number of post 2016 years held

Your COPE amount - available through a click link in the you have been contracted out bit.

The financial year in which you reach state retirement.

Buying them early removes the inflation factor but you could hedge that a bit with a decent savings account.  The negative factor is getting run over by a bus - it is like a reverse life insurance policy, only pays out if you live otherwise the premiums are lost.

I like your analogy!

To April 2022 = 12 years of full contributions

pre-2016 years held = 8 years

post 2016 years held = 4 years

COPE = £9.11/week

State retirement is in FY 2045

molerat

What is the current £ amount at April 2022 ?

Any pre 2016 years will add value as you have such a low number and a low COPE.

Your 2016 starting amount must have been under the old scheme as new would have been £26.47 and old at least £31.81. If all 10 pre 2016 years are available they will all add value but not the full £5.29, only £4.73.

InvesterJones

Ah sorry, £60.15 a week