Paying for extra years, worth it?

sevenhills

A friend has lots of NI gaps. We were talking last night and he said, dismissively, that if he pays more years he will be 74 before he is in profit.
Most people live beyond 74, but when is it worth paying more NI years for a healthy but slightly obese male? How many die before they are 75?

eskbanker

The normal payback is about four years (depending on other income), so it would be illuminating to see his workings....

In terms of the question about life expectancy, there's a calculator on the ONS site:

https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

molerat

£800 / £5.29 = 151 weeks.  If a basic rate tax payer £800 / £4.23 = 189 weeks.  If a higher rate tax payer £800 / £3.17 = 252 weeks so nowhere near 74

eastcorkram

How are people making the calculations, without knowing the age of the person ??

sevenhills

eastcorkram said:

How are people making the calculations, without knowing the age of the person ??

He is in his early sixties. His life expectancy could be after 75, but a small number will die before then.

Silvertabby

Most people make this decision before they reach State pension age.  But if this chap is already 70, then fair point.  

ADD.  Crossed with the above.  As chap is not yet State pension age, then it's a maths problem.  Has happened before on these boards - from memory, that poster was using the weekly increase figure instead of the monthly figure.

eskbanker

eastcorkram said:

How are people making the calculations, without knowing the age of the person ??

None of the above breakeven calculations are affected by age, although @molerat's last comment is assuming (understandably) that OP's friend won't have reached state pension age yet.

Albermarle

The other point is that people often ( usually in fact) underestimate the cost/benefit of a guaranteed retirement income, with inflation linking.
To buy a £5.29 a week pension with full inflation linking in the open market , would cost nearly TEN times the £800 odd it costs to get it by buying missing NI years.
So it is an absolute bargain even if he does die younger than average.

sevenhills

My friend has a small amount of wealth, not sure how much he has now, but he has talked about trading/gambling in shares some years ago.
You would think such people would be astute enough to pay NI and think and plan for their future. 

Albermarle

sevenhills said:

My friend has a small amount of wealth, not sure how much he has now, but he has talked about trading/gambling in shares some years ago.
You would think such people would be astute enough to pay NI and think and plan for their future. 

Some people are suspicious of anything government related, even to the point of causing problems for themselves.

squirrelpie

eskbanker said:

In terms of the question about life expectancy, there's a calculator on the ONS site

Sadly that calculator doesn't take many factors into account, so is not much use to the OP. There is a more detailed one, for example, at:

https://www.direct.aviva.co.uk/MyTools/LifeExpectancy/AboutYou

but I have no idea how well it works.

FWIW, it gives me an extra three years over the ONS one