Top up state pension ?

sanderson59

Hi. I am currently 63 yrs old and have been drawing my company pension for 12yrs. I recently checked by state pension forecast. Although it stated I had a full 37 yrs full contribution, the forecast states over the last 12 yrs I am approx £6700 short on my contributions, however this will only get me an extra £6 per week pension. If you add this over a life expectancy of 20 yrs it is potentially not worth it ?. I have no other income than my company pension, but have not paid any NI since I retired. Need some advice please. TIA

molerat

What exactly does your forecast show? What you have posted makes no sense. Generally buying 1 year at around £800 will add £5.29 to your pension paying back gross in around 3 years.

Post a few details and someone will give you some pointers

Current £££.pp amount accrued up to April 2022
Number of pre 2016 NI years full
Number of post 2016 NI years full
Tax year you reach state retirement
Any COPE amount shown
Years which show not full and prices

mark55man

Hi @sanderson59 - your background (ie work record, opted in or out) all make a difference

Normally your forecast shows the maximum you can get and then underneath that what you would get if you made no further contributions.

Molerat is correct normally the cost of adding one year is £800 and that gets you £260 or so a year.  So a payback of 3 years.  If you buy more than one year its just linear.  

If you translate your £6700 that would imply about 8 years so you would buying £40 a week or so or £2k a year.  

You need to balance buying years too far before your state pension age (as you don't get it back if you die before) with the fact the price increases and there is a time limit for each year.  (I think you can go back 6) which may be all you need 

sanderson59

Ok guys. I am 63 yrs old, I retired early some 12 yrs ago due to ill health and have been receiving a company pension during this period. My NI statement says I have a full 37yrs of payments. I am due to receive my state pension in June 2025. My state pension forecast states I will recieve £179.13, however I can increase this to £185.15 if I pay additional payments. The shortfall occurred during the period I have been retired (average £824.30 per year). The total payment would equate to £6779.80 in addition payments. Given a life expectancy of another 20 yrs ??? I would receive £6260.80 extra state pension. I my mind I can’t see how this is viable ?. I have spoken to my company pension provider & it appears I have not paid any NI payments during the time I have been receiving my company pension & that if any NI payment is due this is my responsibility ??. But £824 a year shortfall seems a lot. I am totally confused and need some advice. Many thanks for replies. 

JGB1955

You only need to pay one year's worth of contributions.  The first £800-ish will increase your forecast by £5.29, to £184.41.  A second contribution would only add an extra 74p.

Dazed_and_C0nfused

You do seem confused!

If you have already accrued £179.13 then you would realistically only need to add one year, which would take you to £184.42.

A second year would only add the final 73p/week.

In return for £824 you would be getting an extra £275/year (possibly £220 after tax) so after just 4 years you will be in profit.

What exactly does your forecast say?  If you do need to pay £6779 then that's a total of 8/9 years of NI.  Which would be adding ~£45/week to your State Pension.  Or £2,340/year (possibly £1,872 after tax).

So you would still be in profit after 4 years.

So you must be getting something wrong.

The key factor to start with is what you actually accrued so far.

And yes, it would be your responsibility.  You don't pay NI on pension income.

xylophone

If you have already accrued £179.13 then you would realistically only need to add one year, which would take you to £184.42.

Current £££.pp amount accrued up to April 2022     Is this  £179.13  ???

Number of pre 2016 NI years full      Presumably 37?

Number of post 2016 NI years full        Presumably nil?

Tax year you reach state retirement      2024/25

Any COPE amount shown  ???

Years which show not full and prices  ???

p00hsticks

Dazed_and_C0nfused said:

What exactly does your forecast say?  If you do need to pay £6779 then that's a total of 8/9 years of NI.  Which would be adding ~£45/week to your State Pension.  Or £2,340/year (possibly £1,872 after tax).

And just to be absolutely clear, you cannot exceed the maximum £185.15, so if your forecast currently says you have £179, buying more than two years is money completely wasted (and even the second will get you very little back).

sanderson59

Ok. My state pension forecast is £179.13p/wk, £778.90p/mth or £9346.75 p/yr. this is a 15/6/25 when I reach 66 yrs old.
Estimate based on NI records at 5/4/22 is £163.26.
I have 38 yrs full contribution, however I have 9 yrs when I have not contributed enough. 

I took early retirement in June 2013 and my only source of income has been my company pension. 

Shortfall amounts :-
21/22 - £800.80
20/21 - £795.60
19/20 - £824.20
18/19 - £824.20
17/18 - £824.20
16/17 - £824.20
15/16 - £824.20
14/15 - £824.20
13/14 - £237.48
Total £ £6779.80

Do do I have to pay all this, in order to increase my estimated state pension from £163.26 to the forecasted £179.13 p/wk.

I don’t understand that if I have full contributions and I don’t have to pay NI on my company pension. Why these shortfalls.

Apologies for being so thick !!.
TIA

sanderson59

Current estimate as of 5/4/22 is £163.26, but but forecast is £179.13 , but states if I continue to make payments to 15/6/25, but I don’t pay any NI ???. 

MallyGirl

just because you don't have to pay NI on pension income doesn't mean you get NI credit for those years. 

You need to buy extra years to take you from £163.26 to £185.15.
The £179.13 forecast probably says something like 'assuming you continue to contribute NI' but you aren't doing that.
Someone better at the detail than me will be along to tell you which make most economic sense to back fill