NI Contributions and the State Pension

MallyGirl

yes that is correct. NI contributions earn you state pension but they go to fund all sorts of public services such as the NHS.

noitsnotme

https://www.gov.uk/tax-national-insurance-after-state-pension-age/stopping-paying-national-insurance

”You stop paying Class 1 and Class 2 contributions when you reach State Pension age - even if you’re still working.

You’ll continue paying Class 4 contributions until the end of the tax year in which you reach State Pension age.”

vicksterja

I have a query about state pension along these lines. . . 

I have no gaps in my NI contributions and my pension forecast states that I'm entitled to the full pension amount if I make 2 more full year contributions before I reach 67. I also have a workplace pension which I can access at 60 so I'm planning to retire then. So, if I work until I'm 60 (7 more years), I'll have made the 2 (+ an additional 5) years NI contributions.

However, someone had told me that for the years I'm not working up until I claim my state pension i.e., between the ages of 60 and 67, I'll start to create gaps in my NI record and my forecast will decrease. I'll need to pay circa. £800-900 per year to prevent this happening (voluntary NI contributions).

I can't find anything in writing that suggests this but I'm told that HM Pensions have provided this advise!

Has anyone else heard this?  

Outeast1000

And what is the difference between Class 1 / 2 and Class 4 contributions ?

Linton

vicksterja said:

I have a query about state pension along these lines. . . 

I have no gaps in my NI contributions and my pension forecast states that I'm entitled to the full pension amount if I make 2 more full year contributions before I reach 67. I also have a workplace pension which I can access at 60 so I'm planning to retire then. So, if I work until I'm 60 (7 more years), I'll have made the 2 (+ an additional 5) years NI contributions.

However, someone had told me that for the years I'm not working up until I claim my state pension i.e., between the ages of 60 and 67, I'll start to create gaps in my NI record and my forecast will decrease. I'll need to pay circa. £800-900 per year to prevent this happening (voluntary NI contributions).

I can't find anything in writing that suggests this but I'm told that HM Pensions have provided this advise!

Has anyone else heard this?  

Never heard it and it is untrue.  The SP forecast can never go down since it is based on annual accruals. So once you have a full pension then that is that.

eskbanker

Outeast1000 said:

And what is the difference between Class 1 / 2 and Class 4 contributions ?

https://www.gov.uk/national-insurance/national-insurance-classes
https://www.gov.uk/national-insurance/how-much-you-pay
https://www.gov.uk/self-employed-national-insurance-rates

p00hsticks

vicksterja said:

However, someone had told me that for the years I'm not working up until I claim my state pension i.e., between the ages of 60 and 67, I'll start to create gaps in my NI record and my forecast will decrease. I'll need to pay circa. £800-900 per year to prevent this happening (voluntary NI contributions).

Whoever that 'someone' is, they're talking rubbish.

Pat38493

p00hsticks said:

vicksterja said:

However, someone had told me that for the years I'm not working up until I claim my state pension i.e., between the ages of 60 and 67, I'll start to create gaps in my NI record and my forecast will decrease. I'll need to pay circa. £800-900 per year to prevent this happening (voluntary NI contributions).

Whoever that 'someone' is, they're talking rubbish.

They are probably misunderstanding it in the sense that the headline amount in the big green box would technically “decrease” if you just stopped working and did nothing to top things up.

However of course the amount you have already earned will not decrease at all and you always have the option to pay for the 2 missing years even at the last minute.

xylophone

I have no gaps in my NI contributions and my pension forecast states that I'm entitled to the full pension amount if I make 2 more full year contributions before I reach 67. I also have a workplace pension which I can access at 60 so I'm planning to retire then. So, if I work until I'm 60 (7 more years), I'll have made the 2 (+ an additional 5) years NI contributions.

Presumably your state pension forecast to 5/4/22 shows  around £174.57?

If so, you need two more qualifying years to reach full NSP.

If 2022/23 is a qualifying year then you need one more qualifying year to reach full NSP.

If you have worked full time this year and intend to do so in the following year, then you will not be able to improve your forecast any more.

It will simply be index linked by whatever system the government chooses (currently "triple lock") up to and beyond state pension age.

However, if you are working and earning the relevant amount, you will still need to pay NI while you are working and under SPA.

Let's say John Brown ( who is aged 53) has checked his state pension forecast and found that he has reached the maximum.

He decides that he has had enough of the daily grind and as Mrs Brown is bringing home the bacon, he can afford to wave goodbye to the office and spend his days on the golf course.

He will not pay NI but this will have no effect on his  state  pension.

He will be entitled to draw his SP at the appropriate age and it will be whatever full NSP is at that time.

p00hsticks

Pat38493 said:

p00hsticks said:

vicksterja said:

However, someone had told me that for the years I'm not working up until I claim my state pension i.e., between the ages of 60 and 67, I'll start to create gaps in my NI record and my forecast will decrease. I'll need to pay circa. £800-900 per year to prevent this happening (voluntary NI contributions).

Whoever that 'someone' is, they're talking rubbish.

They are probably misunderstanding it in the sense that the headline amount in the big green box would technically “decrease” if you just stopped working and did nothing to top things up.

However of course the amount you have already earned will not decrease at all and you always have the option to pay for the 2 missing years even at the last minute.

Yes, I see now that you can read it like that.
If you stop work before State Retirement age and haven't yet attained the maximum pension amount, then while your entitlement as at the point you stop working remains the same, the headline 'forecast amount' will decrease as years without paying NI mount up.