State pension top up for part year

Zerforax

I currently have:

• 17 years of full contributions
• 1 year when you did not contribute enough
• 34 years to contribute before 5 April 2056

I can pay a voluntary contribution of £364.55 by 31 July 2023 to top up the part contribution year.

Part of me thinks it's a no brainer to pay that amount to top it up as good value for money. However, if I need to work for 18 years more to qualify, and I've still got another 20 years before I hit 55 (when you can currently receive a tax free lump sum from personal pension), I struggle to see how I wouldn't qualify my 35 years anyway?

Would appreciate some other opinions!

Sarahspangles

The rules about taking tax free lump sums from personal pensions have already changed to 57 for young’uns like yourself.  They could change again before you get there - my thinking is that the aim is to allow people to withdraw in the ten years leading up to retirement so it will shift every time the pension age rises.

I also have a part year, mine would be less than £200 to purchase but I only need to work this year to qualify a full pension, and I am planning to work it.  It still irritates me when I see that year as available.  But not £200 irritated….!  If you think you might do something else like have triplets and a break to recover and raise them it might be worthwhile for you?  

molerat

If you were retiring in the next few years it would likely be a no brainer but with the amount of slack you have at the far end it is not really worth it

Zerforax

Sarahspangles said:

The rules about taking tax free lump sums from personal pensions have already changed to 57 for young’uns like yourself.  They could change again before you get there - my thinking is that the aim is to allow people to withdraw in the ten years leading up to retirement so it will shift every time the pension age rises.

I also have a part year, mine would be less than £200 to purchase but I only need to work this year to qualify a full pension, and I am planning to work it.  It still irritates me when I see that year as available.  But not £200 irritated….!  If you think you might do something else like have triplets and a break to recover and raise them it might be worthwhile for you?  

My wife has taken a career break to look after the kids. Probably makes more sense to use any funds to plug gaps in her NI record than mine. Thanks! I hadn't thought of that angle.

molerat said:

If you were retiring in the next few years it would likely be a no brainer but with the amount of slack you have at the far end it is not really worth it

Thanks! Think I just wanted to hear someone else say that

Sarahspangles

My wife has taken a career break to look after the kids. Probably makes more sense to use any funds to plug gaps in her NI record than mine. Thanks! I hadn't thought of that angle. 

She should get her NI credited until the last one goes to secondary school, so long as the child benefit is in her name.

If you do have a bit of spare cash I tell you what I do wish I had done in her situation - put a bit into a SIPP in the breaks when I wasn’t contributing to an employee scheme from salary.  Even though the amounts you can put in are small I would have got 25% added by the tax man, and the power of compounding wouldn’t have done me any harm.  Now OH is retired and every month I can bring forward my R day is precious.

p00hsticks

Zerforax said:

I struggle to see how I wouldn't qualify my 35 years anyway?

You're under transitional rules, so don't rely on needing exactly 35 years - that only applies to those born this century. 
You may need more or less to take you up to the maximum amount.

Zerforax

Sarahspangles said:

My wife has taken a career break to look after the kids. Probably makes more sense to use any funds to plug gaps in her NI record than mine. Thanks! I hadn't thought of that angle. 

She should get her NI credited until the last one goes to secondary school, so long as the child benefit is in her name.

If you do have a bit of spare cash I tell you what I do wish I had done in her situation - put a bit into a SIPP in the breaks when I wasn’t contributing to an employee scheme from salary.  Even though the amounts you can put in are small I would have got 25% added by the tax man, and the power of compounding wouldn’t have done me any harm.  Now OH is retired and every month I can bring forward my R day is precious.

Unfortunately due to my income, we don't qualify for child benefit.

p00hsticks said:

Zerforax said:

I struggle to see how I wouldn't qualify my 35 years anyway?

You're under transitional rules, so don't rely on needing exactly 35 years - that only applies to those born this century. 
You may need more or less to take you up to the maximum amount.

Yes you are right. Further down, based on my NI contributions to date, it says my estimate is £116.67. That is ~57% of the maximum £203.85 so I guess that indicates I'm further along? As a % of 35 years, it would be approx 20 years? Unless I need to do a more specific calculation rather than rely on that.

Dazed_and_C0nfused

Zerforax said:

Sarahspangles said:

My wife has taken a career break to look after the kids. Probably makes more sense to use any funds to plug gaps in her NI record than mine. Thanks! I hadn't thought of that angle. 

She should get her NI credited until the last one goes to secondary school, so long as the child benefit is in her name.

If you do have a bit of spare cash I tell you what I do wish I had done in her situation - put a bit into a SIPP in the breaks when I wasn’t contributing to an employee scheme from salary.  Even though the amounts you can put in are small I would have got 25% added by the tax man, and the power of compounding wouldn’t have done me any harm.  Now OH is retired and every month I can bring forward my R day is precious.

Unfortunately due to my income, we don't qualify for child benefit.

p00hsticks said:

Zerforax said:

I struggle to see how I wouldn't qualify my 35 years anyway?

You're under transitional rules, so don't rely on needing exactly 35 years - that only applies to those born this century. 
You may need more or less to take you up to the maximum amount.

Yes you are right. Further down, based on my NI contributions to date, it says my estimate is £116.67. That is ~57% of the maximum £203.85 so I guess that indicates I'm further along? As a % of 35 years, it would be approx 20 years? Unless I need to do a more specific calculation rather than rely on that.

You've misunderstood something somewhere.  There is no income limit to prevent anyone qualifying for Child Benefit.

Some people may need to pay some or all of it back as a tax charge but you can still receive it.  Alternatively your wife could claim but decline the actual payments if you don't want the hassle of paying it back.

But that means she gets their benefit of the NI credits.

And forget 35 years, it is of no relevance to you.

If you have accrued £116.67 at 5 April 2022 then you need an additional 15 years to reach the standard new State Pension of £203.85.  

14 extra years each add £5.82 and the fifteenth and final one takes you to £203.85, your personal maximum.

Zerforax

Dazed_and_C0nfused said:

You've misunderstood something somewhere.  There is no income limit to prevent anyone qualifying for Child Benefit.

Some people may need to pay some or all of it back as a tax charge but you can still receive it.  Alternatively your wife could claim but decline the actual payments if you don't want the hassle of paying it back.

But that means she gets their benefit of the NI credits.

And forget 35 years, it is of no relevance to you.

If you have accrued £116.67 at 5 April 2022 then you need an additional 15 years to reach the standard new State Pension of £203.85.  

14 extra years each add £5.82 and the fifteenth and final one takes you to £203.85, your personal maximum.

Well.. that could've ended up being a costly mistake! You're right, the fact we would have to pay it all back meant I had disregarded it before. I didn't realise she would get the NI credits.

Now let's see if I can get them to back date the child benefit since the eldest is already 7 and then get the NI credits for my wife.

Thanks that is all so helpful!

Dazed_and_C0nfused

You're going to sadly disappointed about the backdating period.

https://www.litrg.org.uk/tax-guides/tax-credits-and-benefits/child-benefit/high-income-child-benefit-charge

Zerforax

Dazed_and_C0nfused said:

You're going to sadly disappointed about the backdating period.

https://www.litrg.org.uk/tax-guides/tax-credits-and-benefits/child-benefit/high-income-child-benefit-charge

Yes I imagine we'll fail but I'll try in any case. We would decline any child benefit in any case, just want it registered for the NI contributions so worth a try I guess.