Confused about the extra Pensions contributions

crmiles01

Hello, I went online to see if I could contribute to make up missed pension years (was living overseas). I have about 6 half/full years missed and I'd have quite a large amount to pay by July to make up for it. I'll 45 and fully expect to be working at least another 15 years (it says another 22 years) so should I not worry about the missed years as I'll get the full pension anyway?
These things really confuse me, its the first time in my life I've thought about my pension and even looked at my forecast. 

molerat

What exactly does your pension forecast show ?

Current £££.pp amount accrued up to April 2022 (and if that amount was from a forecast pre or post April 11th 2023)
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

Suhusa

crmiles01 said:

Hello, I went online to see if I could contribute to make up missed pension years (was living overseas). I have about 6 half/full years missed and I'd have quite a large amount to pay by July to make up for it. I'll 45 and fully expect to be working at least another 15 years (it says another 22 years) so should I not worry about the missed years as I'll get the full pension anyway?
These things really confuse me, its the first time in my life I've thought about my pension and even looked at my forecast. 

The 'quite large amount' makes me wonder whether those are Class 3 contributions - if you worked 'immediately' (as the guidance says - it's somewhat ill-defined what it means) before you went to work overseas, you can pay cheaper Class 2 contributions. However, even paying Class 2 only makes sense if you can't make up those missing years by working future years. To find that out you need to answer molerat's question.

crmiles01

Thanks both for your responses. I'll be honest I'm not great with finance or understanding these things (which is why I've put off looking at these things for years).  I'm not sure what COPE is or what class contributions are. 

The extra payments range between 200-800 per year missed. 

It also tells me I have 22 years of full contributions, 22 years to go, and 6 years where I "didn't contribute enough". 

I've relooked at my forecast and from the wording I just have to trust the forecast is correct without making up the extra years I've missed.  

it says "based on your NI record up until April 22 your forecast is X per week"

Then it says if I contribute for another 10 years (which I'm expecting to) you're forecast will be X per week.

It also says the forecast is the maximum I can get which I assume to mean there is no point me trying to make up the extra payments. 

I also have a work pension (which I'm not worried about). I just really want to know how much those missed payments are going to impact me. 

Hate all this stuff its so confusing.

molerat

If you post up the exact details as asked someone will point you in the right direction.  What you have posted so far is way too vague to understand your exact situation.

xylophone

You mention  membership  of a workplace pension scheme..

It is quite possible that between 1978 and  2012/2016, this pension scheme was contracted out  of State Earnings Related Pension Scheme/State Second Pension (Additional State Pension).

If you were a member in this period, then your state pension forecast will indicate this and give you a figure for your Contracted Out Pension Equivalent.

The COPE was used once only in determining your starting amount for new state pension.

At 6/4/16, your starting (foundation) amount for NSP was the higher of

(a) Your entitlement under the old rules

NI qualifying years/30 (max) x full basic state pension (£119.30) + (Additional State Pension - (if applicable) Deduction for Contracting Out).

(b) Your entitlement under the new rules

{NI  qualifying years/35 (max) x Full NSP (£155.65)} - (if applicable)  Contracted Out Pension Equivalent.

If your starting amount was not equal to a new state pension, there was the possibility of improving your forecast through NI contributions or credits.

What exactly does your forecast show? See molerat's post above.

Below is the Guide for the general public published by HMD in the run up to the introduction of the new scheme.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

I-LOV-MONEY

I too am finding it all very confusing!

Having watched Martin's programme, I thought this would be easy!   I am actually looking at the details for my wife who is 62 this year, but not working (and doesn't intend to).   It says the max amount, as Martin said, is £221.20pw.  It then says they estimate that she will get £215.61 pw.   Then it says if she contributes another year she will get the full £221.  Is it worth it for c.£6 pw?   

Then having looked at her pension record she is 9 years short of having paid the full amount.   To top up her pot it says it would cost £7449. (£800+ pa)

I am just confused by the two statements.   Can she get the full pension by contributing another year, or does she need to contribute 9 years?   Where do I find the cost of another year?

Would be grateflu for any help someone can give me.    Thanks.

Sarahspangles

I-LOV-MONEY said:

I too am finding it all very confusing!

Having watched Martin's programme, I thought this would be easy!   I am actually looking at the details for my wife who is 62 this year, but not working (and doesn't intend to).   It says the max amount, as Martin said, is £221.20pw.  It then says they estimate that she will get £215.61 pw.   Then it says if she contributes another year she will get the full £221.  Is it worth it for c.£6 pw?   

Then having looked at her pension record she is 9 years short of having paid the full amount.   To top up her pot it says it would cost £7449. (£800+ pa)

I am just confused by the two statements.   Can she get the full pension by contributing another year, or does she need to contribute 9 years?   Where do I find the cost of another year?

Would be grateflu for any help someone can give me.    Thanks.

You really need to post a screenshot with any names and her exact birthday obscured.

Lots of people will see years they could buy but don’t actually need to qualify for a full pension.

If you’re getting £5 or £6 a week it doesn’t take too long to pay back £800 - £900 even at 20% tax.

molerat

The forecast clearly states everything.  The big green box at the top is how much she can expect to achieve by the time she reaches retirement.  Below that it shows how much she has already achieved, something that cannot be taken away.  It then goes on to show how many more years of contributions are needed to reach that big green box amount.

If that second amount is £215.61 then she is £5.59 away from the full pension and the forecast will state she needs to contribute one more year.  If she buys that one year the pension will be increased by £5.59 per week, £290.68 per year at a cost of around £824 which will be repaid gross in under 3 years.  That is the equivalent of a single life index linked annuity at 30%+, could you buy that anywhere else ? 

Missing years don't matter, it is what you have got that counts.  Are any of those gaps cheap part filled, the NI record shows the prices ?

Dazed_and_C0nfused

I-LOV-MONEY said:

I too am finding it all very confusing!

Having watched Martin's programme, I thought this would be easy!   I am actually looking at the details for my wife who is 62 this year, but not working (and doesn't intend to).   It says the max amount, as Martin said, is £221.20pw.  It then says they estimate that she will get £215.61 pw.   Then it says if she contributes another year she will get the full £221.  Is it worth it for c.£6 pw?   

Then having looked at her pension record she is 9 years short of having paid the full amount.   To top up her pot it says it would cost £7449. (£800+ pa)

I am just confused by the two statements.   Can she get the full pension by contributing another year, or does she need to contribute 9 years?   Where do I find the cost of another year?

Would be grateflu for any help someone can give me.    Thanks.

Those two statement cannot both be true.

She could have 9 available to buy but why would she want to do that if a single year takes her to her personal maximum of £221.20/week?

All the information you need is available in her Personal Tax Account.  You can check the cost of each year there.  Be aware pre 2016 years probably won't add anything.  Post 2016 years are going to add the missing £5.59.

If she has some cheap pre 2016 years you would have to provide more details for anyone to be able to say if they were a viable option.

I-LOV-MONEY

Sarahspangles said:

You really need to post a screenshot with any names and her exact birthday obscured.

Lots of people will see years they could buy but don’t actually need to qualify for a full pension.

If you’re getting £5 or £6 a week it doesn’t take too long to pay back £800 - £900 even at 20% tax.

So, basically does she need to contribute another year on 4 April 2030 to get the full pension ?!