Confused! - Should I make lump sum payment now or defer to spring 2025?

Mark__H

After about 50 attempts, I finally got through to the Future Pension Centre about a month ago.

To be fair, the lady I spoke to was extremely helpful and walked me through my options.

I’m around 9 years away from state pension age.  I was contracted out while working for my sole employer, so although I’ve got 34 years of full contributions, I’m around 7 years short of full state pension (I quit in 2015 and haven’t worked since) . My projected pension at the moment is just under £162pw, so I’m about £42pw ‘short’ of the £203.85pw maximum pension.

I was told that a one off payment of circa £5700 (representing 7 years NI) would bring me to £202.50pw, i.e. to within a pound of the max.

Doing the maths, paying £5700 to get £2100 p.a. extra pension (=£1680 net after tax as I’ll be also be drawing a private pension by then) it seemed like a no brainer with a breakeven point of only 3.5 years.

I’ve got my 18 digit reference number and was all set to make the payment early next month as I was advised that the rates I was quoted, which equate to about £820 per year of shortfall would be increasing to nearer £1000 from 1st Aug onwards.        

So now I’m a little confused in the light of recent announcements and the deadline date being put back to April 2025. Especially as I’ve read somewhere that the rates are being frozen.

My thought process is that the £5700 would be better off in a savings account for the next 22 months before being used as a one off payment to HM Govt if there is no detriment to myself in delaying until the new deadline.  

Have I understood the position correctly? Are there any pro/cons that I’ve overlooked in relation to whether I make the payment now or in circa 2 years’ time?

Thanks in advance.

molerat

You are correct that the rates for 06/07 to 21/22 are frozen at the 22/23 amounts.  I suspect early 2025 will be chaotic but there are supposedly new processes being brought in to streamline things.

Silvertabby

molerat said:

You are correct that the rates for 06/07 to 21/22 are frozen at the 22/23 amounts.  I suspect early 2025 will be chaotic but there are supposedly new processes being brought in to streamline things.

Even so, if everyone leaves it until the last minute again.......

mad_mix

Does anyone know how long the 18 digit reference number is valid for?

I'm in a similar position to Mark_H, and was planning to make a payment in July.

If I make the payment in March 2025, using the same reference number, will that work?

pinnks

I don't know for sure, but as it is made up of two digits, followed by the amount, part of your NI number and some unique numbers, I assume it remains valid until used.