Should I make voluntary contributions?

daisyrose

I having been reading the forum and the helpful comments. I would like to ask if it will be worth me making voluntary contributions to increase my state pension which I have started to receive earlier this year. I will try and give as much information as possible.

I was made redundant a couple of years ago and the last contributions made were for the year  2018-19.

Ni record states. I have 32 qualifying years up to 5th ApriI 2023. I can make contributions for the years 2018/19 up to and including 2022-23. 

The last State pension forecast received was October 2022.
Forecast is £185.15 a week, Estimate based on Ni record up to 5 April 2021 £179.40 a week. Forecast if you contribute another 2 years before 5th April 2023 is £185.15. Cope estimate £12.32 a week.

State pension amount £790.08 every 4 weeks.

So my questions are. Should I top up and how many years will I need to receive a full pension?
My records states I have 32 qualifying years so do I need to make payments for 3 years for a full pension? If so why does my Ni record show I can make 5 years of payments and my forecast dated October 2022 states I need to contribute another 2 years before 2023?

Thank you.

QrizB

From your last forecast, it looks as though you only need two more years to get a full state pension.

If your NI record says you can pay for five years, pick the two cheapest.

daisyrose

Thank you, that's what I thought but wanted to be sure. Do you know if the cost of making the  payments would be worth doing?

Dazed_and_C0nfused

daisyrose said:

Thank you, that's what I thought but wanted to be sure. Do you know if the cost of making the  payments would be worth doing?

Buying one year is definitely worthwhile.

From what you've posted you currently get £197.52/week and one additional post 2016 qualifying year will add £5.82/week to your State Pension (£302/year).  So you'll get your money back fairly quickly.

A second year will only add the final £0.51/week which takes you to £203.85/week, your maximum under the new rules.

So the second year isn't such a good buy, especially if you would have to pay £800-£900 for it.

daisyrose

Thank you. I wondered how many years I would need. I have read about some contributions not adding much to the pension but it's not easy to understand how it all works. I'm really glad I asked the questions.  I couldn't understand why I was given the option to buy 5 years contributions if I didn't need them. I do have a slightly less year re cost so I will make payment for that one.
Thank you both for your help, it's very much appreciated.

molerat

To be fair the forecast does state how many years you need to reach the top line amount although it doesn't break it down to what each year will give

Forecast if you contribute another 2 years before 5th April 2023 is £185.15.

The 5 years is purely a statement of fact about your NI record, those 5 years are not full and will cost £xxx.xx to buy, it is completely separate from your pension forecast.

The only years that may not add to the pension are pre April 2016, if you have a shortfall then post April 2016 years will always add value (up to the maximum new pension amount)

daisyrose

Thank you molerat,  I think that I was concentrating more on the statement and was confused by "I can make contributions for the years 2018/19 up to and including 2022-23." I can see now that I should have paid more attention to the forecast. It was still worth me asking the questions though because I now know that it is only worth me paying one missing year and I wasn't sure before.

icegreen

I've also found reading the comments regarding topping up the state pension very helpful and I was wondering if someone could give me an indication as to whether or not it would be worth me making voluntary contributions. If it is worthwhile would you be able to let me know how many years I should top up?

Here's the info on my most current SP summary.

Forecast if I contribute until 5 April 2023  - £195.02     
Estimate based NI record up to 5 April 2022 - £189.20
I qualify for state pension in February 2024
No of full years prior to 2016 - 36
No of full years after 2016 - 1
Years not filled - 12 years - 7 years before 2016 and the rest from 2017
COPE estimate - £17.75 a week

Thank you.

 

Dazed_and_C0nfused

I don't think any pre 2016 years will help.

But adding the two cheapest post 2016 years will add £11.64 to your accrued amount giving you £200.84.

A third year will add the final £3.01 giving your personal maximum of £203.85.

I'm assuming you don't expect 2022-23 to be a qualifying year through employment or NI credits.

Personally I think adding all 3 years is worthwhile although obviously the third isn't quite as good value as the first two.

Even if you are having to pay ~£2,700 for 3 years you will be adding £760/year at current rates.  In all probability it will actually be worth more like £820/year with the April 2024 increase included.  

icegreen

Thank you very much for this information, you have been so helpful and I really appreciate it.

Dazed_and_C0nfused

You should be able to confirm this for certain by contracting the Future Pension Centre

https://www.gov.uk/future-pension-centre