Understanding the detail of NI shortfall

MLH0205

Good afternoon,

I am seeking some guidance please on how my National Insurance shortfall has been calculated leaving me in a position where I need to consider voluntary contributions to maximise my state pension.

I have been unsuccessful in reaching anyone by telephone and did write for an explanation in May.  The DWP has just responded but it is a general response and does not tell me anything I didn’t already know from checking my online records.  I have also looked at the NI Community pages and saw someone had raised the same question but had been referred to a telephone number which I had previously tried without success.

My records show that I have 4 years to pay to maximise the SP but I am trying to understand how this has been calculated ie how has it been calculated at 4 years (and not 3 or 5 etc).

I was made redundant in 2020 and have not worked since.  I am effectively now retired and will not be working again ahead of receiving SP in April 2025.

Details of my record as follows:

46 years of full contributions 
3 years to contribute before 5 April 2025
1 year when I did not contribute enough (2021-22 NIL contribution)

Estimate based on NI record to 5/4/22 £185.61 per week

Forecast if contribute until 5/4/25 £203.08 per week

COPE estimate £109.19 per week

Cost to fill 2021-22 £800.80

i was with the same employer from the late seventies until being made redundant.  I know the company contracted out at some point in the eighties and understand that my SP calculation will be some hybrid of pre and post-2016 arrangements.  I’m also aware that the 35 years requirement often mentioned in the media is a ‘red herring’ for me.  As an aside, I left the company pension scheme in 2018 to transfer to a personal pension.

To summarise, I am trying to understand whether I can see how the 4 years requirement has been calculated.

A long post I know but thought it best to provide full information rather than leave gaps to fill.

Thank you.

molerat

At April 2016 you were given the higher of the old or new scheme calculations.  Being contracted out the COPE amount, of which yours is pretty big meaning you were contracted out for the majority of your career, was deducted from your 35 years new scheme amount meaning the old scheme was higher.  The old scheme used a maximum of 30 years contributions giving you £119.30 basic plus additional pension which would be minimal if contracted out.

What your numbers mean

You currently have £185.61 with 41 pre and 5 post 2016 years.  At the introduction of the new scheme you had an old pension of £119.51, £119.30 basic plus 21p S2P. Your new scheme amount was £46.46, £155.65 less £109.19 COPE.  Your contributions after April 2016 have added to that higher old scheme amount, everything being increased inline with the annual indexing.

You need  another £18.24 to reach the max £203.85 which requires 4 year's worth of contributions each giving £5.82 per year up to the maximum new pension so 3 years will take you to £203.08, the 4th only adding 77p so not worth purchasing.

Each of those added years give £302.64 per year pension, increased with the triple lock each year, and pay back the outlay in around 3 years gross so are excellent value.

MLH0205

Thank you molerat, that’s very helpful.