How much does voluntary NI top up add to weekly state pension?

KevinM2

Hello,

I hope my question thread isn't confusing, but basically, can I ask please...

I retired 6 years ago, and am in receipt of a private pension...I will also be getting my state pension in 6 years time...

However, my weekly forecast for my state pension is only £172.14 per week (rather than the £203.85 max)...this is due to me having been in an opted out pension scheme at work, and I understand that...

I currently have 39 years of Full Contribution NI years, and 6 "year is not full" years (the last 6 years, due to me retiring)...

So, I want to voluntarily pay these years to make them Full Years, and I wondered if I would need to pay all 6 years (or maybe even more non full years in the future) to increase my state pension from £172.14/week to the £203.85 max?

Would paying up a full year add a certain amount (and is that amount the same for each year?)...Is it possible to tell how many years I would need to pay up to Full Years status to increase my forecast from £172.14 to £203.85?

Oh, and the price to pay up each year does vary...from £729/year to £824/year (for some reason)...

If you need any further information, I am more than happy to provide it...

Thanks so much for your help!

p00hsticks

Every post-2016 year purchased adds 1/35th of the maximum amount until you reach that maximum - so currently £5.82. 

Buying 5 additional years would take your forecast amount from £172.14 to   £201.24. As you can't make voluntary contributions to take you over the maximum amount, then purchasing the sixth year would only add the final £2.61 to take you to £203.85 

KevinM2

That's great, thanks...just what I was looking for.

So, buying 5 additional post 2016 years would cost me (looking at the cheapest 5 years in my NI contributions) £3,973.90, and that would give me 5/35ths, so an extra £29.12 per week, or £1,514 per year...so I'd break even after 32 months...That seems like money well spent to me.

Plus, that doesn't take into account any pension increases over that time either (I suspect)...

Not sure that paying another £825 (the price to buy the 6th year) for just a £2.61 increase is worth it...at that rate, it would take 6 years for that to beak even...I will probably just buy the 5 years, and live with my max being £201.24/week...

I presume that the weekly pension will be increasing next month (8% or so?)...do you know if the amount to buy my additional years will increase when that happens, or will that stay the same? For instance, currently, it will cost me £729.10 to buy the 2018/19 year (it says I can pay £729.10 up to 5th April 2025, and that figure may increase after 5th April 2025)...does that mean next month's pension increase won't affect what I need to pay to buy the additional years, providing I do it before 5th April 2025?

Thanks for the help...

amanda1024

This page explains why there are different rates for different years: https://www.gov.uk/voluntary-national-insurance-contributions/rates

Also worth considering whether there’s any chance you’ll return to employment- or self-employment 

xylophone

You had 39 qualifying years at 5/4/18?

Your State Pension Forecast currently shows an estimate of £172.14 up to 5/4/23?

This is £31.06 short of a full NSP.

Each year purchased adds  £5.80, so six years to pay.

Check your situation as below.

See https://www.which.co.uk/money/pensions-and-retirement/state-pension/can-i-top-up-my-state-pension-aVwgx1p28af4




https://www.gov.uk/voluntary-national-insurance-contributions/rates

molerat

The £729.10 year will be part filled, full price for 18-19 would be £824.20 so 6 weeks worth of contributions were made that year leaving 46 at £15.85 to pay.

I look at the overall outcome rather than the individual years so 5 years will cost £3973.90 and give £29.12 per week repaying gross in 136.5 weeks, 6 years will cost £4798.10 and give £31.71 per week repaying in 151.3 weeks, only an extra 15 weeks.  5 years is like a 38.1% single life index linked annuity and 6 years 34.4%.

All years are staying the same price until April 2025 as they effectively stopped the clock at April 2023 due to HMRC / DWP being unable to cope with demand, normally years up to 21-22 would increase to the 24-25 price of £967.20 from April and years up to 17-18 would cease to be available.

KevinM2

Thanks for that molerat...I am not quite sure where those 6 weeks of 18/19 contributions came from, as I retired in October 2017, but I am not going to complain...

Thanks for the numbers...I think it's a no brainer, both for 5 and for 6 years contributions...

Dazed_and_C0nfused

KevinM2 said:

Thanks for that molerat...I am not quite sure where those 6 weeks of 18/19 contributions came from, as I retired in October 2017, but I am not going to complain...

Thanks for the numbers...I think it's a no brainer, both for 5 and for 6 years contributions...

It is, you will not find a better return for your £3.9k or £4.7k outlay.

And just as adding 5 years is worth £29.12/week now a month from now it will actually be worth £31.60/week.

And when considering payback time it's likely that the whole of your State Pension will add 20% to your tax liability so the net increase is £25.28/week.

Still a brilliant deal though.

german_keeper

Very refreshing to see someone who appreciates the good deal they have got from the new state pension rules, as indeed I do. So many bitter and twisted people, including my sister, who aren't prepared to understand their good fortune and continue to insist they have been "shafted" or some such nonsense.

pinnks

I agree.  Had the rules not changed I, like many others, would have got £156.20 per week.  I worked until 2019 when I took my CS pension at normal pension age.  Since then I have been paying Class 3 and have 3 years to pay before next March when I cash in my NSP chips.  With 8 post-2015/16 years I fall about £1 per week short of the new max but still the better side of £2,500 per year better off (pre tax) because of the change - well, assuming I live past March 2028 lol.

fly-catchers

Very glad I took the missing years as only 45p a week short of the maximum! Great value for money. Got my first full payment yesterday along with a PB win so very happy!