Pensions and Repaying Student Loan

MikeyPGT

Hiya - this may be a bit niche and possibly in the wrong place ...

I'm 63 and due to get my state pension in 2027.  I am currently 2 years away from completing an OU degree and have had/am getting student loans to pay tuition fees under Plan 2.  My current sole income is a private pension of £15,290 a year and my current State Pension estimate is £9858 a year which I could top up to £11,502 with voluntary contributions.  Plan 2 indicates that there is no write off at 65 but I have seen that people who do not pay NIC are not required to repay student loans - is this correct?  If not, is it worth buying back the extra years given that any increase will attract income tax and possibly student loan repayments?

Any advice much appreciated.

pinnks

I thought the student loan regime is based on "earnings", i.e. income form employment.  Pensions are not earnings, so would your repayment not simply end, or never start, if you are no longer working?  I wait to be told why this is incorrect, lol.

And even if that is incorrect, for Plan 2 GOV UK says, "You’ll only repay when your income is over £524 a week, £2,274 a month or £27,295 a year", which your income will be below from what you write. 

Repaying your student loan: When you start repaying - GOV.UK (www.gov.uk)

MikeyPGT

Thanks - I should have added in that my exisitng pension is a public sector one and so linked to inflation and building in the triple lock (if it is maintained) on the state pension I'm pretty near the starting point for repayments on current levels so just trying to future proof myself

pinnks

But none of that changes the fact that neither of your pensions give rise to "earnings".

kaMelo

Income for the purposes of student loan repayments is only income that is subject to NI, essentially earned income.
Pension income is not subject to NI so is not counted when working out whether repayments are due.

pinnks

Is it earnings that are is subject to NI, or income that uses the same measure of earnings that is used for NI? 

I know it sounds the same but the latter would mean that you would continue to be liable for SL repayments after reaching pension age, so far as you have sufficient earnings, whereas the former would mean that even if you continue to work after pension age, you would not be liable to make SL repayments? 

It'll be in the law but I am too lazy to go looking, lol

kaMelo

If someone is employed it is simple, earned income liable for NI counts towards the earnings threshold for calculating student loan repayments. Unearned income, in whatever form it may come (pensions, interest on savings etc.) does not count towards the earnings threshold as none of it is subject to NI.

If self employed however its a bit more complicated. You have an allowance of £2000 on unearned income (interest on savings, profits on property let, pensions etc.) This is an all or nothing limit, keep under it and none of the unearned income counts towards the earnings threshold. Breach this £2000 limit and the entire amount of unearned income is added to the self employment income. If the total breaches the earnings threshold then loan repayments are calculated accordingly.

If someone is neither employed nor self employed they have no income subject to NI therefore they have no earnings that count towards the earnings threshold so will have no repayments.