Is it worth topping up if it MIGHT push me into 40% tax

Tuftywufty

molerat said:

1 year gives £6.32 pw, £328.64 pa gross or £197.18 after 40% tax and will repay the £907.40 in 4.6 years.  2 years payback depends on exactly how much that final year is worth.

Thanks, yes I I now realise my maths was wrong. The figures are much more favourable than I had worked out

Dazed_and_C0nfused

Tuftywufty said:

pinnks said:

Also, his maths is a bit awry.  Each year adds £328 per year to the pension, so buying 2 years would add £656.  60% of that is £394 after tax, so payback is about 4 years 5 months, ignoring the TL annual increase in the pension.  Not sure where any of his figures come from...

If it is because the second year adds less than £328 per year because he hits the max, then the question is more about whether paying the second year is 

Yes you’re right my maths is off. I mixed up my 40% & 60% figures so the calculations came out wrong. Sorry for the confusion. Each year will add £197.18pa to my state pension after paying 40% tax. My investment of £865pa (or £1731 for 2 years as I intended) will therefore take 4.4 years to return which is a lot better than the 13 years I said.

Is the amount of State Pension you have accrued to date exactly £208.56 🤔.

If not then buying two post 2016 years won't give you exactly £197.18pa.  Unless of course your amount accrued is less than £208.56 and you aren't considering the purchase of a third year (if that's possible).

badmemory

Have you contacted the future pension service - I'm sure someone will be along to give contact details - & get some factual figures then you will know exactly what is & is not possible to achieve.

pinnks

Dazed_and_C0nfused said:

Tuftywufty said:

pinnks said:

Also, his maths is a bit awry.  Each year adds £328 per year to the pension, so buying 2 years would add £656.  60% of that is £394 after tax, so payback is about 4 years 5 months, ignoring the TL annual increase in the pension.  Not sure where any of his figures come from...

If it is because the second year adds less than £328 per year because he hits the max, then the question is more about whether paying the second year is 

Yes you’re right my maths is off. I mixed up my 40% & 60% figures so the calculations came out wrong. Sorry for the confusion. Each year will add £197.18pa to my state pension after paying 40% tax. My investment of £865pa (or £1731 for 2 years as I intended) will therefore take 4.4 years to return which is a lot better than the 13 years I said.

Is the amount of State Pension you have accrued to date exactly £208.56 🤔.

If not then buying two post 2016 years won't give you exactly £197.18pa.  Unless of course your amount accrued is less than £208.56 and you aren't considering the purchase of a third year (if that's possible).

I think OP is saying that buying one year adds £328.64 * 60% = £197.18 per year.  That would be worth paying, of course, but it seems the second year would add only £40 * 60% = £24, so is simply not worth the investment. 

Tuftywufty

Dazed_and_C0nfused said:

Tuftywufty said:

pinnks said:

Also, his maths is a bit awry.  Each year adds £328 per year to the pension, so buying 2 years would add £656.  60% of that is £394 after tax, so payback is about 4 years 5 months, ignoring the TL annual increase in the pension.  Not sure where any of his figures come from...

If it is because the second year adds less than £328 per year because he hits the max, then the question is more about whether paying the second year is 

Yes you’re right my maths is off. I mixed up my 40% & 60% figures so the calculations came out wrong. Sorry for the confusion. Each year will add £197.18pa to my state pension after paying 40% tax. My investment of £865pa (or £1731 for 2 years as I intended) will therefore take 4.4 years to return which is a lot better than the 13 years I said.

Is the amount of State Pension you have accrued to date exactly £208.56 🤔.

If not then buying two post 2016 years won't give you exactly £197.18pa.  Unless of course your amount accrued is less than £208.56 and you aren't considering the purchase of a third year (if that's possible).

My forecast is £209.24 and if I contribute another 2 years it will be £221.20.
So you're right it won't be £197.18pa post tax for a one year contribution. Thank you for pointing that out.

Dazed_and_C0nfused

Tuftywufty said:

Dazed_and_C0nfused said:

Tuftywufty said:

pinnks said:

Also, his maths is a bit awry.  Each year adds £328 per year to the pension, so buying 2 years would add £656.  60% of that is £394 after tax, so payback is about 4 years 5 months, ignoring the TL annual increase in the pension.  Not sure where any of his figures come from...

If it is because the second year adds less than £328 per year because he hits the max, then the question is more about whether paying the second year is 

Yes you’re right my maths is off. I mixed up my 40% & 60% figures so the calculations came out wrong. Sorry for the confusion. Each year will add £197.18pa to my state pension after paying 40% tax. My investment of £865pa (or £1731 for 2 years as I intended) will therefore take 4.4 years to return which is a lot better than the 13 years I said.

Is the amount of State Pension you have accrued to date exactly £208.56 🤔.

If not then buying two post 2016 years won't give you exactly £197.18pa.  Unless of course your amount accrued is less than £208.56 and you aren't considering the purchase of a third year (if that's possible).

My forecast is £209.24 and if I contribute another 2 years it will be £221.20.
So you're right it won't be £197.18pa post tax for a one year contribution. Thank you for pointing that out.

I'd say it's still worth buying both years though given the second is adding £175/year.

Which will become £183/week from April 2025 😉

Tuftywufty

Dazed_and_C0nfused said:

Tuftywufty said:

Dazed_and_C0nfused said:

Tuftywufty said:

pinnks said:

Also, his maths is a bit awry.  Each year adds £328 per year to the pension, so buying 2 years would add £656.  60% of that is £394 after tax, so payback is about 4 years 5 months, ignoring the TL annual increase in the pension.  Not sure where any of his figures come from...

If it is because the second year adds less than £328 per year because he hits the max, then the question is more about whether paying the second year is 

Yes you’re right my maths is off. I mixed up my 40% & 60% figures so the calculations came out wrong. Sorry for the confusion. Each year will add £197.18pa to my state pension after paying 40% tax. My investment of £865pa (or £1731 for 2 years as I intended) will therefore take 4.4 years to return which is a lot better than the 13 years I said.

Is the amount of State Pension you have accrued to date exactly £208.56 🤔.

If not then buying two post 2016 years won't give you exactly £197.18pa.  Unless of course your amount accrued is less than £208.56 and you aren't considering the purchase of a third year (if that's possible).

My forecast is £209.24 and if I contribute another 2 years it will be £221.20.
So you're right it won't be £197.18pa post tax for a one year contribution. Thank you for pointing that out.

I'd say it's still worth buying both years though given the second is adding £175/year.

Which will become £183/week from April 2025 😉

Yes my thoughts now too. Thanks

Tuftywufty

pinnks said:

Dazed_and_C0nfused said:

Tuftywufty said:

pinnks said:

Also, his maths is a bit awry.  Each year adds £328 per year to the pension, so buying 2 years would add £656.  60% of that is £394 after tax, so payback is about 4 years 5 months, ignoring the TL annual increase in the pension.  Not sure where any of his figures come from...

If it is because the second year adds less than £328 per year because he hits the max, then the question is more about whether paying the second year is 

Yes you’re right my maths is off. I mixed up my 40% & 60% figures so the calculations came out wrong. Sorry for the confusion. Each year will add £197.18pa to my state pension after paying 40% tax. My investment of £865pa (or £1731 for 2 years as I intended) will therefore take 4.4 years to return which is a lot better than the 13 years I said.

Is the amount of State Pension you have accrued to date exactly £208.56 🤔.

If not then buying two post 2016 years won't give you exactly £197.18pa.  Unless of course your amount accrued is less than £208.56 and you aren't considering the purchase of a third year (if that's possible).

I think OP is saying that buying one year adds £328.64 * 60% = £197.18 per year.  That would be worth paying, of course, but it seems the second year would add only £40 * 60% = £24, so is simply not worth the investment. 

Thanks for your thoughts. Sorry but I messed up my initial calculation. I can now see it'll be worth buying both years. See my reply to Dazed and Confused. The replies in the thread have made me relook at it (as you can see finance & maths are not my strong point!). This has helped me crystallise my thinking even though I managed to confuse myself initially.

Tuftywufty

badmemory said:

Have you contacted the future pension service - I'm sure someone will be along to give contact details - & get some factual figures then you will know exactly what is & is not possible to achieve.

No not yet but I definitely will do now thanks

pinnks

Tuftywufty said:

pinnks said:

Dazed_and_C0nfused said:

Tuftywufty said:

pinnks said:

Also, his maths is a bit awry.  Each year adds £328 per year to the pension, so buying 2 years would add £656.  60% of that is £394 after tax, so payback is about 4 years 5 months, ignoring the TL annual increase in the pension.  Not sure where any of his figures come from...

If it is because the second year adds less than £328 per year because he hits the max, then the question is more about whether paying the second year is 

Yes you’re right my maths is off. I mixed up my 40% & 60% figures so the calculations came out wrong. Sorry for the confusion. Each year will add £197.18pa to my state pension after paying 40% tax. My investment of £865pa (or £1731 for 2 years as I intended) will therefore take 4.4 years to return which is a lot better than the 13 years I said.

Is the amount of State Pension you have accrued to date exactly £208.56 🤔.

If not then buying two post 2016 years won't give you exactly £197.18pa.  Unless of course your amount accrued is less than £208.56 and you aren't considering the purchase of a third year (if that's possible).

I think OP is saying that buying one year adds £328.64 * 60% = £197.18 per year.  That would be worth paying, of course, but it seems the second year would add only £40 * 60% = £24, so is simply not worth the investment. 

Thanks for your thoughts. Sorry but I messed up my initial calculation. I can now see it'll be worth buying both years. See my reply to Dazed and Confused. The replies in the thread have made me relook at it (as you can see finance & maths are not my strong point!). This has helped me crystallise my thinking even though I managed to confuse myself initially.

Yes, as Dazed and Confused said, you get £197.18 + £175.97 after tax for buying those 2 years, so £373.15 for paying £1,731ish (assuming those are the cheapest 2 years. Payback 4.6 years.  Subject to expected longevity, seems worth it to me...