Voluntary Contributions

BIGJJJJ

Hi, I’m looking at buying NI years to enable me to get the full state pension and looking for some guidance. My circumstances are as follows.

Took early retirement from LGPS In June 2017 and was contracted out. 

I will reach SP age (67) in 2030
Current forecast £184.97 per week

I have been given 6 options to buy and option 6 is the only one that increases my forecast to the full SP.

Option 6 of 6

Tax year gap	Cost
2018 to 2019	£824.20
2019 to 2020	£824.20
2020 to 2021	£795.60
2021 to 2022	£800.80
2022 to 2023	£824.20
2023 to 2024	£907.40
Total cost	£4,976.40

Option 6 increases your State Pension forecast to £221.20

My question is will buying these years guarantee me the full state pension and do I have to buy them all before April 2025.

Ayr_Rage

My question is will buying these years guarantee me the full state pension = YES

Do I have to buy them all before April 2025 = NO

However as you can normally only buy the previous 6 years (the extension to pre-2016 years ends in April) you'll need to chip away at the years.

Not 100% sure but I believe the costs for previous years can also increase, an expert will advise further.

molerat

Yes, 6 will take you to the full amount.  5 will take you to £216.57 at £6.32 each and the 6th will add the final £4.63.

Only 18-19 needs purchasing before April but 19-20, 20-21, 21-22 & 22-23 will increase to £923.00 from then.

You have at least 5 more years going forward, depending on exactly when you reach SR including 24-25, so you could buy some back years and put the money in a high interest account and buy them later.

BIGJJJJ

Thank you for the quick and helpful responses. I am inclined to just buy them all now but I will certainly look at buying 19/20 onwards later and earning some interest on the money. 

molerat

BIGJJJJ said:

Thank you for the quick and helpful responses. I am inclined to just buy them all now but I will certainly look at buying 19/20 onwards later and earning some interest on the money. 

19-20 ceases to be available in April 2026.  They stay at the original price until 2 years after the end of the year, so 23-24 stays at its current price until April 2026, and increase to the current year price each year after that until being no longer available from 6 years after the end of year so 23-24 ceases to be available from April 2030.

p00hsticks

BIGJJJJ said:

Thank you for the quick and helpful responses. I am inclined to just buy them all now but I will certainly look at buying 19/20 onwards later and earning some interest on the money. 

Another option to consider is to buy one (or two ?) past years now and then in May start paying for future years via monthly DD installments as they arise. It saves you putting out all the money in one go but once set up means you don't need to take any further action.  

Pay voluntary Class 3 National Insurance: Set up a Direct Debit - GOV.UK
(note - although that link currently talks about year 2024-25, I think it will be too late for any monthly DD to be put into place for this tax year)

The reason I've put (or two ?)  is because  you haven't said exactly WHEN in 2030 you reach SPA - if it is 5th April 2030 or earlier then the last NI year that will make a difference is for tax year 2028-29, if 6th April 2030 or later you can go up to year 2029-30. 

kempiejon

Is it worth being self employed? Register as self employed, have a little sideline and apparently if your profits are less than £6,725 a year you do not have to pay anything but you can choose to pay voluntary Class 2 contributions.

The Class 2 rate for tax year 2024 to 2025 is £3.45 a week £179 annually. So for the next 4 or 5years until SPA you can accrue credits towards the max pension for much less than the £800 to catch up now. Do the sums it might be best to stick a year or two in now. https://www.gov.uk/self-employed-national-insurance-rates
I investigated this years ago when I was making plans to leave work with a 6 year gap in my record, in the end it worked out a bit differently. Can that work for this example?

BIGJJJJ

Thanks everyone for your guidance. I am inclined to buy the 5 years up until 2022/23 now to avoid any price increase and buy 23/24 before April 2026.