State Pension > Unsure Whether To Top-Up 1 Year or Not...

scoot65

My wife has received her state pension forecast and it states that she can top-up the 2011/12 year at a cost of £824.20. We're unsure whether it's worthwhile doing this. 

My wife came came to the UK (none EU citizen) in 2010. She started working / paying NI etc in 2011 and has worked since then.

She had to have 10 years' NI contributions before she became eligible for State Pension.

She is now a UK citizen and is 58 years old.

Here is her forecast:-

My wife and I are unsure whether topping-up that one year at a cost of £820 would be cost effective. This is because my wife is not going to be working until she is 67. In fact she may finish work this year and possibly look to work for 6 months each year for the next couple of years or so.

The way we read the forecast is that if the top-up is made her weekly pension will rise from £83.56 per week to £95.52 per week...... an increase of £11.96 per week/

So our question is, considering the information above,  would topping up year 2011/12 be of any real benefit as it would seem that it would take a long time to recover the initial £820 outlay.

Many thanks..

kempiejon

it would seem that it would take a long time to recover the initial £820 outlay.

How long roughly? Of course one cannot get a pension until 67 how old are they now? Is it 2033?

Brie

It's not a long time once she hits 67 to recover the money - by my reckoning less than a year and a half.  So good value in that sense.

Also - as I understand it you don't need to work a full year normally to get enough contributions to get the full whack for SP for that year.  So 6 months work for the next 9? years should get added.

Also she should have a look to see what SP she might get from where she used to live.  I was pleased to see that I was eligible for the full SP here but also another 25% of that from where I grew up.  I'm collecting them separately but some countries have reciprocal agreements that might enhance her UK SP.

Have a look at International Pension Centre - GOV.UK

Albermarle

The increase is you add £820, is actually £5.64 a week ( from £140.44 to £146.08)  

So £293  of annual income from age 67 until death, linked to inflation /average earnings increases.

Cost £820.

I do not think you need to be a maths genius to work out that is a fantastic deal !

scoot65

Brie said:

It's not a long time once she hits 67 to recover the money - by my reckoning less than a year and a half.  So good value in that sense.

Also - as I understand it you don't need to work a full year normally to get enough contributions to get the full whack for SP for that year.  So 6 months work for the next 9? years should get added.

Also she should have a look to see what SP she might get from where she used to live.  I was pleased to see that I was eligible for the full SP here but also another 25% of that from where I grew up.  I'm collecting them separately but some countries have reciprocal agreements that might enhance her UK SP.

Have a look at International Pension Centre - GOV.UK

Many thanks for the reply.

1) Less than 18 months to recover the initial outlay does seem to make the £824 worthwhile.

2) I'd also read that information somewhere and was slightly surprised that the full £824 was required for the 2011/12 year. My wife started working in about January of 2011. It was temporary work via work recruitement agency. I don't know if this makes any difference. She then found permanent employment in early 2012 (I think).

3) When she returns to her home country, once per year for a holiday, she pays an annual amount to her social security pension in that country which buys her an addition year of pension there too.  

scoot65

Albermarle said:

The increase is you add £820, is actually £5.64 a week ( from £140.44 to £146.08)  

So £293  of annual income from age 67 until death, linked to inflation /average earnings increases.

Cost £820.

I do not think you need to be a maths genius to work out that is a fantastic deal !

Aren't the £140 / £146 figures assuming she'll work until 67? Which in our case she is not going to do that, so she'll have less than the full amount of years required.

In anycase, it still does appear that in my wife's case it is worthwhile topping up year 2011/12. 

Many thanks, very helpful.

jem16

scoot65 said:

My wife has received her state pension forecast and it states that she can top-up the 2011/12 year at a cost of £824.20. We're unsure whether it's worthwhile doing this. 

My wife came came to the UK (none EU citizen) in 2010. She started working / paying NI etc in 2011 and has worked since then.

She had to have 10 years' NI contributions before she became eligible for State Pension.

She is now a UK citizen and is 58 years old.

Here is her forecast:-

My wife and I are unsure whether topping-up that one year at a cost of £820 would be cost effective. This is because my wife is not going to be working until she is 67. In fact she may finish work this year and possibly look to work for 6 months each year for the next couple of years or so.

The way we read the forecast is that if the top-up is made her weekly pension will rise from £83.56 per week to £95.52 per week...... an increase of £11.96 per week/

So our question is, considering the information above,  would topping up year 2011/12 be of any real benefit as it would seem that it would take a long time to recover the initial £820 outlay.

Many thanks..

One year isn’t going to add £11.96pw so it looks like they are also assuming that your wife will be contributing for 2024/25 as well. 

Normal payback time is 2.5 years or 3 years if a Basic Rate taxpayer. 

squirrelpie

Yes, it's worth doing, and it's worth paying for as many future years as she can either automatically because she's working or voluntarily if she isn't. Do note that if you want to pay for 2011-2012 you MUST make the payment before the 5th of next month.

kempiejon

For future years the better plan currently might be to start a small trading firm, register for self employment and keep profits low and pay class 2 which is much less than voluntary catch up rates £150 vs £800.

QrizB

kempiejon said:

For future years the better plan currently might be to start a small trading firm, register for self employment and keep profits low and pay class 2 which is much less than voluntary catch up rates £150 vs £800.

I sometimes wonder if Class 2 NI is simply a stealth scheme to encourage entrepreneurial behaviour amongst those parts of the population that would otherwise be idle

scoot65

squirrelpie said:

Yes, it's worth doing, and it's worth paying for as many future years as she can either automatically because she's working or voluntarily if she isn't. Do note that if you want to pay for 2011-2012 you MUST make the payment before the 5th of next month.

I hadn't realised that someone can make voluntary NI payments even if they're not working. We'll certainly keep this in mind. Thanks.

This must explain why on my state pension forecast it states I can make vol. payment for '23/24 even though I have full years  / payments and will receive the full SP payments when I reach 67 and I left work a couple of yaers ago.  

kempiejon said:

For future years the better plan currently might be to start a small trading firm, register for self employment and keep profits low and pay class 2 which is much less than voluntary catch up rates £150 vs £800.

AIthough a good option, I have no idea how to do any of that as I've never been self employed / had a business etc. 

Anyway, many thanks for all the replies. Very much appreciated!