Retired 10 years early but gov.uk shows forecast of full State Pension amount.

PuppyDoodles

I took early retirement after 30 years of teaching.
I checked the SP Forecast on the gov.uk website yesterday and it says, in 2031, I’ll receive the full SP amount of £221.20. Wow! … I thought.
However, the site goes on to say …

“Estimate based on your National Insurance record up to 5 April 2024 is £211 a week. 

Forecast if you contribute another 2 years before 5 April 2030 is £221.20 a week.”

I have also checked my NI record and it shows “Full Year” status up until the year 2021/22 (when I retired early) but, understandably the years 2022/23 and 2023/24 are “not full”.

If I click on the two incomplete years, the messages say, “Pay a voluntary contribution of £824.20 by 5 April 2029. This shortfall may increase after 5 April 2025.” and, “Pay a voluntary contribution of £907.40 by 5 April 2030. This shortfall may increase after 5 April 2026.”.

I have three questions …, 

Why does the SP forecast show I will receive a full state pension when, if I understand the messages, I will only do so if I pay the voluntary NI contributions?

Will I have to pay (and keep paying) the NI shortfall until 2031 to receive the full SP amount?

Will the “unpaid” NI figures continue to add up each year until I reach the SP age of 67 in 2032 and will the actual SP forecast figure keep reducing every year until then, if I don’t pay the voluntary NI contribution?

molerat

The big green box is what you could expect to receive by the time you reach state retirement.

Below that tells you how far you have got to date then goes on to tell you what you need to do, how many more years you need to pay, to reach that green box amount.

You need do no more or less.

PuppyDoodles

Thanks for the response. Sorry … still lots of unanswered questions.
If the bit below the gov.uk’s “big green box” tells me what I have to do to receive what’s in it, i.e the full SP amount, where can I find out what I’ll actually get at full SP age, if I don’t do anything, i.e. don’t pay the voluntary NI figures between now and 2031? Surely, that’s the figure that should be in the big, green box as that’s what I’ll be forecasted to actually get?
My question is still, will I have to pay the voluntary NI figure in the six “incomplete” years between now and 2031 (when I’ll be 67) to get the full SP amount? The two incomplete years so far will cost me about £1,800 for a £10/week increase in SP forecast (£211 up to £221). That’s means I’ll need to receive over three years of SP to make it worthwhile i.e. 180 weeks at £10.
All I really want to know is, is that worth it?
If the gov.uk website is currently saying my SP Forecast, based on my National Insurance record up to 5 April 2024, is £211 a week, will that estimated £211 figure then reduce year on year as voluntary NI contributions stack up? By 2031, will the unpaid NI contributions be, “6 years x £900 (approx)”, if I want a full SP?
I hope I’m explaining things clearly enough. 

molerat

That £211 is what you will get, uprated with the triple lock each year, if you do nothing more. It is "in the bank".  The forecast then clearly states that if you contribute another 2 years you will get £221.10.  What is not clear about that ? You do not get penalised for having gaps. And yes paying voluntary contributions is worth it, far better than anything you could buy on the open market.  The 2 cheapest years at the moment are 20/21 and 21/22 at £795.60 and £800.80.  They will increase to £923.00 in April leaving 23/24 and 24/25 the cheapest at £907.40 each.  You can of course leave it until closer to your state pension date, the cost will increase in line with CPI each year.

PuppyDoodles

Thanks again for the reply.
To me, what’s not clear is that I will definitely only have to pay for two years of voluntary NI contributions between now and 2031 to get the full SP. 

Not being au fait with the SP system, I’ve no way of knowing that the 25/26 financial year won’t be added as another incomplete year and therefore mean paying three years of voluntary contributions to get the full SP. I made an assumption, probably wrongly, that every incomplete year has an associated voluntary NI contribution cost that needs to be paid to get the full SP.

molerat

You have got £211 "in the bank".  That cannot be taken away from you.  The full pension is £221.20.  Each year of contributions gives you another £6.23 up to the full amount.  £221.20 - £211 = £10,  £10 / £6.32 = 1.6 years so 2 full years of contributions required to reach the full amount.

I made an assumption, probably wrongly, that every incomplete year has an associated voluntary NI contribution cost that needs to be paid to get the full SP.

Yes, a completely incorrect assumption.  You do not need to fill years just because they are there, you only need to fill the number needed, as shown on the forecast, to get to the max.

cutestkids

PuppyDoodles said:

Thanks again for the reply.
To me, what’s not clear is that I will definitely only have to pay for two years of voluntary NI contributions between now and 2031 to get the full SP. 

Not being au fait with the SP system, I’ve no way of knowing that the 25/26 financial year won’t be added as another incomplete year and therefore mean paying three years of voluntary contributions to get the full SP. I made an assumption, probably wrongly, that every incomplete year has an associated voluntary NI contribution cost that needs to be paid to get the full SP.

You need to pay 2 more years before 2030. If you do that you will get the full amount. If you dont then you will get the lesser amount. You can achieve this by paying years that have a gap. Your forecast has stated what you need to do to get the full amount I'm not sure why you think it is unclear.

Dazed_and_C0nfused

PuppyDoodles said:

Thanks again for the reply.
To me, what’s not clear is that I will definitely only have to pay for two years of voluntary NI contributions between now and 2031 to get the full SP. 

Not being au fait with the SP system, I’ve no way of knowing that the 25/26 financial year won’t be added as another incomplete year and therefore mean paying three years of voluntary contributions to get the full SP. I made an assumption, probably wrongly, that every incomplete year has an associated voluntary NI contribution cost that needs to be paid to get the full SP.

From what you have posted 2025-26 will be another incomplete year.

But why would you buy 3 years if buying 2 would take you to your personal maximum 🤔

To be honest you are overthinking this.  Nowhere on your forecast will it say you have to pay anything. 

Do nothing and get the £211 you have already accrued.

Buy two (post 2016) years and get £221.20.

Buy three (post 2016) years and get £221.20

Buy four (post 2016) years and get £221.20

The choice is yours but the sensible option from a financial perspective is to buy 2 more years.

1957DfurdPensionist

Maybe my example case might help / perplex both @PuppyDoodles and respondents.  I do understand PuppyDoodles reticence in simply accepting just one interpretation (i.e. "of course it is both correct and perfectly clear") of the government's so-called "forecast" and associated Green Box device.

1. • In October 2016 I downloaded my forecast stating that based on my actual contributions (36 full years) up to 5. April 2015 (NB that was the end of the tax year two years previous to the forecast), my nSP would be £121.30pw and my forecast was £154.20pw.  The forecast also stated "£154.20pw is the most you can get". At the date of forecast, October 2016, the full nSP was £155.67 and 1/35th of that amount was £4.45pw which is what one year of voluntary NI would buy.  My £121.30pw was simplistically (155.67-121.30) / 4.45 = 7.7 NI full years short.
2. • In February 2020 I again downloaded a forecast stating that based upon my actual contributions to 5. April 2019 (NB end of previous tax year) my nSP would be £131.39pw and my forecast was £165.11pw.  At that time full nSP was £168.60 and 1/35th of that amount was £4.82pw which is the extra weekly pension that one year of voluntary NI would then buy.  My £131.19 was therefore (168.60-131.19) / 4.82 = 7.7 NI full years short.

So the two forecasts were consistent, right?  WRONG!

At October 2016 I could have accumulated up to 2015/16 -2022/23 inclusive i.e. up to 8 further NI full years  before my sPA beyond those used in the forecast.

At February 2020 I could have accumulated further contributions for no more than 2019/20-2022/23 inclusive i.e. just 4 further NI full years before sPA.

Although the second forecast said I had shortfalls I could fill, it did not say which I should "fill" or how many. Neither forecast told me what I actually needed to do to optimise my pension - I was expected to be able to read between the lines in both cases.  As I was working abroad and continued beyond sPA, I did not bother claiming or investigating voluntary contributions immediately.

I am now approaching 2 years beyond sPA and have now paid 7 years VC's out of a dozen I could have paid.  DWP told me that it was not worth me paying for any year prior to 2016/17.  No one can tell me why I could not pay for 2015/16 for example and achieve a full nSP.  The net result is that I am told my current entitlement excluding deferral effects is £216.62pw cf. £221.20pw full nSP.

So what else is inconsistent between the two forecasts I downloaded? Well, if I add 7 x £4.82 to £131.39 in the second forecast and then apply the annual triple lock percentages from April 2020 through April 2024 (3.9%, 2.6%, 3.1%, 10.1%. 8.5%) I get exactly £216.62.

However, if I add 7 x £4.45 to £121.30 from the first forecast and then apply triple lock from April 2017 through April 2024 (2.5%, 3.0%, 2.6%, 3.9%, 2.6%, 3.1%, 10.1%. 8.5%) I get exactly £219.11.  Why the difference??  And if £154.20 was the forecasted "most I could ever get" at 2016 rates of nSP, why is £219.11 the resultant of applying Triple Lock to that number for the 8 years, not £221.20, the full nSP now?  It is not explained by the 0.7 NI full year that I was inexplicably denied being allowed to voluntarily pay for.  Some other spanner must've been in the works.

In any In any event, considering the bvggers muddle that was the basis for all unckeckable COPE calculations, who would put his or her life on even one of my two forecasts being properly and fairly compiled? I'm with PuppyDoodles with the reticence - it is not misplaced - I am by the looks of it around 8 years older but (until I paid for 7 VC's - not just 2) neither of us will have contributed NI for the last decade of our normally expected working lives at least. I am guessing that the difference between us might be an NI record that includes either a much longer period receiving NI credits or a career which avoided the contracted out nonsense, as opposed to my original 36 full years being majority contracted out contributions. Either way, I would recommend that PoppyDoodles completes the official online form https://secure.dwp.gov.uk/request-a-call-back-to-pay-voluntary-national-insurance-contributions/contact-form that requests a callback about the effect of possible VC's for gap years and information about which are worth paying and how to pay. By doing so PoppyDoodles can hold the clock on the 5.April 2025 deadline for paying for any NI year more than 6 years ago (just in case that would be a good idea). PoppyDoodles can then expect a telephone call within 8 weeks from DWP about options in the matter.