NI gaps, state pension, PhD graduate

jaybud15

Hi,

So I’m 30 at the moment and I’ve worked for and paid NI for about 2.5 years. I know that I need 35 years of NI contributions for a full state pension. I’ve been in education until the end of 2021, when I was 26. If I plan to retire at 60, that means I would have to pay every single year from 25yo onwards. So should I pay for a few years of gaps to fill it? Or is my money worth more investing elsewhere?

Sarahspangles

jaybud15 said:

Hi,

So I’m 30 at the moment and I’ve worked for and paid NI for about 2.5 years. I know that I need 35 years of NI contributions for a full state pension. I’ve been in education until the end of 2021, when I was 26. If I plan to retire at 60, that means I would have to pay every single year from 25yo onwards. So should I pay for a few years of gaps to fill it? Or is my money worth more investing elsewhere?

Have you accessed your Personal Tax Account to confirm what you’ve actually been credited? 

molerat

You are obviously seriously short for your age so your options are to pay gaps now or pay at the other end.  Are there any part filled cheap years, easy pickings ?  You obviously have enough years going forward to make the max, your forecast should state that, but I personally would not buy any past full price years.

jaybud15

Sarahspangles said:

jaybud15 said:

Hi,

So I’m 30 at the moment and I’ve worked for and paid NI for about 2.5 years. I know that I need 35 years of NI contributions for a full state pension. I’ve been in education until the end of 2021, when I was 26. If I plan to retire at 60, that means I would have to pay every single year from 25yo onwards. So should I pay for a few years of gaps to fill it? Or is my money worth more investing elsewhere?

Have you accessed your Personal Tax Account to confirm what you’ve actually been credited? 

I've got 2 full years, 2 partial years and 8 years of gaps

jaybud15

molerat said:

You are obviously seriously short for your age so your options are to pay gaps now or pay at the other end.  Are there any part filled cheap years, easy pickings ?  You obviously have enough years going forward to make the max, your forecast should state that, but I personally would not buy any past full price years.

Yeah 2 partial years of £801 and £796. Saves a bit of money but only a small fraction.

QrizB

jaybud15 said:

If I plan to retire at 60, that means I would have to pay every single year from 25yo onwards. So should I pay for a few years of gaps to fill it?

You might plan to stop working at 60, but you can continue paying NI until you reach state pension age. It would probably make more sense to plan to make up for any missed years at that time, rather than now.

molerat

jaybud15 said:

molerat said:

You are obviously seriously short for your age so your options are to pay gaps now or pay at the other end.  Are there any part filled cheap years, easy pickings ?  You obviously have enough years going forward to make the max, your forecast should state that, but I personally would not buy any past full price years.

Yeah 2 partial years of £801 and £796. Saves a bit of money but only a small fraction.

Which doesn't really scream pay now.  Better to plan for paying at the end.  Start now by putting £300 pa into a savings account and increase that amount with inflation each year.  Over the next 25 years you should have accumulated enough to pay the 8 years you will likely need to fill.

jaybud15

QrizB said:

jaybud15 said:

If I plan to retire at 60, that means I would have to pay every single year from 25yo onwards. So should I pay for a few years of gaps to fill it?

You might plan to stop working at 60, but you can continue paying NI until you reach state pension age. It would probably make more sense to plan to make up for any missed years at that time, rather than now.

molerat said:

jaybud15 said:

molerat said:

You are obviously seriously short for your age so your options are to pay gaps now or pay at the other end.  Are there any part filled cheap years, easy pickings ?  You obviously have enough years going forward to make the max, your forecast should state that, but I personally would not buy any past full price years.

Yeah 2 partial years of £801 and £796. Saves a bit of money but only a small fraction.

Which doesn't really scream pay now.  Better to plan for paying at the end.  Start now by putting £300 pa into a savings account and increase that amount with inflation each year.  Over the next 25 years you should have accumulated enough to pay the 8 years you will likely need to fill.

Ok that makes sense, I won't pay it now. Thanks for the comments!

QrizB

Just to illustrate why you might defer buying until you're older, the current cost of a full year's Class 3 NI is £907.

So you could pay £907 now and get a year.

Or, just as a thought experiment (don't really do this unless you've got a burning desire to try long-term investing), you could buy about £530-worth of index-linked gilt T58 and reinvest the dividends as they arise. When that matures in 2058 (when you'll be 63?) it should be enough to buy you a year of Class 3 NI.

Assuming that Class 3 NI still exists and they haven't changed the state pension again in the meantime.