Working out the £ boost that missing years would bring to my weekly estimate

SweetSue_Beanstalk

Hi everybody,

A few up front details from my Gov Gateway page:

I will be able to claim a pension in 2049, with my forecast (based on payments up to 5/4/2048) being £221.20 p/w if I contribute another 24 years. The estimate based on my NI record is £73.34.

There are 11 gaps available to fill, dating from 2006 to 2024 in a combination of partial top-ups and full years required. Reading other posts I believe the number of years pre- and post- 2016 matter - 4 years since 2016, 7 years before.

I have two possibly very silly or straightforward questions I hope someone is willing to help me with...

- Is it possible to work out what actual ££ value my paying for those missing 11 years would add to the current weekly estimate of £73.34? Is there a rough formula?

- And, would the number of future NI contributing years required for the full pension be as straightforward to calculate as 24 - 11 = 13? My record prior to 2006 is of 4 full years only.

Thank you very much.

molerat

Years 2016-17 and later add £6.32.

Years 2015-16 and earlier add £6.32, £5.65 or £0.00 depending on the number of years already held, additional pension and COPE amount.  If those existing years are already valued on old rules (£5.65) adding more could switch them all to new rules (£6.32) And it is not as simple as £6.32 / £5.65, you have to work everything at 2016 values so £4.45 / £3.98

The number of future years required would depend on how much you increase that 2024 amount by with prior years as indicated by the above pre 2016 values - currently it is £221.20 - £73.34 / £6.32.
Were you in a contracted out pension, is there a COPE amount ?  If you have "You've been in a contracted-out pension scheme" on your forecast then click here https://www.tax.service.gov.uk/check-your-state-pension/account/cope whilst logged into your tax account

Can you confirm how your years pre and post 2016 are split

My record prior to 2006 is of 4 full years only.

4 years since 2016, 7 years before.

edit.  It looks like whichever way it is split the 2016 starting amount is old rules so further pre 2016 years will be at £5.65 ....... to start with.

SweetSue_Beanstalk

Dear Molerat,

Thank you very much for taking the time to read and reply to me.

I think I get the gist of what you're saying about the £6.32/£5.65 that different years will contribute. Does my sharing the breakdown of which years pre/post 2016 were full/missing make anything more clear to you? 

There are no COPE periods to factor in, btw. 

Pre 2006

96-97, 97-98, 98-99, 04-05 = 4 full years of NI contributions/credits
99-00, 00-01, 01-02, 02-03, 03-04, 05-06 = 6 not full years (I was in tertiary education for most of these)

Post 2006

06-07   £824.20
07-08   £824.20
11-12   £412.10
12-13   £824.20
13-14   £824.20
14-15   £47.55
15-16   £95.10
17-18   £348.70
21-22   £523.60
22-23   £824.20
23-24   £907.40

Warm thanks.

molerat

You currently need (23.4) 24 years to reach the max with 24 years to do it in.

Starting with those 2 really cheap years, 14-15 &15-16, takes you to £84.64 leaving (21.6) 22 years needed

Next, 11-12 & 17-18, take you to £96.61 leaving (19.7) 20 years needed

Then 21-22 takes you to £102.93 leaving (18.7) 19 years needed.

That seems to me to be the best way to go, those 5 cheapest will cost £1427.05, less than 2 full price years, and add 4.7 years to your total so maintains your 24-5=19 cost effectively.

What you do from then is down to you.  You can either buy a few more old years or pay going forward.

The 2016 calculation changes to new rules with 6 additional pre 2016 years, 13 x £4.45 - £0 COPE overcomes the 13 x £3.98 + £5.98 additional pension.

SweetSue_Beanstalk

Dear Molerat,

Thank you again. Apologies for the delay in getting back here to read your kind reply.

I've been getting stuck on a couple things as I've reread your messages.

In your first message you said:
"And it is not as simple as £6.32 / £5.65, you have to work everything at 2016 values so £4.45 / £3.98 "
 - I don't fully understand what you're saying here or the reasoning. That there was/is a parallel lower rate to the £6.32 etc one and it applies to everything ie. all my potential years to be paid? 

"The 2016 calculation changes to new rules with 6 additional pre 2016 years, 13 x £4.45 - £0 COPE overcomes the 13 x £3.98 + £5.98 additional pension."
- Is that additional 6 the standard rule or are you referring to 6 of my own qualifying years? And, forgive my confusion, where is your 13 coming from?

Is there somewhere you'd recommend I go to read an explanation of the calculations and their changes over the years? 

Many thanks and warm wishes.

Sarahspangles

There was a calculation in 2016 for everyone with an NI history. If you go back and rewrite that history to change the starting point from which you build more pension with New State Pension contributions then you need to use the ‘value per year’ that applied at the time i.e. in 2016.

It’s a really complex calculation and very kind of posters like Molerat to run them for people. It’s clear that HMRC/DWP are completely swamped.

Are you aware that if you might want to make up those years you urgently need to book a callback? You wouldn’t be required to buy the years when you eventually speak to an advisor but the clock is ticking loudly for you to have the option. They’re highly likely to confirm what Molerat says looks like the most cost effective option.

molerat

There are many posts on here explaining it all, the post at the top of this sub board is a good place to start, but the basis is that at April 2016 you were given a starting amount of the higher of old scheme X(max30) x £119.30/30 + S2P or new scheme X(max35) x £155.65/35 - COPE.  

Your calculation was old 7 x £119.30/30 + £5.98 = £33.82 or new 7 x £155.65/35 - £0 = £31.13 so old wins and post 2016 years just add to the starting amount.  

When you add a pre 2016 year you have to go back and redo that calculation for each year and in your particular case it switches the basis from old to new at 6 years when the calculation becomes old 13 x £119.30/30 + £5.98 = £57.68 or new 13 x £155.65/35 - £0 = £57.81. You need to redo it at 2016 values as additional pension and COPE are both set at 2016. £3.98 uprated with inflation from 2016 to today = £5.65, £4.45 = £6.32. If you look at your total years required as the pre 2016 years are added it only reduces by .9 years per year purchased, in your case it does not change the total number of years as you can only fill whole years but in some cases it can add an extra year.

The 13 years mentioned is your existing 7 plus 6 added.  The difference in value only applies to pre 2016 years, post 2016 are always worth £6.32 as they are all new scheme years and simply add to your 2016 starting amount.

SweetSue_Beanstalk

Dear Molerat and SarahSpangles,

I'm so impressed by and appreciative of your sharing your knowledge and time with me (and so many others!!). I wish there was something I could advise on in return 

I think I just about have my head around what you've told me. I will try to get through to the phone line and/or book a call back.

Given the switch that adding 6+ pre 2016 years introduces to the calculations, can I ask you whether there is some advantage to be had in prioritising the post-2016 years? A year purchased = a full year rather than .9 for instance?

Kind thanks to you both.

QrizB

If you want to buy pre-2016 years, you need to do it before the 5th of April.

After that date you'll only find the previous six years available, so back to 19/20.

molerat

SweetSue_Beanstalk said:

Dear Molerat and SarahSpangles,

I'm so impressed by and appreciative of your sharing your knowledge and time with me (and so many others!!). I wish there was something I could advise on in return 

I think I just about have my head around what you've told me. I will try to get through to the phone line and/or book a call back.

Given the switch that adding 6+ pre 2016 years introduces to the calculations, can I ask you whether there is some advantage to be had in prioritising the post-2016 years? A year purchased = a full year rather than .9 for instance?

Kind thanks to you both.

As long as you buy those 5 cheap years it makes no difference what you do on top of that.  The 0.9s will not add up to needing another year as it switches to new calculation before it gets to that point.  So get the 5 plus anything else you want.  You do not actually need to buy any more past years as you have enough room to fill going forward although at higher cost.