Do I need to pay all NI missing years for full state pension?

swift57

Apologies if I’m duplicating, but I’ve not found an answer to this question.

I am worried about making the wrong decision re. topping up gaps in my NI contributions, and would be grateful if someone with more expertise in this area than me could offer advice.

I am 60 and can draw my State Pension in 2031. 

I have contribution shortfalls due to a lot of missing years (for various reasons). 

 

1.) Do I need to pay ALL of the missing years listed to qualify for a full state pension?

2.) Does this seem a good use of my savings? (I don’t have a private pension, so I assume it is!)

 

INFORMATION FROM THE GOVERNMENT WEBSITE:

A.) Pension estimate based on my NI record up to 5 April 2024 = £106.95 a week.

B.) Pension forecast (based on my continuing NI contributions until 2031) =  £151.19 a week  (£657.41 a month, £7,888.88 a year).

The summary states: “You can improve your forecast. You have shortfalls in your NI record that you can fill and make count towards your State Pension… You’ve been in a contracted-out pension scheme”.  “The most you can increase your forecast to is £221.20 a week.”

I have 16 payable gaps:

2023 to 24 = £907.40

2022 to 23 = £824.20

2021 to 22 = £800.80

2020 to 21 = £795.60

2019 to 20 = £824.20

2018 to 19 = £824.20

2017 to 18 = £824.20

2016 to 17 = £824.20

2015 to 16 = £824.20

2014 to 15 = £824.20

2013 to 14 = £824.20

2012 to 13 = £824.20

2011 to 12 = £427.95

2010 to 11 = £47.55

2008 to 09 = £110.95

2006 to 07 = £396.25

I’d be grateful for any advice/clarification about the best course of action, before I pay all the missing contributions in a panic!  

Thanks.

 

molerat

You need 19 more years to reach the full amount with 7 more years, including 24-25, available to get there so you need to fill at least 12 past years to reach the max.

What is your COPE amount ? Click here https://www.tax.service.gov.uk/check-your-state-pension/account/cope whilst logged into your tax account - this is necessary to clarify my figures below

How many full years do you already  have ?

Unlikely you have more than 18 so all available years are on the table.  Those 4 early years are an immediate buy taking you to £129.56 for not much more than the price of a single year.  That leaves a total of 15 more years needed, 7 future and 8 more past years.  You have 12 years that you do not have to buy before April, that is 2019-20 until retirement so if you really want to you only have to get 7 now from 2018-19 and earlier and make arrangements going forward.

One thing though, do your circumstances prevent you from being eligible for pension credit as if you are eligible topping up your pension could be counter productive.  You say you don't have a private pension but what pension were you contracted out to ?

Ayr_Rage

You need to phone the pension line and ask what years will actually increase your SP.

swift57

That’s very helpful, thanks.

I have 16 full years before 2006.

It’s unlikely that I’ll be eligible for pension credit by the time I retire, so it is worth my topping up to get the full pension.

I didn’t realise I was ‘contracted out’ until I checked on the website! I’m not sure when this was. It must have been during employment earlier in my career. I cashed in one workplace scheme because it didn’t seem worth continuing without the employer’s contribution once I left, so perhaps it dates from then...

I checked on the website about COPE and it states: “You can no longer see estimated COPE figures your State Pension forecast– it will just tell you that you were contracted out of part of the State Pension.” It looks as though I’ll have to try and obtain this info from the HMRC, but I doubt I’ll receive it until after the 5/4 deadline. 

 

molerat

Click on that link whilst logged in to your account.

What I have said about the number of years holds true without knowing the COPE amount, it is just fine tuning.

swift57

I did as you suggested. Apparently, the info for the workplace scheme has been archived, but it has given me an address, so I can pursue that. 

I really appreciate you taking the time to clarify my situation. I've been so worried about the best way to make up the missing years, but understand what I need to do now. Many thanks.

molerat

swift57 said:

I did as you suggested. Apparently, the info for the workplace scheme has been archived, but it has given me an address, so I can pursue that. 

That is a very recent change then as it was working in the past few weeks.

SnowMan

Molerat is right in what he says above.

We can deduce your starting amount at 2016 would have been £75.26pw (in 2016/2017 terms), and so must have been based on the old rules regardless of your COPE figure if you've got 16 years (as 16/35 x 155.65 = 71.15 so the most the new rules calculation could be is 71.15). And we can further deduce that buying 4 pre 2016 years will still result in a starting amount based on the old rules.

And so if you want to get to the full new state pension of £221.20pw you need to buy the 4 relatively cheap pre 2016 years (2006/2007, 2007/2008, 2008/2009 and 2009/2010). And it would seem logical to buy 2016/2017, 2017/2018, 2018/2019 also. And you need to buy these before 5th April 2025 to get you the minimum 7 years molerat correctly identifies you need now to give you the opportunity to get up to the full new state pension, because of the 5th April 2025 deadline that applies to years on or before 2018/2019. Your deadlines are below. That leaves you with exactly 12 years from 2019/2020 onwards that if purchased at a later date will when added to the 7 get you to the 19 you need.

Buying 4 pre 2016 years adds 4 x 5.65 = 22.60

Buying 14 post 2016 years adds 14 x 6.32 = 88.48

So total state pension is then 106.95 + 22.60 + 88.48 = 218.03pw

And then the 15th post 2016 year gives you the further 3.17pw that takes you up to the full new state pension of £221.20pw. And 4 + 15 is the 19 years molerat refers to.

If you do only buy the 7 years mentioned above now, then you will have to subsequently buy 2019/2020 by 5/4/2026, you will have to buy 2020/2021 by 5/4/2027 and so on to reach the full new state pension. You could of course buy more than the 7 now.

swift57

Many thanks for this excellent explanation; I hope I have understood it correctly. 

Looking at your figures, in addition to buying the suggested 7 essential missing years, it would make financial sense for me to buy some extra missing years (between 2019/202 – 2022/2023).  If I’m going to buy them anyway, I may as well buy them now - before they rise in price to £921.96 after the 05 April 2025 ‘initial deadline’.

I could then pay the remaining contributions annually to ensure I have 32 full years by the time I retire in 2031. 

molerat

It is purely your call how you do it, the only "must do" is 7 of those earlier years, "financial sense" is your view on the risk of your estate losing that money you will have laid out if you step in front of a bus next week v the increased cost of buying them later.  2025 rate is £923 btw.

swift57

Point taken. 

Your information and advice (Molerat and SnowMan) have been invaluable. Thanks.