Should I top up?

Jezwed

I reach state pension age in July 2025. I know Martin says it's advisable to make up any shortfall but the difference in what I've been forecasted to receive is £202 against full £220 (I was contracted out). To receive the full amount I would have to pay £2282. As I already receive a civil service (!) pension I will be liable for tax from July. Is it worth paying it only to be taxed more? Think I worked it out it would take 2.5 years to recoup the money. I could pay less to receive less than full amount...

Dazed_and_C0nfused

Jezwed said:

I reach state pension age in July 2025. I know Martin says it's advisable to make up any shortfall but the difference in what I've been forecasted to receive is £202 against full £220 (I was contracted out). To receive the full amount I would have to pay £2282. As I already receive a civil service (!) pension I will be liable for tax from July. Is it worth paying it only to be taxed more? Think I worked it out it would take 2.5 years to recoup the money. I could pay less to receive less than full amount...

How many years would you hope to be receiving the State Pension for 🤔

Isn't 80%, or even 60%, of £900+ extra State Pension each year better than not getting it?

I suspect getting the full amount might not be your optimum choice though.  Going from £202 to £221.20 would need 4 extra years but 3 will take you from £220.96.  The fourth year adds very little.  Although if your £202 is rounded 3 years may be enough for you to hit £221.20.

QrizB

If I offerwd you an investment that would pay back 30%+ a year, everyone would tell you it's a scam because there's no way to earn that much on an investment.

But that's what the Government is offering you with this chance to top up your pension.

Jezwed

This is my shortfall info:-
year 1 £47.55
year 2 £634
year 3 1458.20
year 4 2282.40
Year 3 would give me £215.59 pw
year 4 would give me £221.20 pw full amount at current rate

molerat

So those 4 years will give you £24.57 pw, £1277.64 pa, for an outlay of £2282.40 so paying back gross in 92 weeks, under 2 years.  If you took an annuity with that money you would likely get around £114 pa, this gives you 11 times that.  Now does it look good value ?

QrizB

I mean, you might pay it today then be hit by a meteorite tomorrow. But statistically you're likely to live another 20 years or more.

20 years of £900 a year (or of £720 a year after tax) for £2282.40? Who wouldn't take that offer?