My pension and National Insurance contribution

Ann60

Hi everyone,
I am seven years short of National Insurance Class 3 contributions for a full pension and I want to know whether to pay for the missing years.

I will be 60 years old in May when I get my pension (75% entitlement at the moment) I have not worked for the last 29 years and have 19 years Home Responsibility Protection included.

My 75% pension plus my husband’s wage / or pension in 3 yrs, is over the limit of entitlement to Pension Credit.

I realise that after approx. two and a half years I would get this money back in the extra pension - which makes financial sense. Before parting with a big part of our savings to pay for the missing contributions, costing £2748-20 altogether, I wanted to know if there is any way round this to qualify for a full pension?

Thanks in advance for any help!
Ann.

Sue-UU

Hello Ann and a warm welcome to the Forum.

I'll be frank and say quite honestly that sadly I don't know the answers to your questions. I see no one else has answered you yet either. If nobody else comes on by the end of next week then go to your Citizens Advise Bureau and ask them all the questions. Write down all that you'll need to ask/tell them then you won't forget important information.

If nothing else, at least I've put your thread back up to the top for people to see it more easily! Good luck Ann and please let us know how you get on.

Sue.

Devoran

Hi,
You say you have 75% pension entitlement, regardless of whether you buy the extra 7 years I urge you to seriously consider defering drawing the pension for as long as you can afford to. By delaying taking the pension you will gain in real terms about 10% additional pension each year (ie defer for 30 months and your pension is over 100%) you will gain further with inflation rises, as these are based on the whole pension you draw not the smaller one you qualified for. My wife is deferring her pension for five years and will get over 50 per cent more. (Also if you are tempted you can opt for a lump sum alternative.
Women tend to live longer and should benefit big time.
On the payment of back contributions the pensions website tells you exactly how much pension each £1 you pay gives you, so you can work out how long you need to claim to get your money back.
Good luck, and take your time to make the right choice.
Devoran

tanith

Ann not hi-jacking your thread but I am considering deferring my pension due this year and wonder if its worth deferring as I would have to dip into savings during the deferral time to pay day to day bills .. so is it really worth it?

Devoran

Hi,
None of this pension decision making is easy. You need to look at the pensions service website and the examples in the online booklets. Saving versus deferral is tricky. If you get top whack interest on savings at 6.7%, after tax it is about 5%. Deferring the pension adds up to about 10% compound or 7% if you take the lump sum, both of these are tax free. Obviously you should never borrow to get this deal, but it comes down to how you feel about the future. If you have a good retirement income planned, the extra pension in years to come may not be important, but if you can get by today and know a much better income lies a few years ahead, then the answer could be a deferral.
A calculator, pencil and paper and a bit of research could be a very profitable way to spend an evening.
Happy searching pensioners-to-be,
Devoran

ManAtHome

Think your instincts are right - shouldn't be much of a gamble getting the money back after 3 years at most (allowing for lost interest on the payment).

As others have said, could also be worth thinking about deferring - bit more of gamble here whether you take take the lump sum (BoE base rates plus 2%) or the extra pension at 10% plus index-linking. This bit is a bit of a "more brainer" than paying the extra contributions in my opinion.

Sue-UU

Thanks so much for all the above info that you've given Ann (and all other pre pension females who read this) Devoran as I've found it all so very interesting. I'm not near pension age yet, but unless things change, then it's good to be aware of all the bits and bobs and grom all you've said above it would make real sense for Ann to defer.

Many thanks Devoran, Sue.