SP Question

tigerspill
tigerspill Posts: 774 Forumite
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in Pensions, annuities & retirement planning
I was wondering how much of the year you need to work to qualify for a full year of State Pension?

Also If I retire before getting the full 35 years, am I able to buy remaining years - I am in normal employment if that makes any difference?

Thanks
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Comments

  • LHW99
    LHW99 Posts: 4,203 Forumite
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    A qualifying year is, I think, based on paying an amount of NI equal to 52 x the Lower Earnings Limit.
    http://www.rights4seniors.net/content/qualifying-years
    You can usually buy extra years if needed, but I think they are only available for a certain time after the end of that tax year.
    https://www.gov.uk/new-state-pension
    Worth checking your entitlement.
  • Linton
    Linton Posts: 17,135 Forumite
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    LHW99 wrote: »
    A qualifying year is, I think, based on paying an amount of NI equal to 52 x the Lower Earnings Limit.
    http://www.rights4seniors.net/content/qualifying-years
    You can usually buy extra years if needed, but I think they are only available for a certain time after the end of that tax year.
    https://www.gov.uk/new-state-pension
    Worth checking your entitlement.

    You can pay a voluntary contribution for any year after April 2016 between when you stop getting NI years from employment and when you reach State Pension Age. Each year will give you 1/35 of the full SP until you reach the full amount. It is a spectacularly good deal reaching break even in about 3 years.

    It may or may not have the desired affect if you pay for years before April 2016.
  • tigerspill
    tigerspill Posts: 774 Forumite
    First Anniversary Name Dropper First Post
    Thanks folks.
    So on our retirement plans, it looks like I will have 34 years so will need to buy one year; and my wife will have 32 years so will have to buy three years.

    From this page - https://www.gov.uk/voluntary-national-insurance-contributions/rates
    it looks like I would be paying for Class 3 at £14.25/week. So that would be £741 for the year.
    Does that sound about right?
  • Linton
    Linton Posts: 17,135 Forumite
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    edited 1 January 2018 at 6:13PM
    tigerspill wrote: »
    Thanks folks.
    So on our retirement plans, it looks like I will have 34 years so will need to buy one year; and my wife will have 32 years so will have to buy three years.

    From this page - https://www.gov.uk/voluntary-national-insurance-contributions/rates
    it looks like I would be paying for Class 3 at £14.25/week. So that would be £741 for the year.
    Does that sound about right?

    Yes. You should check your SP forecast - you could lose SP if you have been contracted out during parts of your 34 years. Paying voluntary contributions will also recover this money..
  • 33q
    33q Posts: 43 Forumite
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    edited 2 January 2018 at 4:59PM
    I find the Government website is not straightforward to understand with regards to how may state pension is calculated and importantly how I may boost it.

    My Pension statement says that I will get £143.46 per week if I continue to contribute NI and £125.23 if I don’t contribute.

    My Maximum is £148.02

    I took early retirement 7 years ago aged 55 and receive a DB pension. Worked from 18, same company, no NI Gaps. But no NI paid or credited since.

    I’d like to consider increasing my SP to its maximum. An increase of £22.75…Approx. £4.56 * 5 years.

    Meaning I’d pay in £14.25 (Class 3) * 52 * 5….Approx £3705, to get £22.24 per week (£1157 per Annum). And I can delay payment until just before my retirement age of 66. (OK the Class 3 contrib. may change a little depending on year)

    Could someone check my thinking as it seems a pretty good deal for me to pay-out about £3750 to get £1200 for my entire retirement. Payback a little over 3 years.

    Many thanks in advance
  • Linton
    Linton Posts: 17,135 Forumite
    Name Dropper First Post First Anniversary Hung up my suit!
    Your thinking is good. Go for it.
  • tigerspill
    tigerspill Posts: 774 Forumite
    First Anniversary Name Dropper First Post
    Linton wrote: »
    Yes. You should check your SP forecast - you could lose SP if you have been contracted out during parts of your 34 years. Paying voluntary contributions will also recover this money..

    I was contracted out for a long time, but when the pension was baselined in April 2016 it was basically 30 years at the "old" basic SP which I think was around £119.
    When I log in - at 5/4/17 mine is £147.03 - so with this year and next, I will have the full £159.55 or maybe need one more year to work or buy. My wife's says £127.62 and needs another 8 years. She plans to work 5 years - hence the need to potentially buy three years.
  • 33q
    33q Posts: 43 Forumite
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    I now need to extend the thinking to my wife....happy days

    Thank you:D
  • 33q
    33q Posts: 43 Forumite
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    Another thought to consider how truly worthwhile this is is to consider the tax situation. The £1200 extra per year would be taxed, in my case at 20%, bringing the value down to £960.

    Does anyone know if the voluntary class 3 payments are tax deductable? Did a quick search and I'm not sure.

    I have edited my previous figures as my arithmetic was a bit out! Principle remains though
  • Tom99
    Tom99 Posts: 5,371 Forumite
    First Post First Anniversary
    The payback period after 20% tax is 3.9 years so still very good value. The £741 cost is not tax deductable
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