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  • FIRST POST
    • kingsleypne
    • By kingsleypne 3rd Jul 18, 2:14 PM
    • 18Posts
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    kingsleypne
    Filling in missing NI years to boost state pension
    • #1
    • 3rd Jul 18, 2:14 PM
    Filling in missing NI years to boost state pension 3rd Jul 18 at 2:14 PM
    My wife has gaps in her NI record and we've been wondering whether to pay Class 3 contributions either to fill in those gaps or to pay for future years (she no longer works).

    She received a state pension forecast recently which indicated that based on her current NI record her forecast was 126.93 per week and that she needed to contribute another 8 years to get a full pension. The state pension forecast also indicated a COPE amount of 8.76. Her starting amount is based on the new pension rules.

    I checked her state pension forecast online which indicated she had 29 years of contributions. This confused me as this seemed to imply she only needed 6 more years of NI contributions so I rang the Future Pensions Centre.

    They told me she could pay NI contributions for up to 6 years prior to 2016 but would then need another 2 years post 2016 to wipe out the COPE amount.

    Previously I'd been led to believe filling in the gaps prior to 2016 would not increase her state pension - she would have to buy post 2016 years.

    Can anyone confirm that what I'm currently being told by the Pensions Centre is correct? I don't want to pay for years prior to 2016 if they're not going to count.
Page 1
    • xylophone
    • By xylophone 3rd Jul 18, 6:26 PM
    • 27,315 Posts
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    xylophone
    • #2
    • 3rd Jul 18, 6:26 PM
    • #2
    • 3rd Jul 18, 6:26 PM
    https://www.royallondon.com/global/documents/goodwithyourmoney/topping-up-your-state-pension-guide.pdf
  • jamesd
    • #3
    • 3rd Jul 18, 6:29 PM
    • #3
    • 3rd Jul 18, 6:29 PM
    It's only 35 years for someone who has been in the single tier system for all contributing years. Since it only started in 2016 this is impossible and varying numbers of years are needed depending on each person's individual work history.

    Unfortunately, to be truly sure what she should do we really need both her old rules and new rules amounts. This will let us see the true effect of buying more pre-2016 years. Also important is the cost of those years and how long it is to her state pension age; if she has the time and the price is the same she might as well stick to 2016 onwards years.

    The rest of this post is generalities but I think she's in the region where relying on them is unsound and we need more information.

    Getting to 30 pre-2016 years is likely to be useful because that maximises the basic state pension component. More than 30 years produces no further increases in the basic state pension, so it's a pure waste of money. This can result in a change from new rules to old rules being higher.
    • molerat
    • By molerat 3rd Jul 18, 6:39 PM
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    molerat
    • #4
    • 3rd Jul 18, 6:39 PM
    • #4
    • 3rd Jul 18, 6:39 PM
    I believe the FPS are now up to speed with advice but no harm in checking the figures yourself. If she currently has no post 2016 years, that 126.93 works back to 29 years new pension minus 8.76 COPE at April 2016 so it looks like FPC are correct with filling up pre 2016 to 35 years and then 2 post 2016 to fill up to the full amount as the cheapest way. To make it worthwhile the pre 2016 years need to be purchased before April 2019 or they will increase in price to around 15.09 per week from the original 12.05 - 14.10.
    Last edited by molerat; 03-07-2018 at 7:54 PM.
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    • Tom99
    • By Tom99 3rd Jul 18, 6:51 PM
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    Tom99
    • #5
    • 3rd Jul 18, 6:51 PM
    • #5
    • 3rd Jul 18, 6:51 PM
    Getting to 30 pre-2016 years is likely to be useful because that maximises the basic state pension component. More than 30 years produces no further increases in the basic state pension, so it's a pure waste of money. This can result in a change from new rules to old rules being higher.
    Originally posted by jamesd

    That is not the case if your starting amount is based on the new pension rules. 30 yrs is for the old pension rules.
    The OP has been told that the 126.93 is based on the new rules and if that is the case pre 2016 year could be used to make up the difference if enough years are available.
    • Iamadored
    • By Iamadored 4th Jul 18, 5:24 AM
    • 30 Posts
    • 12 Thanks
    Iamadored
    • #6
    • 4th Jul 18, 5:24 AM
    • #6
    • 4th Jul 18, 5:24 AM

    My wife has gaps in her NI record and we've been wondering whether to pay Class 3 contributions either to fill in those gaps or to pay for future years (she no longer works).
    Originally posted by kingsleypne
    Paying Class 3 contributions to maximise her State Pension is very cost effective, provided every year purchased becomes a qualifying year (I.e. counts towards her SP).

    It is the FPC's job to advise you so that you only purchase years that count towards the SP. That's what they do all day, so they are pretty reliable.

    If you are not confident, you could purchase one year at a time, and then check her SP Forecast has gone up, before purchasing the next.

    You could also leave it for a month, and then ring the FPC again, and ask them the same question (as if you are ringing for the first time). I did this, and got treated as a new customer (they do not seem to keep any records). I got a different adviser but he came up with pretty much the same answer.

    It is generally cheaper to buy earlier years, and fill in gaps, than later or future years.


    She received a state pension forecast recently which indicated that based on her current NI record her forecast was 126.93 per week and that she needed to contribute another 8 years to get a full pension. The state pension forecast also indicated a COPE amount of 8.76. Her starting amount is based on the new pension rules.

    I checked her state pension forecast online which indicated she had 29 years of contributions. This confused me as this seemed to imply she only needed 6 more years of NI contributions so I rang the Future Pensions Centre.

    They told me she could pay NI contributions for up to 6 years prior to 2016 but would then need another 2 years post 2016 to wipe out the COPE amount.
    Originally posted by kingsleypne
    The FPC has told you that her Starting Amount is based on the new rules. This means she can have the full 35 years pre-2016 (29 which she already has, plus 6 which you can purchase, by filling in gaps). This will increase her SA to the maximum New SP of 164.35 per week. BUT, she also has a small COPE which has to be deducted. So her SA would be reduced to 164.35 - 8.76 = 155.59.

    To get her back up to the maximum New SP she would indeed have to purchase 2 post 2016 years. Each year adding 4.70 to her SP.


    Previously I'd been led to believe filling in the gaps prior to 2016 would not increase her state pension - she would have to buy post 2016 years.
    Originally posted by kingsleypne
    This is only true for people whose SA is based on the old rules, & had 30 full years of National Insurance Contributions (NICs) pre-2016. Or, for those whose SA is based on the new rules, & already had 35 full years of NICs pre-2016.

    Who led you to believe this?


    Can anyone confirm that what I'm currently being told by the Pensions Centre is correct? I don't want to pay for years prior to 2016 if they're not going to count.
    Originally posted by kingsleypne
    I am pretty sure what you are being told is correct, but for your own peace of mind, perhaps you could ask them to put it in writing? I've no idea whether they will or not.
    But, if they do, & they turn out to be wrong, you will have an extremely strong case for a refund.
  • jamesd
    • #7
    • 4th Jul 18, 12:42 PM
    • #7
    • 4th Jul 18, 12:42 PM
    That is not the case if your starting amount is based on the new pension rules. 30 yrs is for the old pension rules. The OP has been told that the 126.93 is based on the new rules and if that is the case pre 2016 year could be used to make up the difference if enough years are available.
    Originally posted by Tom99
    My earlier post mentioned the foundation amount and changing basis but yours seems to have ignored this. In case that's because you don't know about it, the foundation amount is the higher of the old rules and new rules calculations as of 2016. When you buy a pre-2016 year the comparison is done again. That can cause the foundation amount to change from new to old or old to new. If we tell someone who will see a change from new rules to old to buy pre-2016 years that take them above 30 we're likely to have told them to waste their money. But even that isn't certain because the years above 30 could be cheap enough to buy to make buying them and getting a switch back to new rules a good deal.

    Up to 30 pre-2016 years will almost always be beneficial because that increases both the old rules and new rules amounts. But it takes a lump sum purchase so it might still be cheaper to buy later years instead.

    The current number is based on the new rules but buying years before 2016 up to the 30 allowed under the old rules is likely to make the old rules calculation higher and cause the foundation amount calculation to flip from new rules to old. Once that flip happens it's the old rules 30 years up to 2016 that applies. The new rules amount combined with the number of years so far tells us that buying up to 30 pre-2016 years is likely to cause this change.

    We know that some pre-2016 years are likely to make sense because she has 29 years now. But to know how many we need to know the old rules calculation as well as the new rules so we can see when the change from new rules to old happens.

    Once we know when the change happens and the cost of each year we can work out the cheapest way to get to the maximum.
  • jamesd
    • #8
    • 4th Jul 18, 12:51 PM
    • #8
    • 4th Jul 18, 12:51 PM
    The FPC has told you that her Starting Amount is based on the new rules. This means she can have the full 35 years pre-2016 (29 which she already has, plus 6 which you can purchase, by filling in gaps).
    Originally posted by Iamadored
    Unfortunately it doesn't mean that because buying pre-2016 years can cause the basis for the foundation amount calculation to change from new rules to old and the costs of each year can differ. Both of those factors need to be considered. It's not as simple as just number of years when pre-2016 years are involved, the basis and possible change of basis for the foundation amount needs gto be considered as well.

    Your post seems to have completely ignored the foundation amount rules and the way buying pre-2016 years can cause it to switch from new rules to old..
  • jamesd
    • #9
    • 4th Jul 18, 12:57 PM
    • #9
    • 4th Jul 18, 12:57 PM
    I believe the FPS are now up to speed with advice but no harm in checking the figures yourself. If she currently has no post 2016 years, that 126.93 works back to 29 years new pension minus 8.76 COPE at April 2016 so it looks like FPC are correct with filling up pre 2016 to 35 years and then 2 post 2016 to fill up to the full amount as the cheapest way. To make it worthwhile the pre 2016 years need to be purchased before April 2019 or they will increase in price to around 15.09 per week from the original 12.05 - 14.10.
    Originally posted by molerat
    Yes, they are probably right, since they have access to the old rules number as well as the new, unlike us, so they can see whether the foundation amount basis will change from new rules to old or not, not being what their answer implies.

    But we were asked to check what they said and we're not in the position to do that at the moment.
    • Tom99
    • By Tom99 4th Jul 18, 1:43 PM
    • 3,016 Posts
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    Tom99
    Unfortunately it doesn't mean that because buying pre-2016 years can cause the basis for the foundation amount calculation to change from new rules to old and the costs of each year can differ. Both of those factors need to be considered. It's not as simple as just number of years when pre-2016 years are involved, the basis and possible change of basis for the foundation amount needs gto be considered as well.

    Your post seems to have completely ignored the foundation amount rules and the way buying pre-2016 years can cause it to switch from new rules to old..
    Originally posted by jamesd

    If you have under 30 yrs pre 2016, but a pension based on the new rules then each additional year should add 164.35/35=4.70pw, but under the old rules would add 125.95/30=4.20pw.
    Therefore how can a pension already based on the new rules flip to the old rules when the amount for each additional year is always greater under the new rules?
    • GunJack
    • By GunJack 4th Jul 18, 1:50 PM
    • 10,434 Posts
    • 7,814 Thanks
    GunJack
    If you have under 30 yrs pre 2016, but a pension based on the new rules then each additional year should add 164.35/35=4.70pw, but under the old rules would add 125.95/30=4.20pw.
    Therefore how can a pension already based on the new rules flip to the old rules when the amount for each additional year is always greater under the new rules?
    Originally posted by Tom99
    Because if pre-2016 years are bought, the Apr 2016 comparison calculations need to be done again, i.e. the position as at Apr 2016 but with the additional pre-2016 years taken into account.
    ......Gettin' There, Wherever There is......
    • Tom99
    • By Tom99 4th Jul 18, 2:00 PM
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    Tom99
    Because if pre-2016 years are bought, the Apr 2016 comparison calculations need to be done again, i.e. the position as at Apr 2016 but with the additional pre-2016 years taken into account.
    Originally posted by GunJack

    But the new will add 4.70pw and the old 4.20pw so whilst you can flip from old to new I can't make out how you could flip from new to old.
    • GunJack
    • By GunJack 4th Jul 18, 3:10 PM
    • 10,434 Posts
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    GunJack
    But the new will add 4.70pw and the old 4.20pw so whilst you can flip from old to new I can't make out how you could flip from new to old.
    Originally posted by Tom99
    Forget the added post-2016 years for a moment, it's the starting amount as of 5 Apr 2016 (end of tax year 15/16) that will be recalculated. Then, the higher amount at that point in time, be it under old or new calculation) will have the post Apr-2016 (i.e. 16/17, 17/18, etc.) added. In other words, the starting amount will be re-baselined.
    ......Gettin' There, Wherever There is......
    • Tom99
    • By Tom99 4th Jul 18, 3:17 PM
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    Tom99
    Forget the added post-2016 years for a moment, it's the starting amount as of 5 Apr 2016 (end of tax year 15/16) that will be recalculated. Then, the higher amount at that point in time, be it under old or new calculation) will have the post Apr-2016 (i.e. 16/17, 17/18, etc.) added. In other words, the starting amount will be re-baselined.
    Originally posted by GunJack

    Yes the starting amount will be re-baselined but if you pay for a pre 2016 year you will add 4.70 pw to you new pension forecast as at April 2016 but only 4.20 pw to your old pension forecast.
    Therefore you cannot flip from the new basis being the higher of the two to the old basis being higher.
  • jamesd
    [Yes the starting amount will be re-baselined but if you pay for a pre 2016 year you will add 4.70 pw to you new pension forecast as at April 2016 but only 4.20 pw to your old pension forecast.
    Originally posted by Tom99
    There are contracted out years to consider. Old rules is unaltering 4.20 a year for up to 30 years plus the earnings-related portion but new rules is 4.70 a year for up to 35 years minus the deduction for being contracted out. In that situation the old rules can end up higher than the new.

    So the first key comparison is at 30 years: is old rules of 30 years of BSP plus earnings-related portion higher or lower than 30 years at new rate minus the deduction under those rules?

    This one looks fairly close to the margin. Certainly too close for me to be confident that it's new rules without also knowing the old rules numbers.
    • Tom99
    • By Tom99 4th Jul 18, 4:53 PM
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    Tom99
    There are contracted out years to consider. Old rules is unaltering 4.20 a year for up to 30 years plus the earnings-related portion but new rules is 4.70 a year for up to 35 years minus the deduction for being contracted out. In that situation the old rules can end up higher than the new.

    So the first key comparison is at 30 years: is old rules of 30 years of BSP plus earnings-related portion higher or lower than 30 years at new rate minus the deduction under those rules?

    This one looks fairly close to the margin. Certainly too close for me to be confident that it's new rules without also knowing the old rules numbers.
    Originally posted by jamesd

    The added pension and COPE amounts are not going to alter and if you pay a missing pre 2016 year you will therefore add 4.70 to the new basis forecast and 4.20 to the old.
    If that is correct then if the new basis is already the higher of the two it will always be the higher, you could not flip from new to old.
  • jamesd
    I don't think that the reported COPE is the full new rules deduction.
    • Tom99
    • By Tom99 4th Jul 18, 5:14 PM
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    Tom99
    I don't think that the reported COPE is the full new rules deduction.
    Originally posted by jamesd

    Why would it not be? Presumably the contracted out period was only a few years which is why the new basis forecast is the higher.
    Last edited by Tom99; 04-07-2018 at 5:17 PM.
    • molerat
    • By molerat 4th Jul 18, 5:33 PM
    • 19,579 Posts
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    molerat
    155.65 / 35 x 29 = 128.97 - 8.76 = 120.21 x 1.025 = 123.22 x 1.03 = 126.92


    My gateway pension amount is also 1p more than the calculation.
    Last edited by molerat; 04-07-2018 at 5:35 PM.
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    • Iamadored
    • By Iamadored 5th Jul 18, 1:45 AM
    • 30 Posts
    • 12 Thanks
    Iamadored
    OMG you have lost me. What specific information does the OP need to provide to enable you to determine whether the FPC has given him the correct advice?
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