UK Pensions - Is it worth catching up on NI Contributions before April 2016

[Mike Teavee]

Hi guys,

 

Apologies if this has been asked/answered before, I did do a search but couldn't find anything relevant so here goes.

 

in 2017 I caught up on 6 years (7 if I included that Tax year) NI Contributions at Class-2 rate (on the basis I'm an Expat) and now have the full 35 years contributions (I'll actually have 37 once I sort out 2017-18 (50p mistake on my part) & 2018-19 are applied).

 

 

so I now wan't to stop paying (especially as it's now gone up to Tier-3 rates for Expats), when I look at my Pension Forecast it states I need to pay another 6 years (presumably 4 once 2017-18 & 2018-19 are sorted) to reach the full amount 

 

 

Does anybody know if this Is because I caught up on 2010-11. 2011-12, 2012-13, 2013-14, 2014-15 & 2015-16 after the April 2016 re-baseline of entitlements & so I've wasted ~£950 as these won't count (In which case, does anybody know if I can reclaim this, I'm sure I saw a MoneyMarket article on something similar but can't find it again now)..

 

 

Thanks

 

 

MTV 

[potless]

20 minutes ago, Mike Teavee said:

Does anybody know if this Is because I caught up on 2010-11. 2011-12, 2012-13, 2013-14, 2014-15 & 2015-16 after the April 2016 re-baseline of entitlements & so I've wasted ~£950 as these won't count (In which case, does anybody know if I can reclaim this, I'm sure I saw a MoneyMarket article on something similar but can't find it again now)..

Go onto "www.thisismoney.co.uk" at the top of the page you should find a heading titled "pensions" Click on that. There are a variety of articles that may help, one in particular named "Saver buys 2500 pounds of top- ups that count 'towards' but dont improve his state pension.

[Mike Teavee]

14 minutes ago, potless said:

Go onto "www.thisismoney.co.uk" at the top of the page you should find a heading titled "pensions" Click on that. There are a variety of articles that may help, one in particular named "Saver buys 2500 pounds of top- ups that count 'towards' but don't improve his state pension.

Thanks... it probably was "ThisIsMoney" I saw it on but for some reason thought it was MoneySupermarket... 

 

[topt]

7 hours ago, Mike Teavee said:

In which case, does anybody know if I can reclaim this,

A lot of people have been trying but probably unlikely.

Best of luck. 

[sandrabbit]

don't bother catching up, you don't know what will happen in the future as it's the worst pension in the western world. I was advised by an accountant not to bother as you will be pro rata in terms of payments. think about where did your earnings related go?

[BritManToo]

8 hours ago, Mike Teavee said:

Does anybody know if this Is because I caught up on 2010-11. 2011-12, 2012-13, 2013-14, 2014-15 & 2015-16 after the April 2016 re-baseline of entitlements & so I've wasted ~£950 as these won't count (In which case, does anybody know if I can reclaim this, I'm sure I saw a MoneyMarket article on something similar but can't find it again now)..

It's because buying years before the new pension don't add much, if anything.

Essentially the New Pension was introduced to screw over everyone that previously made NI contributions.

After 2016, each year adds 4.25 pounds a week.

It's the cheapest pension your money can buy, at around 1,500 pounds to buy 225 pounds/year.

If you can buy the years at 200 pounds even better.

Normally a 1,500 pound pension investment will only buy you 5%, 75 pounds/year.

 

If you think you'll live 7 years after your state pension age, buy as many post 2016 as you can.

If you're feeling a bit crook, don't bother.

[partington]

As I understand it the position is this:

 

Before the pension rule changed in April 2016 you needed 30 years of NI contributions to get the full pension.

After April 2016 - say you are young person beginning your first NI contributions in tax year 2016-2017- you need 35 years of contributions for a full pension.  

 

However, if your work history straddles the rule change year, 2016 - that is, if  you started contributing before April 2016, but will not reach pension age until after April 2016 - special arrangements apply.

 

These special arrangements allow you to make up past incomplete years' contributions, and, depending on the number of years you have to go until retirement age, also allow you to contribute more than 35 years to maximise your pension.

 

If you reached 30 years of NI contributions before April 2016, then, even if you have incomplete years before 2016, there is no point in trying to make up any more. Any number of years greater than 30 before April 2016 will not add to your pension therefore you should only try to make up years before April 2016 to a total of 30. Any more years before this are wasted as they will NOT increase your starting amount.

 

However you can make up years after 2016, and continue to contribute each current year until you reach your pension age. Each additional year you complete will add approx £4.22 per week ( I haven't looked up the exact current figure)  to your pension amount, up to the maximum current pension amount (approx. £169 per week). 

 

This is true even if the number of years total (30 before 2016, X years after 2016) adds up to more than 35.

[Mike Teavee]

8 hours ago, topt said:

A lot of people have been trying but probably unlikely.

Best of luck. 

From the ThisIsMoney article mentioned above, it looks like a lot of people are having more success (there's even mention of it being automatically refunded).

 

I need to speak to them anyway about the 2017-18 shortfall so no harm in asking... I know the shortfall will be because of 50p that I miscalculated when I paid up 7 years worth, they said they'd write off - Silly me thinking HMRC will let you get anyway with anything though we both agreed it was going to cost them more to process it than they would receive.

 

[Mike Teavee]

8 hours ago, sandrabbit said:

don't bother catching up, you don't know what will happen in the future as it's the worst pension in the western world. I was advised by an accountant not to bother as you will be pro rata in terms of payments. think about where did your earnings related go?

I disagree... I managed to pay most of my shortfall at Class-2 so I only need to receive a pension for 8 months before I'm in profit, even at Class-3 Rates, I make it approx 3 years (each years catch-up is worth approx 250GBP pa, current yearly rate is approx 780GBP).

 

Not sure what you mean by thinking about where my earnings related went, if you mean my private pension, most (20 years) is in a fInal salary scheme so I know this pensions (kicks in at 60) will reduce when I start receiving the State Pension, but only by 20/35ths so it (on paper, currently) is still worth doing to receive the additional 15/35ths)

 

I do agree that fck knows what the future holds for UK Pensions, can't do anything but try to put yourself in the best possible place.

 

 

 

 

 

 

[strikingsunset]

it’s a no brainer - maximize your contributions - providing you live till around 70 you’re return on investment is around 25 per cent per year.


Sent from my iPhone using Thaivisa Connect

[topt]

2 hours ago, Mike Teavee said:

From the ThisIsMoney article mentioned above, it looks like a lot of people are having more success (there's even mention of it being automatically refunded).

Well that is good news and must have changed since I last read an article on it.

2 hours ago, Mike Teavee said:

I disagree... I managed to pay most of my shortfall at Class-2

I take it you must have been working abroad to be able to do that?

 

I was hoping to top up with Class 2 initially for years prior to 2016 but was told by an advisor would make no difference as @partington explains above. Big difference between Class 2 and 3 when you are looking at more than a few years. 

[sometimewoodworker]

20 hours ago, Mike Teavee said:

Does anybody know if this Is because I caught up on 2010-11. 2011-12, 2012-13, 2013-14, 2014-15 & 2015-16 after the April 2016 re-baseline of entitlements & so I've wasted ~£950 as these won't count (In which case, does anybody know if I can reclaim this, I'm sure I saw a MoneyMarket article on something similar but can't find it again now)..

 

It is almost certainly because you were contracted out for some of your working life. 

 

There has has been some significant miss information posted in this thread. Some is completely false.

 

you need 35 years of full contributions for a full pension. Which years they are is not relevant.

 

Contracted out years are not the same so should be disregarded.

 

Class 2 years are incredibly good value for money.

Class 3 years are extremely good value for money.

 

You would have to be a genius level investor to get a better return than Class 3, and a super genius to beat Class 2.

 

 

[Mike Teavee]

2 hours ago, sometimewoodworker said:

It is almost certainly because you were contracted out for some of your working life. 

 

There has has been some significant miss information posted in this thread. Some is completely false.

 

you need 35 years of full contributions for a full pension. Which years they are is not relevant.

 

Contracted out years are not the same so should be disregarded.

 

Class 2 years are incredibly good value for money.

Class 3 years are extremely good value for money.

 

You would have to be a genius level investor to get a better return than Class 3, and a super genius to beat Class 2.

 

 

If that was the case then I'd only have a few years contributions but as you can see from the OP I have 35 years, but only 32 of these are counting to my pension, which when I look at my working history...

 

Summary 

 

... Doesn't tally one way or the other... 

 

 

Will try to find the time to call them week after next to get my 2017-18 sorted and find out exactly why I don't have 35 years (If the  top-ups count) or 29 years (if they don't at all) or how the bl@@dy hell they get it to be 32 years :s 

 

 

Maybe the years you're contracted out apply pro-rata (e.g. 10 years of contracted out is work 8 years of full contributions) Who knows :s 

 

 

 

[sometimewoodworker]

28 minutes ago, Mike Teavee said:

Maybe the years you're contracted out apply pro-rata (e.g. 10 years of contracted out is work 8 years of full contributions) Who knows :s 

That is certainly possible and DWP are the people to talk to they are extremely helpful (shocking for a government department but true)

 

Don't forget that the contracted out years mean that you have another pension that  possibly provides more than the state pension would have done if you were not contracted out, so if you can top up to the full pension you are quids in.

 

I don't believe that the topup years don't count. That is AFAIK a totally false idea.

 

the contracted out years make calculations difficult and only DWP or an independent pension adviser can answer completely.

 

But it is your responsibility to ask the correct questions, people making assumptions rather than asking DWP is probably why some people have made payments that was of no benefit to them.

 

[mikecha]

Hi  i took my pension and left it as it is the money i should pay contrabution i keep 

worked out ok

 

 

better pay into a uk account and have a simple adress in uk otherwise u get the rate overseas   thats not what u want every pound counts to live good luck  

[RandG]

If you are registered on the HMRC website,  it will give you details of what years are logged as fully paid and what your current forecast is,  based on what you have paid,  and what the maximum you could achieve if you carried on paying and what years could be paid up retrospectively.  It really is useful.  We used it last year to maximise my German wife's UK pension. Good luck. 

[Chongalulu]

No point exceeding 35 years full contributions ,that point is at which you’ll receive full state pension. 'Contracted out"does not mean out of the state pension it means out of SERPS ,the earnings related bit,but this usually means that bit instead went into an occupational scheme so that amount will be made up ,or more so from that scheme. I would endorse another commenters experience that calling DWP is very worthwhile they are very helpful and efficient and will even call you back.

[twix38]

This quote is flat out wrong....

 

"you need 35 years of full contributions for a full pension. Which years they are is not relevant."

 

Paying pre 2016 and 2016 contributions will not count towards increasing your pension from 30 years to 35 years.

[Guderian]

You need to know how many years you were contracted out for. If it was around 12 or 13 years or more then your pension will in effect be the amount under the old system regardless of how many years you buy. If you were not contracted out then it's worth topping up to the full 35 years needed for the new pension as it's significantly more generous than the old one. A case in point is myself. I worked overseas mostly and was stupid enough not to pay the voluntary Class 2 NI while abroad. I ended up with a total of just 13 years of contributions which were forecast to give me a state pension of around £2K/year when I retired to Thailand 15 years ago. Who cares, right? Since 2008, with safe investment opportunities as rare as hen's teeth, I've topped up as much as I can so I will now have 30 or 31 qualifying years when I reach state pension age. As I was only contracted out for around 5 years whilst working in London I ended up under the new system and the projected state pension now is over £8K/year, well worth having. My older brother and my mate who's older than me were both civil servants so they were contracted out their whole working lives, and even with 40 years of contributions each they will both be under the old system and getting a smaller pension than me with 5 years of contributions missing but under the new system. Needless to say they are not amused by this. I've no idea why they made it work this way but over the last five years during quite a lot of discussion over the voluntary contributions with both DWP and HMRC that's how it's turned out for me. I’ll continue to pay voluntary NI until I reach 66 in 4 years time and it seems to have been the right thing to do in my case, that extra 8 grand a year will be handy. Now I just have to figure out how to get it index-linked, because while living in Thailand it won’t be. Maybe a change of location to the Philippines will be needed in the next 4 or 5 years?

 

 

 

 

[mikosan]

2 hours ago, nchuckle said:

No point exceeding 35 years full contributions ,that point is at which you’ll receive full state pension. 'Contracted out"does not mean out of the state pension it means out of SERPS ,the earnings related bit,but this usually means that bit instead went into an occupational scheme so that amount will be made up ,or more so from that scheme. I would endorse another commenters experience that calling DWP is very worthwhile they are very helpful and efficient and will even call you back.

I am a little confused about this also.  I was under the impression I had to contribute for 35 years, so, with reference to the attachment below, I am one year short.  So why does it say I must contribute 6 years before 2024? For information, I retired in 2007 and moved overseas.

[Chongalulu]

26 minutes ago, mikosan said:

I am a little confused about this also.  I was under the impression I had to contribute for 35 years, so, with reference to the attachment below, I am one year short.  So why does it say I must contribute 6 years before 2024? For information, I retired in 2007 and moved overseas.

What it means is that you have 6 years left before you presumably reach retirement age 2024 in which you 'may' contribute. It simply assumes you might. So where it says "view details " on 'year is not full' click on that where I think it will indicate what if anything you contributed in say 2008/9 . I’m surprised that it says full year in financial year 2007/8 if you said you stopped working then. If you received for example unemployment benefit etc until April 2008 your NI contributions would have been made fir you perhaps explaining a full year? Anyway see which one of the subsequent years (perhaps 2008/9) has the least amount left to pay to complete the full year contributions- perhaps you were receiving benefits for part of that year? Then just pay the balance of that year ,or whichever has the least left to complete the 35 years. You need no more. In any case if you don’t you will still get 34/35ths 

[mikosan]

1 minute ago, nchuckle said:

What it means is that you have 6 years left before you presumably reach retirement age 2024 in which you 'may' contribute. It simply assumes you might. So where it says "view details " on 'year is not full' click on that where I think it will indicate what if anything you contributed in say 2008/9 . I’m surprised that it says full year in financial year 2007/8 if you said you stopped working then. If you received for example unemployment benefit etc until April 2008 your NI contributions would have been made fir you perhaps explaining a full year? Anyway see which one of the subsequent years (perhaps 2008/9) has the least amount left to pay to complete the full year contributions- perhaps you were receiving benefits for part of that year? Then just pay the balance of that year ,or whichever has the least left to complete the 35 years. You need no more. In any case if you don’t you will still get 34/35ths 

I am most grateful for your very helpful response.  I am also somewhat relieved.  Regards.

[sometimewoodworker]

1 hour ago, twix38 said:

This quote is flat out wrong....

 

"you need 35 years of full contributions for a full pension. Which years they are is not relevant."

 

Paying pre 2016 and 2016 contributions will not count towards increasing your pension from 30 years to 35 years.

You are completely and utterly wrong.

 

I payed contributions for years prior to 2016 to bring my full years up to 35. All the full years counted.

[topt]

30 minutes ago, sometimewoodworker said:

You are completely and utterly wrong.

No he isn't.

Suggest you read the Money Mail articles mentioned and earlier post from @partington

 

I personally spoke to an advisor from or affiliated to DWP (appointment made in advance via HMRC) and was told that if I paid any money towards years prior to 2016 when the change occurred that they would not count towards increasing my state pension. They apparently calculate under which system you would get more money - the old or new flat rate - at the 2016 date and advise you accordingly. 

 

Money Mail had many articles about people paying thousands of £ worth of top ups and being told it had no impact on their final pension. 

 

Your specifics may have been different. 

[topt]

Some interesting info in these links for anybody wanting to know more -

Good explanation of the differences and changes - 

https://www.dailymail.co.uk/money/pensions/article-6257963/Puzzled-state-pension-maze.html

 

When pension forecasts may be wrong..........

https://www.dailymail.co.uk/money/pensions/article-6932201/My-state-pension-forecast-wrong-buy-ups.html

 

Someone who has been refunded -

https://www.dailymail.co.uk/money/pensions/article-6928583/Saver-buys-ups-count-DONT-improve-state-pension.html

 

[Mike Teavee]

11 hours ago, mikosan said:

I am most grateful for your very helpful response.  I am also somewhat relieved.  Regards.

You might want to consider making 1 more years payment to take it up to the full 35 years.

 

It will cost about £780 but will give you an extra £250 pa so will for itself in 3 years or so

[sometimewoodworker]

12 hours ago, topt said:

They apparently calculate under which system you would get more money - the old or new flat rate - at the 2016 date and advise you accordingly. 

 

12 hours ago, topt said:

Your specifics may have been different. 

To qualify for the full basic rate pension you need 35 qualifying years (not contracted out) current retirees claim £164.35 in 2018/19. per week

 

There is no requirement of when those years are for the basic pension. There is absolutely no requirement for you to make 30 years before 2016 and 5 years after. For the basic pension that suggestion is totally wrong.

 

If you are talking about anything other than the BASIC pension (for example the old  State Earnings-Related Pension Scheme (SERPS), State Second Pension, State Second Pension) other conditions may apply.

 

if you were contracted it is a different calculation.

 

[partington]

1 hour ago, sometimewoodworker said:

 

There is no requirement of when those years are for the basic pension. There is absolutely no requirement for you to make 30 years before 2016 and 5 years after. For the basic pension that suggestion is totally wrong.

 

It isn't being claimed that you need to make 30 years before 2016 and 5 years after.

 

What is being discussed is whether it is worth topping up incomplete years before 2016 by retrospectively paying NI contributions for those past years.

 

In this specific situation many people have paid for missing years before 2016, sometimes thousands of pounds, and subsequently discovered their pension amount has not increased.

 

There are many links here to newspaper articles discussing people trying to claim back these futile payments from HMRC, and often succeeding.

[sometimewoodworker]

3 hours ago, partington said:

It isn't being claimed that you need to make 30 years before 2016 and 5 years after.

 

That was exactly your claim. In post number 7. How else do you claim that someone can have 35 years. And you are wrong.

 

you said

 

Quote

If you reached 30 years of NI contributions before April 2016, then, even if you have incomplete years before 2016, there is no point in trying to make up any more. Any number of years greater than 30 before April 2016 will not add to your pension therefore you should only try to make up years before April 2016 to a total of 30. Any more years before this are wasted as they will NOT increase your starting amount.

As I have said that is completely false with regard to the basic pension.

 

IF you have 35 full qualifying years even if they are ALL prior to 2016 then you will be entitled to the full new state pension 

 

Additional pension amounts and contracted out years are different and for those you need to talk to DWP. 

 

You are confusing the requirement for the old and new pension, the number of years needed, the date the new pension came into force and the additional pension that someone could have under the old pension.

[BobBKK]

I paid up before coming here but have to wait until 67 to get my pension. Outcomes vs inputs it's a risk how long you will live. Pay it is my view.