Retirement

[Tashyboy]

I mentioned this on Saturday and lo and behold the sky app has run this today. Bottom line if someone is topping up there pensions now. They need to see if they have at least 35 years of national insurance paid for there full pension. It may be a case of topping up that and not a private pension pot for the moment. But seek advice.
ago06:53

'Should I top up my national insurance and could it really get me £6,000 extra?'​

By Jimmy Rice, Money blog editor
Every Monday the Money team answers your Money Problems or consumer disputes. Find out how to submit yours at the bottom of this post. Today's question is...

I'm 62 and have 10 years of gaps in my national insurance record as I worked for my parents' import business without a fixed wage during most of my twenties and thirties, and had periods of unemployment in my fifties. What are the benefits of topping up before I retire in a few years and can I really get £6,000 added to my pension for every £900 I put in?
Tony, Palmers Green

This is a question many people approaching retirement will be asking themselves, Tony.
First, it's worth us outlining why your national insurance record matters and who can top up.
If you reached pension age after 6 April 2016 you need 10 years of NI contributions to get a state pension - and 35 years to get the full £221.20 a week. Before that 2016 date, it's 30 years.
People may have gaps in their record for numerous reasons including: being unemployed, on a low income, self-employed, having worked abroad, or having taken a break from work to raise a family.
Ordinarily, you can pay voluntary contributions for the past six years - but currently there's an extended period meaning a man born after 5 April 1951 or a woman born after 5 April 1953 can pay voluntary contributions to make up for gaps between April 2006 and April 2016.
The deadline for this is 5 April 2025.
How much could topping up earn you?
It would cost £907.40 to cover all NI contributions from the 2023-24 tax year - each year is different but this is a good guide. Going back to your question, if you went on to enjoy 20 years of retirement, you would get back £6,000. It would take just three years to get your £907.40 back.

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Who might want to think twice?
Just to stress, as always, that this post is not intended as financial advice. Instead, we're outlining things you should think about.
The first thing anyone should consider is if they'll fill gaps naturally through working - in which case there'd be no point topping up. Given your age, Tony, it could be an option for you - but check your state pension forecast here.
There are lots of other things to factor in and you should seek independent financial advice.
Wealth management firm Charles Stanley says a key consideration is whether a higher pension would either:

• Drag you into paying tax when you retire;
• Mean you no longer qualify for certain benefits.

"You might not benefit from the full amount of extra money as some will be taken in income tax," they say.
"In addition, boosting state pension income can affect entitlements to means-tested benefits. Notably, if you claim pension credit, which tops up the income of very low earners over state pension age, any increase in the state pension would normally reduce an award. This often means that you would be no better off paying voluntary contributions."
Another consideration - and this isn't something most people want to contemplate - is that if you don't think you'll live long enough into retirement (you might be in ill-health or have a terminal illness) to benefit from topping up, then it's probably not worth it.
People should also look into whether they could transfer contributions from their spouse or civil partner.
One more way to top up
Which? advises: "Ensure that you are getting any NI credits you are entitled to before contemplating paying voluntary NI contributions for a particular year.
"These are free and will apply, say, if you are caring for a child in the family as a parent or grandparent, claiming statutory sick pay or looking after a sick/disabled person."
What next?
If you're below state pension age, you can contact the Future Pension Centre to see if you'll benefit from topping up - they're on 0800 731 0175. If you already claim the state pension, call the Pension Service on 0800 731 0469.
Again, before taking any action you should seek independent financial advice.
If you do decide to top up, you'll need a Government Gateway account.
On there, you can see gaps, the cost of filling them and how much you could benefit - you can then pay online.

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• The form above - you need to leave a phone number or email address so we can contact you for further details;
• Email news@skynews.com with the subject line "Money blog";
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[SwingsitlikeHogan]

Be aware that if at any point you have been ‘contracted out’, you and your employer will not have been paying the full NI contribution for those years. This means that your NI record may show a full number of years in excess of 35 (noting that that number is specific to pensions for which NI payments started in 2016) but with a requirement to pay X further years until your retirement state pension date of 20xx for you to qualify for the full new state pension.

 

[YandaB]

Be aware that if at any point you have been ‘contracted out’, you and your employer will not have been paying the full NI contribution for those years. This means that your NI record may show a full number of years in excess of 35 (noting that that number is specific to pensions for which NI payments started in 2016) but with a requirement to pay X further years until your retirement state pension date of 20xx for you to qualify for the full new state pension.

Interesting, how do you find out?

 

[SwingsitlikeHogan]

Interesting, how do you find out?

You have to contact the Pension Service. I did this (phoned them) for my wife as her record was showing 40+ years but still had four years to qualify for the full state pension. This was down to her being contracted out when working for the NHS.

The following explains how it works for NHS employees in period 1978 to 1997, and how the employer pension plus basic NI payments worked together to provide the Guaranteed Minimum Pension. I’m thinking same or similar applies for other employments. If Contracted Out, 35yrs NI contributions are insufficient to qualify for the full new state pension.

Guaranteed Minimum Pension (GMP) | NHSBSA

GMP is the least amount you’ll get from your pension scheme by law if you worked between 6 April 1978 and 5 April 1997. How GMP affects you If you worked between 6 April 1978 and 5 April 1997, you would have been contracted out of the State Earnings Related Pension Scheme (SERPS). This...

www.nhsbsa.nhs.uk

 

[Springveldt]

Be aware that if at any point you have been ‘contracted out’, you and your employer will not have been paying the full NI contribution for those years. This means that your NI record may show a full number of years in excess of 35 (noting that that number is specific to pensions for which NI payments started in 2016) but with a requirement to pay X further years until your retirement state pension date of 20xx for you to qualify for the full new state pension.

I'm pretty sure I was contracted out for a couple of years in the early 2000's (my choice as I said to the financial advisor at the time I doubt there will be a government pension by the time I get to 65) but then the government opted everyone back in. My NI record shows full payments for every year when I check on the government website. It shouldn't really affect me though as I've still got lots of years left before retirement so I should cover even those opted out years.

 

[PNWokingham]

I'm pretty sure I was contracted out for a couple of years in the early 2000's (my choice as I said to the financial advisor at the time I doubt there will be a government pension by the time I get to 65) but then the government opted everyone back in. My NI record shows full payments for every year when I check on the government website. It shouldn't really affect me though as I've still got lots of years left before retirement so I should cover even those opted out years.

i was also contracted out for some early years but doesn't seem to have affected my amounts as it shows full max level

 

[Red devil]

i was also contracted out for some early years but doesn't seem to have affected my amounts as it shows full max level

Same here

 

[SwingsitlikeHogan]

There was a short few years period in the late 90s early 2000s that I was contracted out - but as others have note I don’t seem to have any incomplete years. Our company financial advisor and the company suggested we contract out, and I think that that was subsequently realised to be a mistake. I’m thinking that my employer must subsequently made up the shortfall - I don’t recall me making it up, or I paid sufficient lower level of NI that it didn’t matter. I don’t honestly know.

 

[RangeRat]

It’s worth setting up a Government Gateway account online with HMRC to see your pension forecasts etc. it’s a bit of a pain to set up with all the info they need to verify.

But once done you can get an up to date State Pension forecast, see all of your NI contributions for every year, see tax paid for recent years, PAYE, self assessment etc. You can just log in anytime and see it all.

 

[clubchamp98]

I retired 10 yrs early at 56.
I got a letter to pay £800 pa for 10 yrs so £8000 to top up.
This was to get full pension even though I had paid in for 38 yrs.
It’s a minefield.
But as stated with tax etc it wasn’t worth it .

 

[PJ87]

I retired 10 yrs early at 56.
I got a letter to pay £800 pa for 10 yrs so £8000 to top up.
This was to get full pension even though I had paid in for 38 yrs.
It’s a minefield.
But as stated with tax etc it wasn’t worth it .

I'm 37 wife's 36

I have to pay 14 more years to get full she has to pay 17 more to get full because she has 2 incomplete years

Looking at it on our accounts it would cost £800 to pay up the 2 missing years but because she will work 17 more years it seems silly to pay it

 

[clubchamp98]

I'm 37 wife's 36

I have to pay 14 more years to get full she has to pay 17 more to get full because she has 2 incomplete years

Looking at it on our accounts it would cost £800 to pay up the 2 missing years but because she will work 17 more years it seems silly to pay it

My confusion is that I paid NI for 38yrs so why I don’t get the full pension.

Goes over my head a bit tbh.

 

[Billysboots]

My confusion is that I paid NI for 38yrs so why I don’t get the full pension.

Goes over my head a bit tbh.

I’m the same. I’m not 100% sure, but in my case it has something to do with me receiving a public sector pension and/or a previous job when part of my pension was “contracted out”. It amounts to a couple of quid a week I won’t get. Not even a pint.

So I’ll need to cut down on my drinking.

 

[clubchamp98]

I’m the same. I’m not 100% sure, but in my case it has something to do with me receiving a public sector pension and/or a previous job when part of my pension was “contracted out”. It amounts to a couple of quid a week I won’t get. Not even a pint.

So I’ll need to cut down on my drinking.

I worked for the same firm for 38 yrs in one job.
Went at 56 when i was offered redundancy.
I keep hearing that you need 32 yrs I think to qualify for your pension but I am still not sure of the rules.

I was sent a letter asking for £800 for each year I went early still none the wiser.

If anyone can explain in plain English I would be grateful.

 

[Billysboots]

I worked for the same firm for 38 yrs in one job.
Went at 56 when i was offered redundancy.
I keep hearing that you need 32 yrs I think to qualify for your pension but I am still not sure of the rules.

I was sent a letter asking for £800 for each year I went early still none the wiser.

If anyone can explain in plain English I would be grateful.

Best bet is to ring your local HMRC office. They’re pretty good.

I’ve just looked and I am short on one year, but still appear to have ample years of NI contributions. I then read that I have, at some point, been in a pension scheme where part of my contributions were contracted out.

Where it gets confusing is that, last tax year, I was told I would be eligible for a full state pension at 67 if I made another full year of contributions. Now, having made that additional full year of contributions, I am still being told I need to make another full year of contributions, despite my record being bang up to date.

I’ll see what next April brings and then might make a phone call myself.

 

[NearHull]

You neeed 35 full years, it’s a bit of an no brainier to buy any shortages when you reach retirement. Each year that you purchase, at circa £800, will increase the pension payout by circa £5 per week. The investment therefore will be returned in around 3 years, after then, each and every week, is a bonus. Live another 10 years and the Govt will give you a further £2,500 for each purchased year.

 

[Billysboots]

You neeed 35 full years, it’s a bit of an no brainier to buy any shortages when you reach retirement. Each year that you purchase, at circa £800, will increase the pension payout by circa £5 per week. The investment therefore will be returned in just under 3 years, after then, each and every week, is a bonus. Live another 10 years and the Govt will give you a further £2,500 for each purchased year.

And you see this is where I scratch my head. According to my NI record I have 41 full years and just a single year where I am short. It’s a minefield and then some.

 

[PJ87]

You neeed 35 full years, it’s a bit of an no brainier to buy any shortages when you reach retirement. Each year that you purchase, at circa £800, will increase the pension payout by circa £5 per week. The investment therefore will be returned in around 3 years, after then, each and every week, is a bonus. Live another 10 years and the Govt will give you a further £2,500 for each purchased year.

Also depends on other pensions you have no? I mean that £5 can be taxed at 20% or 40% depending how much pension you receive so makes it less and less worth it

 

[SwingsitlikeHogan]

And you see this is where I scratch my head. According to my NI record I have 41 full years and just a single year where I am short. It’s a minefield and then some.

It’s all to do with being contracted out and I think this might apply to many working in the public sector inc NHS.

The difficulties in working things out arise because the pension was changed from two tier (GMP and SERPS) in, I think, 2016. The new system is single tier and a higher level of full pension than GMP alone (contracting out was not paying SERPS). The 35yrs requirement for full new state pension is for folks starting payment of NI contributions on or after 2016. If you were contracted out of SERPS for any period before 2016 you have to make up the shortfall of SERPS payments to qualify for the full amount of the new state pension…and making up that shortfall of however many years contracted out SERPS payments can take a good few years of paying NI.

Well that’s my take on it.

 

[NearHull]

Also depends on other pensions you have no? I mean that £5 can be taxed at 20% or 40% depending how much pension you receive so makes it less and less worth it

I agree.