Pension Voluntary contributions

gentry

Hi, I`ve just received my invation letter to claim my state pension.
I have 41 years full and 9 not contributed enough.

Just wondering how it would work if I did pay any Voluntary contributions to boost my pension? 
I have several past years with the same shortfall and 2 recent years with less shortfall,
would payments come off the oldest date first?.

Thanks
  

woodbine

Have you asked for a pension forecast? this will tell you how much SRP you will be getting, but and it is a but as it's like all things pension complicated you should have enough with 41 years to get the new unified SRP which currently is £179.60 per week increasing in April by 3.1%
some details in the link below:

https://www.gov.uk/new-state-pension/what-youll-get

gentry

Thanks woodbine,
yes I`ve done the pension forecast online and it states currently £151.66, and the most I can get is £177.32 if I paid back all the shortfall.

Teddybear12

Hi @gentry Welcome to the Community. Do you know how much you would have to pay back ?

gentry

Thanks for the welcome Teddybear12,... much appreciated

£7181.20 in total, I`m 65 now, 66 in April.
My main thought is, if I did/could pay it all, it would take me over my Tax allowance and I would pay tax anyway, so I`m trying to work out how much to pay to maybe improve it.

calcotti

State Pension is currently a mess Because it’s in a transitional state and even if you want to boost the pension it isn’t straightforward to work out which years to pay. Payment of years pre 2016 affect calculation of your starting amount calculated under the old pension rules. Payment of years post 2016 affect calculation of the amount under the new pension rules. i think it’s likely that paying contributions for years prior to 2016 will not increase your entitlement.

Many people have made voluntary payments and then found it has no impact on their entitlement.

There’s information on pages 6 and 7 here
https://www.ageuk.org.uk/globalassets/age-uk/documents/factsheets/fs19_state_pension_fcs.pdf

calcotti

More reading material here
https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf
see page 6 onwards
(Note that the amounts are out of date because the guide is a few years old.)

Have a look at pages 10 and 11. I think this means that if you already had 30 years of contributions by April 2016 (which I infer you did) it is unlikely that paying voluntary contributions for any years prior to this will increase your pension.

mikehughescq

I concur. Absolutely no point in paying voluntary contributions in this scenario. 

calcotti

mikehughescq said:

I concur. Absolutely no point in paying voluntary contributions in this scenario. 

I think they may increase entitlement by paying contributions for the gaps in the years since 2016. Depends on whether the old rules starting amount is greater or less than the new rules starting amount and how much the new rules amount could be changed by. 

In general, if applicable, getting a future return of £5/week for an investment of £800 is a good thing. Obviously if OP will be paying tax (at basic rate) in retirement the £5 is reduced to £4/week but that's still £208/annum.

For the many years in which we are going to have retirees straddling the two schemes it is very poor that government do not explain clearly what the impact of filling gaps will be on pension entitlement.

OP, you have up to 6 years from the relevant year to make voluntary contributions contributions and these can be made after you reach pension age so you don't have to rush this.
https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

Realise I didn't directly address this question

gentry said: ..would payments come off the oldest date first?.

The answer is no. If you choose to make voluntary contributions you specify which year(s) they are for.

gentry

Thanks very much calcotti and mike.

Some great feedback to go through here, and yes I thought any contributions would have to be made before pension age.

calcotti

scotleag said:

Hi @gentry I go along with everyone saying don't pay any more voluntary contributions. 

I haven't said that. If OP has a couple of recent years available to fill then at a maximum cost of £800/annum for a return of £5/week gross that would be a good deal in my mind. If the years are partially complete the cost would be less. However it depends on OP's overall circumstances and whether or not that return is actually the case. I would certainly not making any contributions without doing some investigation.

scotleag said:
You need 35 years before April 2016 to get the full pension. 

It is not correct to say that 35 years of contributions gets a full new State Pension. If OP was 'contracted out' during all or part of working life a deduction will be made from entitlement because while contracted out reduced NI contributions were made. In such a case more than 35 years may be required to get the full new State Pension. 

I infer taht this is likely to be OP's situation.

30 years before April 2016 gets the full old basic State Pension.

gentry

Hi @scotleag
I got the pension forecast online rather than any calculations on my part, thanks for the info.

I will be taking up the invitation to apply though, just in case the Government have any more changes planned!

Teddybear12

@gentry I would, good luck.