Retirement, how much?

[yello]

Does anyone know, when they say about the 35 years contribution, does it matter when those 35 years are? I want to retire early and don't want to have to pay NI if I'm not working and I've already got my 35 years in (just waiting for a statement from them at the moment).

It didn't matter in my case. I'm effectively 'early retired'.

I've not worked (paid, in the UK that is) for 15 years and I'm not pension age for another 6 or 7. I had my 35 qualifying years around 10 years ago because I bought gap years and paid voluntary contributions for a couple of later years. I'm all 'paid up' with a (near) full state pension waiting in the wings (though I get paranoid that the rules will change, or a mistake has been made, and so I check it every year!)

 

[SpokeyDokey]

Does anyone know, when they say about the 35 years contribution, does it matter when those 35 years are? I want to retire early and don't want to have to pay NI if I'm not working and I've already got my 35 years in (just waiting for a statement from them at the moment).

If you've done your 35 years (and it is confirmed by HMRC) then you are not required to pay any further NI to ensure that you get the full new state pension.

You could continue to earn a little under £184 per week without having to pay any further NI as an employee if you wish:

https://www.gov.uk/national-insurance

 

[cougie uk]

I’d hope that financial advisor is no longer providing financial advice…..it is almost always advantageous to complete that state pension if you can afford to. More reading here….

Of course, a further tweak is that every year you defer your taking of that state pension, it increases by 5.8%
That is a harder one to decide…..if you get to that age and don’t need it, it could be a benefit….but remember the state pension stops when you do 🪦, whereas any unused DC pots can be passed on….

I'm racking my brain to remember the exact explanation but it made sense at the time.

I'm only two years short and a few years away from collecting it anyway so there's always the chance that I might take a job and qualify anyway.

 

[Ming the Merciless]

Does anyone know, when they say about the 35 years contribution, does it matter when those 35 years are? I want to retire early and don't want to have to pay NI if I'm not working and I've already got my 35 years in (just waiting for a statement from them at the moment).

Go here to find out, you’ll need a government gateway ID to log in. But basically not really. Once you have 35 qualifying years of NI contributions you’ve maxed out basic SP entitlement.

https://www.gov.uk/check-state-pension

 

[Ming the Merciless]

I'm racking my brain to remember the exact explanation but it made sense at the time.

I'm only two years short and a few years away from collecting it anyway so there's always the chance that I might take a job and qualify anyway.

It would only make sense not to make up missing years if your employment means you’re going to hit 35 qualifying years of NI contributions anyway or you plan to die in less than 3 years of reaching state pension age.

A good IFA would show you their workings and any assumptions so you can verify the advice yourself. If you gave an answer in a maths exam with no workings, you wouldn‘t get full marks. The check state pension link above tells you what you get for your contributions together with a link to your full NI record.

 

[yello]

I'm racking my brain to remember the exact explanation but it made sense at the time.

It's possible there are scenarios where it would make sense.

As you have 33/35th of a pension already, those extra 2 years to be paid/bought would cost you x and so might not make that much difference in the long run.

Let's say for example ("for example" ok!!) that you have a limited life expectancy (lord, it's awful to deal in these terms!) then, yes, it's maybe advice that'd make sense. You'd spend (say) £2000 (or whatever, it's a made up figure for the purposes of illustrating the point) for those 2 years and that'd increase your pension by £500 a year (again, made up). That's 4 years until 'break even' point. SO if you going to pop your clogs at 70 then arguably it's not worth buying those 2 years.

Edit: as MtM said above, but they were much more concise!

 

[PaulSB]

I asked a financial advisor about this - is it worth paying to complete and get a full state pension. She said it wasn't worth doing. I'd double check your thinking. I can't remember her explanation sadly.

Clearly it depends on individual circumstances but my understanding is it is almost always beneficial. My wife will pay just below £4000 to purchase an additional five years. This will increase her SP by £1300pa. After three years Mrs P will have returned the capital investment. While none of us can predict the future I think my good lady should be OK for another +/- 20 years. Lets say she manages 18 years, after 3 years to return the capital she would get £1300 x 15 = £19500. It is as people have said a non brainer.

Thanks to @Dirk and to echo his view I spoke to the Future Pension Centre today. Friendly and knowledgeable people. To summarise this is the advice/position we have been given. Hopefully it will help others:

1. Voluntary contributions can be made at any time pre or post state pension age
2. The dates shown on the .gov website are the latest date for buying a particular year, after this date the year is no longer available to purchase
3. Each additional year purchased increases the payment by £5.13 per week
4. The pension only increases once the payment has been received

So in Mrs P's case if she pays one year before she reaches SP her weekly pension will increase by £5.13, buy five years and it is £25.65. This could all be made very clear on the .gov website and would save a lot of time and energy for staff and callers.

 

[Dirk]

Clearly it depends on individual circumstances but my understanding is it is almost always beneficial. My wife will pay just below £4000 to purchase an additional five years. This will increase her SP by £1300pa. After three years Mrs P will have returned the capital investment. While none of us can predict the future I think my good lady should be OK for another +/- 20 years. Lets say she manages 18 years, after 3 years to return the capital she would get £1300 x 15 = £19500. It is as people have said a non brainer.

Thanks to @Dirk and to echo his view I spoke to the Future Pension Centre today.

My pleasure

 

[mr_cellophane]

National Insurance goes into the same tax pot as Road Tax.

 

[Low Gear Guy]

Another question which I haven't found the answer to.

I have or will shortly have a full 35 years contributions but the state pension will be reduced as I was contracted out for about half the time. This will reduce the pension payable.

Is it possible to increase the state pension to the full amount by working more years or making additional contributions?

 

[alicat]

Is it possible to increase the state pension to the full amount by working more years or making additional contributions?

Yes. I am doing precisely that. Caveat about working more years if you are already state pension age so not paying NI.

 

[mr_cellophane]

Another question which I haven't found the answer to.

I have or will shortly have a full 35 years contributions but the state pension will be reduced as I was contracted out for about half the time. This will reduce the pension payable.

Is it possible to increase the state pension to the full amount by working more years or making additional contributions?

AFAIK you can't make up for years you were contracted out.
https://www.gov.uk/contracted-out

 

[mr_cellophane]

Clearly it depends on individual circumstances but my understanding is it is almost always beneficial. My wife will pay just below £4000 to purchase an additional five years. This will increase her SP by £1300pa. After three years Mrs P will have returned the capital investment. While none of us can predict the future I think my good lady should be OK for another +/- 20 years. Lets say she manages 18 years, after 3 years to return the capital she would get £1300 x 15 = £19500. It is as people have said a non brainer.

Thanks to @Dirk and to echo his view I spoke to the Future Pension Centre today. Friendly and knowledgeable people. To summarise this is the advice/position we have been given. Hopefully it will help others:

1. Voluntary contributions can be made at any time pre or post state pension age
2. The dates shown on the .gov website are the latest date for buying a particular year, after this date the year is no longer available to purchase
3. Each additional year purchased increases the payment by £5.13 per week
4. The pension only increases once the payment has been received

So in Mrs P's case if she pays one year before she reaches SP her weekly pension will increase by £5.13, buy five years and it is £25.65. This could all be made very clear on the .gov website and would save a lot of time and energy for staff and callers.

To be pedantic, you have not made allowance for investing the £4,000. My LV pension pot increases by around 10% each year. So she would only be £900 a year better off and wouldn't have the £4k to fall back on.

 

[PaulSB]

To be pedantic, you have not made allowance for investing the £4,000. My LV pension pot increases by around 10% each year. So she would only be £900 a year better off and wouldn't have the £4k to fall back on.

The £4k doesn't come out of a pension pot as my wife doesn't have one. I'm not taking £4k out of mine as it would cost me £1k in tax. The money comes from cash savings. After returning the capital in three years the annual return is 26%.

 

[alicat]

AFAIK you can't make up for years you were contracted out.

Yes, you can. I'm doing it. Read the link you posted to. A person who is contracted out is now contracted back in and just needs to pay more NI to take advantage of the full new state pension.