UK state pension

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Just checked my UK pension and despite having the req'd 35 years of NI contributions, the DWP website says I will need to contribute for another 8 years if I want to have the full pension of 175 GBP a week. Now I opted out of SERPS many years ago and I accept having a reduced weekly pension scheme but to be told I have to contribute for a further 8 years seems a bit confusing. Anyone else come across this anomaly?

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I also contracted out for a few years and looked at mine about 11 years ago, and was forecast the full pension. More recently I now need a few more years contributions. No idea how, but before it went up I would have got something like £143 a week, so +/-£20 less than the full pension.

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This is correct.

 

The new state pension (£175.20 per week at present, if you have contributed for 35 years) is reduced for any period contracted out of SERPS, on the basis that during that time you contributed less than others towards the state pension, so it is fair. Furthermore, you are due to a pension from the contracted out scheme, which usually exceeds the reduction.

 

Many people (perhaps a majority) were contracted out at some point, so I find it a bit surprising that this feature isn't better known. I suppose there is no advantage to the government to publicise that their "universal" pension isn't really as universal as it sounds.

 

It affected me in the same way, but I knew about it when the new scheme was introduced, and I was able to make up some of the difference with voluntary Class 3 contributions. These are a bargain if you compare expected benefits to cost. Voluntary Class 2 contributions are an even bigger bargain, but are not available to everyone.

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So, after contributing 35 years, you're entitled to £700 per 4 weeks or €805 at current rates. I don't know the amount as a contribution, but is that a good deal?

 

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2 minutes ago, LukeSkywalker said:

So, after contributing 35 years, you're entitled to £700 per 4 weeks or €805 at current rates. I don't know the amount as a contribution, but is that a good deal?

 

Normally yes, but you need to work it out for your own circumstances - UK Gov gives rates depending on your age

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To give an idea based on my actual situation as of a few mins ago when I printed off my forecast.

Current forecast £154 a week

If I contribute 3 more years I will get £169 a week

If I top up the shortfalls I could get a maximum of £175 a week

 

I have 12 years where I did not contribute enough, these vary between some and no contributions, so I intend to top up as much as possible to maximise the benefit, each additional year will give me approx £4.50 a week more. 

 

The first possible year I could top up would cost £61.20 as its only a few weeks missing, this is a must as I will get that back within 15 weeks!

The next possible year would cost £642.6 as there is a lot more missing so that would give me a "return" in 12 years

The following years all have no contributions at all, so will cost £795.6 each year I top up, and would pay for itself in around 15 years. 

 

So, depending on how long I intend to live, I intend to top up the first year, and possibly the next, so that I maximise those years. 

 

Edited to add: I have just written a cheque for the first smaller payment and will send it tomorrow (saves extra trips to the post office) as I have a few things to post, so thanks for doing this thread as I have been booted into gear to get at least 1 more complete year.

 

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Yes, it seems a good deal if you compare it with Germany where the contributions are substantial.

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I applied to get class 2 contributions and it was granted that costs for the year 17/18 and it cost 148,20 pounds

 

I will get this back with in  3 months for when I retair( if I live that long), which is an absoulte bargen, and I would advise everybody to do if they  can, its basically money for nothing.

 

Ok 805 euro per month is not a lot, but in comparison to what you put in its a steal.

 

It should be noted that the money the people put in to the  SERPS  scheme is not lost either, you will given a pension too for that part, do not forget to claim it, The UK pension system in newcastle can help you find it.

 

 

 

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On 15.4.2020, 17:21:53, LukeSkywalker said:

Yes, it seems a good deal if you compare it with Germany where the contributions are substantial.

 

These can easily be in the tens of thousands of EUR in Germany...

 

I asked at the Deutsche Rentenversicherung office during my last meet up:

For a few years of "topping up" I'd need to live to be 88 to break even!

 

What @yesterday said, work repeating : 

Compared to UK pensions, the top ups for 10 years (past) and 5 years to retirement,

would be paid back to me as a pension after less than 2 years of receiving a UK pension.

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I know, I already paid in >€100K in the German system and my employer the same amount as well. The amounts are dazzling.

 

I wonder though how the UK will be able to finance your pension scheme.

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1 hour ago, HH_Sailor said:

 

These can easily be in the tens of thousands of EUR in Germany...

 

I asked at the Deutsche Rentenversicherung office during my last meet up:

For a few years of "topping up" I'd need to live to be 88 to break even!

 

What @yesterday said, work repeating : 

Compared to UK pensions, the top ups for 10 years (past) and 5 years to retirement,

would be paid back to me as a pension after less than 2 years of receiving a UK pension.

 

The German Pension scheme can't be compared to the UK Pension scheme due to the differing amounts paid in and out. In the UK you can get £175 a week so £9100 a year. In Germany I think the amount is 48% of your final salary (or something similar) so it is more like a private pension and they also base their payouts on people living into their late 80's. So if you want to compare the two then it's like saying your final salary before you retire in the UK would be £19000.

 

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1 hour ago, LukeSkywalker said:

 

 

I wonder though how the UK will be able to finance your pension scheme.

 

This very short payback period is obviously a mistake, from the UK. If you live and work in the UK and pay normal contributions, you get your money back at about 80 years old. The only people who can get this are people who were employed in the the UK and then move aboard. Which means, its a small percentage of the overall population ( not sure I think true self employed can do it as well ) and thus it should not cost to much to finance.

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Paying voluntary class 2 to cover a year's gap in NI contributions costs £158.60 (this year). For people who live overseas, voluntary class 2 is only available to people who are working.

 

Voluntary class 3 costs £795.60 (this year)

 

In each case, the payment could result in an additional pension of about £5 per week from state pension age. 

 

So, as I stated above, both represent a bargain, and in the case of class 2, an incredible bargain. They were planning to abolish class 2 a while ago, but it hasn't yet happened.

 

The rules are complicated, an it will not be effective for everyone. However, it can be effective in some cases if you will make less than the full 35 years' contributions OR if you have a significant deduction from the new flat rate state pension due to being contracted out in the past. It helped me, but everyone thinking about this needs to understand their personal position.

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20 minutes ago, apel said:

Paying voluntary class 2 to cover a year's gap in NI contributions costs £158.60 (this year). For people who live overseas, voluntary class 2 is only available to people who are working.

 

Voluntary class 3 costs £795.60 (this year)

 

In each case, the payment could result in an additional pension of about £5 per week from state pension age. 

 

So, as I stated above, both represent a bargain, and in the case of class 2, an incredible bargain. They were planning to abolish class 2 a while ago, but it hasn't yet happened.

 

The rules are complicated, an it will not be effective for everyone. However, it can be effective in some cases if you will make less than the full 35 years' contributions OR if you have a significant deduction from the new flat rate state pension due to being contracted out in the past. It helped me, but everyone thinking about this needs to understand their personal position.

I have a few years to make up due to contracting out, I sent a cheque yesterday to make up 1 more full year (the oldest and luckily the cheapest) and will get at least another 3 before I retire. I will probably not get the full amount, but I now have a record of what I can pay and the latest I can pay each year by with the current rules.  It is a very individual thing and everyone needs to use their own circumstances as to if its worth it. 

 

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2 hours ago, SusieT said:

I have a few years to make up due to contracting out, I sent a cheque yesterday to make up 1 more full year (the oldest and luckily the cheapest) and will get at least another 3 before I retire. I will probably not get the full amount, but I now have a record of what I can pay and the latest I can pay each year by with the current rules.  It is a very individual thing and everyone needs to use their own circumstances as to if its worth it. 

 

 

not sure if I understand you right, so I will say it anyway

 

you can pay 'back' years as well I think up to 5 years, I think, so it maybe be possible to get a few more years paid now to increase your pension in the future, I found it difficult to understand and its well worth ringing  Newcastle up  to get an answer that yes it will quailify and incrase your pension. Like you said, everything depends on your own personal postion.

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43 minutes ago, yesterday said:

 

not sure if I understand you right, so I will say it anyway

 

you can pay 'back' years as well I think up to 5 years, I think, so it maybe be possible to get a few more years paid now to increase your pension in the future, I found it difficult to understand and its well worth ringing  Newcastle up  to get an answer that yes it will quailify and incrase your pension. Like you said, everything depends on your own personal postion.

Exactly, when you log on to the HMRC website you can see the full NI record, or you can  filter to see just the years that are not complete. If you expand those years it tells you how many weeks contribution was made, and how much it would cost to complete it (or, it will say its too late to complete it). There is something about if you are over 60 you can go back further than 6 years, but I just did a cheque for the first possible year to top up, then closer years can be done later. There are options to pay by DD monthly or by card, so enough choice for most people. I only sent a cheque because trying to call them right now to pay by card is not going to be easy as I would guess that being April they will have enough work plus they will be on minimum staffing, so I decided a cheque with a note would get there and they can deal with it when they can. 

All the instructions for what you need to write on the back of the cheque and in a note to them are on the website.

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If your objective is to reduce the deduction for contracting out (rather than building up towards the 35 years), it might not makes sense to pay voluntary contributions for years before 2016, as that's when the deduction was crystallised.

 

It just highlights the point that you have to understand your own position.

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7 minutes ago, apel said:

If your objective is to reduce the deduction for contracting out (rather than building up towards the 35 years), it might not makes sense to pay voluntary contributions for years before 2016, as that's when the deduction was crystallised.

 

It just highlights the point that you have to understand your own position.

Thats why I looked carefully at what I need to pay and am doing the 2 that will drop off first, and that are also cheapest. I have the years until I retire that I could pay, plus I have some of the years I have been here, which would bring me up to pretty much the maximum IF I were to pay them all which is unlikely!   

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Does anyone happen to know what whether a job seeker (receiving benefits) can pay class 2 or class 3 national voluntary insurance contributions. I can only see in the Information broschure „ unemployed not receiving benefits - class 3“.

 

Thanks for your replies.

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6 hours ago, Lindar said:

Does anyone happen to know what whether a job seeker (receiving benefits) can pay class 2 or class 3 national voluntary insurance contributions. I can only see in the Information broschure „ unemployed not receiving benefits - class 3“.

 

Thanks for your replies.

 

If you are receiving benefit, you should be getting NI credits.

 

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

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