New State Pension Query

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kernowp

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I have a query about the New UK state pension arrangements. I understand that the standard amount of this pension is £164.35 pw. On checking, I find that my predicted pension is £151.92 pw. But the government website also says that I need to continue to make NI payments and, based on my current contributions, my state pension would be 128.44 pw.

The same website also confirms that I have 37 years of full contributions.

I am 61 years old, an early retiree with an occupational pension of about £40k pa. I understand that I was contacted out for some of my employment and that my COPE (contracted out pension equivalent) is £94.41 I don’t understand how my COPE contributes to my current or future occupational pension.

Although I have 37 years of full contributions, I have “not full” years for 2009/10 and 2010/11 when I worked abroad. Also “not full” from 2013/14 when I retired.

Since retirement I have a small self employed ‘hobby’ income from photography on which I do not pay tax as expenses exceed income. I could pay class 2 NI contributions, but have not.

I presume that my maximum is lower because of the time that I was contracted out. Why does the government website say that I have to continue to make NI payments to receive the maximum of £151.92 although it also confirms that I have more than 35 years contributions?

If this is correct, what do I have to do to make up the position? I think that I have a number of options but clearly want to make up the difference in the most cost effective way.

1. Making up payments for the 2 missing years when I was abroad (£689 and £626 respectively).
2. Making up payment for 2013/2014 which is quoted at £704.
3. Making back payments of class 2 NI for 2014 onwards (Government website does not give a figure to make up payment here – is this because I could still back pay the class 2 contributions?).
4. Paying class 2 NI for 2017/18
5. Paying class 2 NI until state pension age.

Any advice appreciated.
 
Thanks for replying Marc and sorry for getting it wrong. The link you sent has far more information than I have found so far so I will review it carefully to see if it answers my questions before posting again in the correct place.
 
kernowp said:
I have a query about the New UK state pension arrangements. I understand that the standard amount of this pension is £164.35 pw. On checking, I find that my predicted pension is £151.92 pw. But the government website also says that I need to continue to make NI payments and, based on my current contributions, my state pension would be 128.44 pw.

The same website also confirms that I have 37 years of full contributions.

I am 61 years old, an early retiree with an occupational pension of about £40k pa. I understand that I was contacted out for some of my employment and that my COPE (contracted out pension equivalent) is £94.41 I don’t understand how my COPE contributes to my current or future occupational pension.

Although I have 37 years of full contributions, I have “not full” years for 2009/10 and 2010/11 when I worked abroad. Also “not full” from 2013/14 when I retired.

Since retirement I have a small self employed ‘hobby’ income from photography on which I do not pay tax as expenses exceed income. I could pay class 2 NI contributions, but have not.

I presume that my maximum is lower because of the time that I was contracted out. Why does the government website say that I have to continue to make NI payments to receive the maximum of £151.92 although it also confirms that I have more than 35 years contributions?

If this is correct, what do I have to do to make up the position? I think that I have a number of options but clearly want to make up the difference in the most cost effective way.

1. Making up payments for the 2 missing years when I was abroad (£689 and £626 respectively).
2. Making up payment for 2013/2014 which is quoted at £704.
3. Making back payments of class 2 NI for 2014 onwards (Government website does not give a figure to make up payment here – is this because I could still back pay the class 2 contributions?).
4. Paying class 2 NI for 2017/18
5. Paying class 2 NI until state pension age.

Any advice appreciated.
Click to expand...

I'm no expert but I've done a fair bit of reading on this topic recently so I'll add my two pence for what it's worth;

I understand that the standard amount of this pension is £164.35 pw. based on my current contributions, my state pension would be 128.44 pw.
Click to expand...

With each qualifying year worth around £4.70 a week to the pension, it sounds like you only have around 27 contributions that are being contributed towards the 35 years needed for the full 164.3 amount?
So you could be about 8 years short at the moment.


I presume that my maximum is lower because of the time that I was contracted out. Why does the government website say that I have to continue to make NI payments to receive the maximum of £151.92 although it also confirms that I have more than 35 years contributions?
Click to expand...

I would call the Pension department and double check the facts and your records. The new government gateway website is in BETA mode and still prone to inaccuracy.
It could just be that the website records all 37 years of your contributions by default, but in reality, the contracted years won't count towards your new uk state pension.


1. Making up payments for the 2 missing years when I was abroad (£689 and £626 respectively).
Click to expand...
If you were working abroad, you should be eligible to back-pay the years at the lower Class 2 rate of contributions. These are less than £3 a week, so will be around £150 per year for each of the two years.
The government website is in BETA mode and by default lists all 'not full' years eligible to be back paid as eligible under the higher class 3 rates, even if they are eligible for the lower class 2.

Also, if you worked those 2 years abroad in Ireland or any other EU country, you'll be able to claim a very small pro-rata pension from that country.


2. Making up payment for 2013/2014 which is quoted at £704. Since retirement I have a small self employed ‘hobby’ income
Click to expand...
If you became self-employed immediately after retiring, then you should be able to make up payment for this year at the Class 2 self-employed rate, which again, at less than £3 a week, will be a lot less than the quoted £704 which I assume is the default class 3 unemployed rate.

3. Making back payments of class 2 NI for 2014 onwards (Government website does not give a figure to make up payment here – is this because I could still back pay the class 2 contributions?).
4. Paying class 2 NI for 2017/18
5. Paying class 2 NI until state pension age.
Click to expand...

Is it possible that the government website hasn't given a figure to make up 2014 onwards because it's unaware that your circumstances changed?
If self-employed all this time, then yes I believe that you can back-pay Class 2 NI contributions for these missing years.
Back-pay the earlier years first, as the rates are slightly cheaper. For example 2013-14 tax year they were 2.70 a week. But 2018-19 tax year they are 2.95 a week. So that's a £13.00 difference for the full year.
 
Lisboa. Thanks, I am getting great advice here despite being on the wrong site! I am responding for the sake of completeness.
I think that the contracted out years count for less, but there does not seem to be a transparent way of calculating this other than accepting the figures from the website. I found a 2016 article in the Telegraph which is similar to my situation albeit the figures are slightly out of date. This quotes
  • 60-year-old male with 40 qualifying years of National Insurance payments.
  • Contracted out whole period from 1978 – 2016
  • Reaches state pension age in 2022, so at 6 April 2016 had 6 yrs until state pension age.
  • His starting amount is £119.30 - this is full basic state pension, no additional state pension.
  • This is less than the full new state pension of £155.65 a week.
  • For each qualifying year up to state pension age he can earn £4.45 per week of new state pension.
  • So in 6 years he can earn an extra £26.70 giving him a total state pension at state pension age of £146 per week. This is £9.65 per week less than the full new state pension.
​
So, in my position, it looks like I can accrue more pension by electing to pay voluntary class two contributions for 2017/18 (tax return not yet submitted) and onwards to April 2023 (My pension date is May 2023). This will give 6 years. Additionally, I will look to back pay two year's voluntary contributions which should take me above the maximum. I will try to confirm this with HMRC next week.
​
 
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