scot47

I was ASTOUNDED when I found out how cheap this was. I paid the max at Class 2. I now enjoy my sate Retirement Pension based partly on those contributions at not much more than £100 a year.

Having been at school and university (Kirkcaldy High and Edinburgh University) with Gordon Brown. I had a word. Things have now changed ! Great to have access to the corridors of power ! I expect that I shall soon be rewarded with a knighthood.

Johnnyboy11

Worth pointing out that there is no pot of money backing your State Pension. All you have is a promise from today's Government that the future Government will honour your State Pension entitlement when the time comes, and that time keeps getting pushed out...


Government owes £5.3trn in pensions - ONS

Miss Ann Thrope

Actually that journey was covered in just one post and, as ever, our tour guide and navigator was the redoubtable Millhouse. And to think I've been accused of lowering the tone....

scot47

I see the Typo Plague has hit me again ! I STILL recommend payment of NI arrears to any who can. Examine your own situation and think seriously about it.

Pulaski

I try to not make a habit of agreeing with Mr 47, but if you get the same advice with respect to money from a Scot and a Yorkshireman, you should consider it very seriously!

scot47

I trust that my cheque is in the post

Bahtatboy

What's the nett effect of a top-up? Is it directly pro rata, ie if you top up to 30 years then you get 30/35 of the full pension, or is there a minimum entitlement (say 50% of the full pension regardless of years of contribution), and a top-up to 30 years will give you a pro rata increase from 50%?

Pulaski

You need ten years of contributions to get anything (10/35ths), but from there on it is linear, with every year of contributions adding 1/35th of an annual "full" pension. Hence the calculation of how long it takes to get back your £144 of Class 2 contributions, which if a full pension is £160/wk, then the increment for 1 year of contributions is £160×52/35, which is £237/yr for life!, which cost you £144 once. In other words you get your £144 back after only 31 weeks of retirement.

That said, there are complications in some cases, such as for years when you were "contracted out", when a year of contributions doesn't get you 1/35th of a full pension.

Johnnyboy11

Excellent post, especially the "contracted out" bit.

In my case I'll have 35 years of NI contributions by the end of this tax year, but will only receive £137 of the maximum State Pension of £164 (a 16.4% reduction) due to earlier "contracted out" years when I was an employee and contributing to a UK company pension scheme. I need to make another 5 years of NI contributions, i.e. 40 years' contributions in total, in order to qualify for the full State Pension.

Having said that, I should receive the 16.4% delta, or better, when I access my deferred company pension.

Worth also pointing out that NI contributions are mandatory for employees working in the UK, even if you already have 35 years of NI contributions. This will work out well for me, as I plan to return to work in the UK in mid-April, so I'll probably achieve the extra 5-years' contributions that I need.

This Scotsman also strongly recommends paying as many Class 2 NIs as possible, including any backdated ones (6-years usually).

Johnnyboy11

Another way of looking at the State Pension (£164.34 per week from April) is that an equivalent, index linked annuity at state retirement age would likely cost about £285,000 on today's market.

Bahtatboy

Thank you guys.