nun

Here's what happened to me.

I've been paying Class 2 NI for 27 years and have 3 years of NI from when I was in sixth form college, so I had 30 years of contributions, I'm 53 years old and currently will get the pension at age 66. In March 2014 I got a letter from HMRC saying that I now qualify for full basic state pension and that I could stop making payments. I wrote back to them saying that I'd like to continue in the expectation that I will need 35 years of contributions under the 2014 Pension Act. About 6 weeks later I received my usual annual bill for Class 2 NI which I paid.....so now I have 31 years of contributions.

Editha

Not sure if it is still there. The owner died about 8 years ago. But I suppose someone else might be running it now.

Even though I've settled in Devon, I still miss North Staffs a bit. I'm planning to visit next year.

bigglesworth

I do hope they are still there although I fear you may be right. Staffordshire oat cakes! I can taste them now.

But if you are right, perhaps only we pensioners will know what they taste like?

fulwood

How can I bookmark this?

dunroving

You should be able to add this thread as a favourite, just like you probably have the BE home page as a favourite.

Just click "Favorites ... Addd Favorite" while you are reading this thread, and give it a name like "UK State Pension Thread - BE."

formula

There has been a bit of moving around in the welfare pot but they seem to have arranged it for the better now. The income based benefits bill is being capped, which allows for more changes and reductions for all these claimants.

The state pension is out of that welfare cap. They always have the option to raise the pension age again and put further conditons on who can have a state pesnion. Although many worked out years ago to not rely on a receiving a state pension.

Out of that cap too are those parents who just want some help with their childcare costs only. They will be spared having to claim the benefit Tax Credits and it's much stricter replacement Universal Credit. These parents will get their childcare help through the tax system in their wages.

I'm not sure they intend to cut the pension bill? Perhaps just aim to slow the annual increase by raising the retirement age and refusing to pay everyone a state pension?


Massive administration savings.

For the claimants of this income based benefit, UC will bring massive changes. Especially for those who presently claim the benefits Tax Credits, ESA,Income Support and housing (rent and mortgage). And 3 year sanctions for those who don't do as their told

not2old

I wonder & I do not know the answer to this ....

For a current over 65 state pensioner (A) getting & collecting the full amount (or partial) of category A state pension, with the spouse (B) under the current rules getting 60% of A's pension to the maximum allowed.

If the A pensioner tops up the extra 5-years worth of voluntary class 3A NIC of £4,450, do any of you know if the spouse on category B pension will also get a raise of 60% of the extra £5/wk of the A pensioner gets? If so, then the payback would be shorter & maybe worth doing the top up - providing they both live long enough to recoup the investment made..

new information added to the post I found the following on a web search after I first posted.

In a Telegraph article ... yet it doesn't seem to me that the spouse (B) gets any portion of the increased money the A pensioner would get while still living - or its been taken for granted or omitted?

<from the Telegraph>

"There will be a short window to take advantage of this, running for 18 months from October 12 2015 to April 1 2017.

Each additional £1 a week will cost a 65-year-old £890. The maximum top-up of £25 a week will cost £22,250. An online calculator is available at gov.uk/state-pension-topup. The payout is linked to inflation, so it will rise each year.

The Government will allow a surviving spouse or civil partner to inherit 50pc of the top-up on the pensioner’s death."

nun

For people doing Class 2 NICs for basic state pension paying the extra 5 years to go from 113GBP/wk to 148GBP/wk is a great deal. Even if you don't pay the extra 5 years you'll get a slightly larger pension.

Editha

I agree. It's a priority for us for my husband get as much of the five years paid as possible.

Editha

Reading the information on the government web site, I don't think that there is any provision for the spouse other than the 50% on death, but it isn't stated specifically.

not2old

we kicked around deferral, the payback time as well as live long & healthy.

The following illustration is an all off the wall hair brained idea of mine, so please give me some consideration - be kind ...and if you can poke holes in it, then go ahead

As an over 65, I am still not a believer. What I would like to throw out (discussed somewhere else) is as an individual living in the UK on the poor end of the scale with zero taxable income - why fork out the extra (say) 5 years at £4450 for that extra £5/wk £260/yr when I can take just £2880 put it into a stakeholder pension with the government tops up £620 to make the pension pot £3500. In the next tax year I am allowed to take 25% or £875 of the £3500 out , of which I add another £2005 to it into a separate stakeholder pension. In year 2 repeat - I could take out another 25% £875. Then put the balance in the pension account into an annuity?

On the basis the investment return in the stakeholder pension is at least equal to the yearly fee of 0.5% - 1%

Total initial cash outlay... £2880 + £2005 = £4885

Cash in hand in by year 3 is £875

Real cash outlay £4885 - £875 = £4013

Pension pot value = £5250

Tax free gain = £1237 or 30.825%

20 year 5% fixed Annuity = ~£420/yr or ~£8/wk

or pick an age 70 even 75 to go annuity - then

withdrawing £1000/yr the money will be gone in ~7yrs

information from the government

Tax relief on pension contributions
Each year you’ll receive tax relief on your pension contributions of up to 100 per cent of your UK earnings (salary and other earned income). This is subject to an 'annual allowance' above which tax will be charged (more below).

If you have little or no earnings and are in a 'relief at source' scheme, you will still get tax relief. For every £80 you contribute in a tax year, the government will contribute a further £20 until the total value of contributions reaches £3,600 for the year.

dunroving

You are more of an expert than me but there are a couple of things in your post that drew my attention - whether they are holes or just my misunderstanding, I don't know, but anyway ... I have pasted the bits below, because you already have bolded parts of your original post and it would get confusing if I bold others. Anything in bold below is a quote from your post:


as an individual living in the UK on the poor end of the scale with zero taxable income - why fork out the extra (say) 5 years at £4450 for that extra £5/wk £260/yr when I can take just £2880 put it into a stakeholder pension with the government tops up £620 to make the pension pot £3500.

Point #1: I'm not as familiar with stakeholder pension regulations as I am with SIPPs, but I think you are talking about a similar principle - the 20% "topping up" by the government. My question is does this happen if you are a non tax-payer? I think if you are a 40% tax-payer you can apply to have the additional 20%, which implies that the top-up is whatever is your marginal tax rate - if that is zero, then at some point wouldn't that catch up with you? (usually the pension provider just adds the 20% ... at some point wouldn't that somehow be linked via you NI number with the fact you don't have taxable income? If you were a regular employee on, say, just £10k a year, pension contributions wouldn't include a 20% bonus, because your "pre-tax" contributions wouldn't actually be any different than your "post-tax" contributions ... does this make sense?

In the next tax year I am allowed to take 25% or £875 of the £3500 out , of which I add another £2005 to it into a separate stakeholder pension. In year 2 repeat - I could take out another 25% £875. Then put the balance in the pension account into an annuity?


Point #2: The other thing is that I believe the government is planning a way to prevent the quasi money-laundering method you describe m which you take out 25% tax free the year after you put it in. There's an article I read about this just yesterday, if I can find it I will post a link.

[I think it may be either this article or this one. I don't have time to re-read at the moment but hopefully I am correct. If it's neither of these, take a look at the Huffington Post and it will be in there ... I know I read it in the past day or two.]

ETA: Just re-read and it is in the first article:

"I’m 55. Will I be able to pay into a pension then draw it out straightaway?

Yes and no. Financial advisers – and the tax authorities – are alert to the possibilities of “salary washing” that the new rules offer. For example, someone aged 55 or above could use their “additional voluntary contribution” scheme at work to maximise their payments into their pension – and then draw it down a year later, with 25% of it tax free. New rules are expected to limit, but not altogether wipe out, the possibility of doing this."

rebs

Is this what they call the 'pension loophole' on MSE?

The Pension Loophole: Make £1,000s

Editha

You refer to 'deferral' but what you are actually choosing for comparison is the class 3a contributions option. It may be that deferral also compares poorly with your stakeholder pension route, but that is not the comparison you are making.

I'll make the comparison with deferral:

Using your method of investing in a stakeholder pension, you will pay out a total of £4013 over three years.

At the current pension rate of £113.10 per week, £4013 would fund a deferral of the state pension for 35 weeks. You get an increase in your pension of 1% for every five weeks you defer. So 35 weeks deferral will gain an extra 7%, which is £7.92 p.w. or £411.69 p.a.

This is less than the fixed annuity you say you would buy with your stakeholder pension of £420 a year.

In fact, I think you could get a better fixed annuity rate than that at 68 years of age. I suggest you look at some annuity tables. For example, the Financial Times table currently gives a fixed annuity rate for a 70 year old of 6.72%.

Nevertheless, I still think that deferring the state pension is a better option for two reasons:

Firstly, you see a return on your investment sooner. You only need to defer your pension for 35 weeks, not put off claiming an annuity for 3 years.

Secondly and most importantly, the state pension is subject to the 'triple lock' which means it goes up by whichever is the greater of average wages, inflation, or 2.5%.

The FT annuity table gives the annuity rate for single life with 3% annual escalation at 3.969 for a 65 year old and 4.787% for a 70 year old. This is significantly less than the gain on deferral of a state pension.

not2old

yes & there are a few more ..

In that part of the NW UK which I grew up, is a place by the name of Southport, a seaside town, lots of old folks retirees there. I have been looking & tracking for a while as well as considering a buy-to-let, no, not as a slumlord - but to zone in on 'retirement residencies' & the 'what if'?

In Southport one can buy a decent over 60 one bedroom sheltered housing apartment. With a warden on site - well managed & maintained or as little (above the low) of £40k total purchase price (not shared ownership).

For the one that I am stating, from the realtor website

Additional Information
Service Charge: £912.64 each half year, made payable to 'Peverel Retirement' Ground Rent: £219.00 each half year, made payable to 'Estates and Management Ltd'

These typically rent for around £600/mth. The senior renting would be on a 3 -5 year assured lease or a lifetime lease. The tenant has to pay as applicable any council tax, electricity bills, as well as any internal in the apartment maintenance (make sure that is in the lease). The common areas, windows, roof & all other exterior maintenance is covered by the manage fee & the ground rent of approx £2400/yr - round we'll say £200/mth

For those with the cash to do this

Investment (not mortgaged) £40,000 (excluding any closing costs)

Gross rent £7200

Net rental income £4800

ROI 12%

I have researched other areas in Devon, Lymington, the Wirral for the typical 'Sheltered housing' ROI - being picky & depending on resources not less than 8% is doable.

Of course if one was to to do a buy-to-let 50% LTV, the extra cash could pay off the mortgage & be free in no time