Pulaski

From what I have read, as far as I can tell, the contracted out years don't count, so the number of qualifying years is: the number of years worked with NI paid - the number of years contracted out + the number of years of voluntary contributions.

As I was, as far as I remember, contracted out for 12 years, so I think I can keep on contributing beyond 35 years to increase my pension, and I would therefore need to reach 47 years (years worked with NI paid + the number of years of voluntary contributions) to get a "full" pension.

spainrico

Thanks folks, especially CapnBilly, very good feedback. It looks like it is worth paying in the extra five years for which I have a quote from DWP and hopefully I will live long enough to get the return.

tebo53

I have a similar story as you Fred and was contracted out for many years until I received a letter from the government advising it was in my best interest to "opt back in" i was also surprised as to how much I was to receive each 4 weeks which is £817 (£10,621)

Fredbargate

Fred & tebo it's interesting to see those figures because I have never been able to calculate them myself.

I recieve £12,035 by combining my UK and Gibraltar entitlements

bobd22

My understanding is that while contracted out (military and Police) then the NI contribution was reduced by 1.5% it is for this reduction in NI that the newer single tier pension is reduced. Under the previous state pension there was no reduction. I believe reason for that is under old state pension if that was sole income then it could be topped up by benefits, new single tier pension rolls all into one. Of course you can't pay into SERPs if you are contracted out.

spainrico

This seems to confirm this thread's conclusions

STEVE WEBB: Buying top-ups and paying missing NI to boost state pension | This is Money

stevesainty

I believe that, for the moment anyway, you do not have to make the extra contributions until just before you receive your state pension. You can just put aside the extra contributions and pay them in in a lump sum at the end. This way you can keep your money, just in case!

You will have to keep a watch on the government changing their minds though.

In my case, and if my calculations are correct, I can pay in six years worth of extra contributions, 3,665 GBP which I will recoup if I am still alive in my 6th year of collecting my state pension.

I stopped paying NIC in 2012 and I will receive my state pension in 2022. I was contracted out for 30 years in the Fire Service.

bobd22

I think you would still not get the full new pension Steve as you would be deducted for the 30 years contracted out. Even those who thought by paying SERPs they would improve state pension, are now finding they only get extra pension from SERPs if their SERPs take them over the current £155 single tier pension.other than that SERPs are rolled into the pension.

CapnBilly

Not sure about your calculation Steve, the figure you quote is for 5 years contributions, not 6, and payback is always just under 4 years at basic tax rate, and just over 5 years at top rate.

stevesainty

Thank you CapnBilly, my main point though was to highlight the fact that you can put off the decision to pay the extra contributions until nearer the time of your receipt of the state pension.

bobd22

Interestingly just looked at that link and checked my NI contributions record. It shows up untill 1975 I had 6 full years contributions followed by full years contributions until 2012 when I retired age 58. The reason that the first years contributions are interesting is that from my state pension forecast I am being deducted maximum amount from the new pension as due to government pensions I have been contracted out. However surely that depends how they count up your NI contributing years. Up until 1975 in the military unless you served 22 years you were not entitled to a pension so surely pre that you could not be contracted out? So surely given I have 43 years fully paid NI contributions if they count from 1969 per their records for my first 35 years contributions I have 6 years paid non contracted out followed by 29 years at contracted out rate? It would seem they are taking the beneficial to DWP route of counting only the last 35 years contributions which seems unfair?

CapnBilly

It doesn't really work like that. SERPS started in April 1978, and that stage companies could choose if they wanted to contract their scheme out, in which case they had to guarantee your minimum pension. You don't lose out because you are guaranteed the minimum state pension providing you have sufficient years. However, if you were contracted out for a long period of time, then your pension less COPE amount will probably be quite low, in which case you will receive the minimum anyway. In addition, if your employer didn't choose to contract out straight away there may be a short period when you accrued some SERPS. So in my example above I receive about £2 a week SERPS even though I was in the same contracted out scheme for about 5 years before SERPS started, and over 20 years overall.

You can tell by checking your starting pension, if it's more than the basic rate (at the date of the estimate) then you've also received some SERPS. In other words any SERPS you contributed at any time is added to the basic pension you are awarded.

bobd22

No it's not SERPs I am talking about. I have had a pension forecast which shows a reduction as you say because I have service pension, it explains that the reason for this is because of reduction 1.5% in NI contributions as in a contracted out pension scheme. Ok but pre 1975 in the forces you only got a pension if you served 22 years, serve 21 no pension etc. That changed in 75 and again as you say in 78 when they brought in a preserved pension for any service over 2 years. So one assumes at that point we paid the reduced NI? Be it from 75 or 78, I joined up before that. My NI record shows that I have 6 years full contributions up to 1975. So from their explanation of reduction due to reduced NI contributions doesn't take account that my state pension should be calculated 29 years on reduced NI contributions and 6 years in full contributions. If they look at overall payments . But before 1975 no one could predict I would complete a pensionable engagement you could only sign on for non pensionable engagements at that time and had to get promoted to sign on further. I find it quite interesting but not surprising that government departments always base calculations to benefit the government. They changed annual government pension increases from RPI to CPI but when it's for money into government coffers I.e. repaying student loans rail fare increases they use RPI the historically higher rate.

CapnBilly

But it doesn't matter because even if they did that your starting pension would still only be the basic state pension plus any accumulated SERPS as I explained. The only difference might be that your starting pension less COPE might be a bit higher. The difference between contracted out and in is reflected in SERPS. In terms of calculating your basic state pension, it doesn't matter whether they are contracted out or in, it's the number of years.

bobd22

Thanks for explanation still confused lol.