State pension qualifying years

[LondonPM1]

Why bother it’s like peanuts you get back


Sent from my iPhone using Contractor UK Forum

The state pension of 120 a week is hardly peanuts - Everyone should be buying years if they can or need to

[TheDogsNads]

The state pension of 120 a week is hardly peanuts - Everyone should be buying years if they can or need to

If they need to yes. No, they shouldnt if they can without considering several things.

If you have been contracted out, buying credits may not improve your State Pension 1 penny. You should discuss with DWP first.

If you have an occupational pension, you need to be aware if you buy credits which result in both your State Pension and occupational pension putting you over the income tax threshold, you will lose 20 odd percent to tax, straight off the bat.

Effectively, that might mean if you pay, I dont know, 750 quid for a year's credit, you could potentially only get the value of around 500 quid's worth of that credit after tax added to your State Pension.

I think at current rates, a year's NIC's adds about £4.50 a week to your State pension before any tax due.

[cwah]

I think at current rates, a year's NIC's adds about £4.50 a week to your State pension before any tax due.

Definitely worth it because I got this £4.5/week for free because I don t pay for NI.


And if I can accumulate without having to pay for anything for 35 years, I cumulate to £175/week.

I wouldn t say no to that. And it definitely worth the effort

[cwah]

Or another to put it to light, £175/week is £9450/year.

So if you live to 77 years you already get £94k, which is not a small amount anymore. And it's adjusted to inflation as well!

Would be stupid not cumulating because 1 year feels too small.

[escapeUK]

My salary was on 2017-18: £8,160
The threshold salary to be a qualifying year (Primary theshold) is £680/month or £8,160 (so exactly my salary)

Just want to pick up on this point as its not correct. As shown in the graphic in your post its not the thresholds primary £9500 or secondary £8788 that make a year qualify - these are trigger points for employer NI (secondary) and employees NI (primary). Its the lower earnings limit you have to look for, this is the level above which a year would qualify. For 20/21 this is £120 per week, so £6240.

Those who earn between the lower earnings limit and the primary threshold: this group is ‘credited’ with NI contributions towards their NI record but do not have to actually pay employees NICs. Personally I pay upto secondary threshold as that means my company does not pay employers NI either!

[TheDogsNads]

Or another to put it to light, £175/week is £9450/year.

So if you live to 77 years you already get £94k, which is not a small amount anymore. And it's adjusted to inflation as well!

Would be stupid not cumulating because 1 year feels too small.

You're ignoring the tax element if, as I mentioned, you have a State Pension and an occupational pension.

For 2020/ 21, it costs just over 15 quid a week, times 52 to buy a year's NI qualifying contributions. Earlier years are a bit less due to the NI rate in force at the time.

This means you would pay about £780 for the year. However, when you have a State pension and occupational pension and added together, they take you over the income tax threshold, you will lose roughly 25% of the value of the £780 contribution due to income tax when you draw both pensions.

Bear in mind although the income tax threshold will ultimately rise with inflation, so too will the amount of the State Pension and perhaps, even the occupational pension.

If you are a younger person who's retirment date is years in the future and you have years missing from your NI record, it is probably best to buy these while you can. If you are close to your retirement date, have an occupational pension and have recent missing NI contribution years, it may not be that beneficial buying those extra years.

That's what Im saying, you need to look at your circumstances and decide whether it is worthwhile.

[cwah]

You're ignoring the tax element if, as I mentioned, you have a State Pension and an occupational pension.

For 2020/ 21, it costs just over 15 quid a week, times 52 to buy a year's NI qualifying contributions. Earlier years are a bit less due to the NI rate in force at the time.

This means you would pay about £780 for the year. However, when you have a State pension and occupational pension and added together, they take you over the income tax threshold, you will lose roughly 25% of the value of the £780 contribution due to income tax when you draw both pensions.

Bear in mind although the income tax threshold will ultimately rise with inflation, so too will the amount of the State Pension and perhaps, even the occupational pension.

If you are a younger person who's retirment date is years in the future and you have years missing from your NI record, it is probably best to buy these while you can. If you are close to your retirement date, have an occupational pension and have recent missing NI contribution years, it may not be that beneficial buying those extra years.

That's what Im saying, you need to look at your circumstances and decide whether it is worthwhile.

Fair point for occupational pension. I don't have that and only use SIPP, which I can manage the withdrawal rate in order to remain below the taxable rate.

So could be different with occupational pension but not for the one without

[cwah]

Ahhh I need help with all this bureaucracy...

I called the National insurance first (National Insurance numbers - GOV.UK) to explain that I paid above the Lower Earning Limit so I should be entitled to basic state pension (Rates and allowances: National Insurance contributions - GOV.UK)

Then they told me I have to contact the pension advisory instead (Contact the Pension Service - GOV.UK). After 3 calls to different people and many hours wasted, the guy told me I have to WRITE them an MAIL to make a request to this department:

National Insurance Contributions and Employers Office
HM Revenue and Customs
BX9 1AN
United Kingdom

So I sent a mail about 6 weeks ago, and found out this address is for non UK resident (I am UK resident): National Insurance: non-UK residents - GOV.UK


So far, they still haven't answered me. Didn't mail me back. Didn't call me back. Didn't email me back.

What should I do?

[Lance]

What should I do?

go here Citizens Advice

[TheDogsNads]

Ahhh I need help with all this bureaucracy...

I called the National insurance first (National Insurance numbers - GOV.UK) to explain that I paid above the Lower Earning Limit so I should be entitled to basic state pension (Rates and allowances: National Insurance contributions - GOV.UK)

Then they told me I have to contact the pension advisory instead (Contact the Pension Service - GOV.UK). After 3 calls to different people and many hours wasted, the guy told me I have to WRITE them an MAIL to make a request to this department:

National Insurance Contributions and Employers Office
HM Revenue and Customs
BX9 1AN
United Kingdom

So I sent a mail about 6 weeks ago, and found out this address is for non UK resident (I am UK resident): National Insurance: non-UK residents - GOV.UK


So far, they still haven't answered me. Didn't mail me back. Didn't call me back. Didn't email me back.

What should I do?

You send them a copy of the original letter plus a follow up demanding a response. Send it guaranteed next day delivery or first class signed for. Keep the receipt and take a screenshot of confirmation of delivery from the Royal Mail site after the relevant delivery date.

You've just got to keep on at them. one of their tactics is to ignore you until you give up. You must not.