State Pension - Gap in contribution

[Raymond Lin]

I just checked mine, it seems there is a gap in a few years in my early 20's when i went back to do my Post-Grad then Law conversion and Law School.

I have already contributed 21 years, so I only need 14 more years and if even if I aim to retire at 60, I will get to 35 years before that.

Would you pay a voluntary contribution for these 2 shortfalls? I am thinking of just do the one that is short by £364 anyway.

(I can't pay back the other earlier ones, just these 2)

 

[Quartz]

Absolutely, if you have the funds available. You never know what the future may hold.

 

[MichaelAwkward]

Just FYI in case you weren't aware, and for others, although the deadline for paying these top up contributions for more than 6 years ago has been extended to 31st July 2023 it's still difficult to get through to HMRC in order to get the transfer reference that you need to make the payments as they've been inundated by requests, although I'm sure their receipts this year will be bumper regardless.

I have a bunch of missing years from when I was at university - I can top up the oldest one where I was partially working for something like £124 but taking my age into account, I've determined this isn't worth it as I'll likely end up with a full record anyway.

In your case this looks to be the same, so I wouldn't bother. The value in these top ups is really only there for people retiring sooner and those without other sources of income in retirement. Where it's more marginal is if you may decide to retire earlier - in which case topping up those 2 years now may be better value than doing so in the future.

And of course, as always, there's nothing to say that the state pension will be the same or even exist in the future.

MSE's page has more info: https://www.moneysavingexpert.com/savings/voluntary-national-insurance-contributions/

 

[Quartz]

The value in these top ups is really only there for people retiring sooner and those without other sources of income in retirement.

You forget peace of mind and insurance. What if you take a year or two out to care for parents or children? What if you go abroad for a couple of years? What if your retirement fund is mismanaged, say someone does a Maxwell?

 

[Raymond Lin]

Just FYI in case you weren't aware, and for others, although the deadline for paying these top up contributions for more than 6 years ago has been extended to 31st July 2023 it's still difficult to get through to HMRC in order to get the transfer reference that you need to make the payments as they've been inundated by requests, although I'm sure their receipts this year will be bumper regardless.

I have a bunch of missing years from when I was at university - I can top up the oldest one where I was partially working for something like £124 but taking my age into account, I've determined this isn't worth it as I'll likely end up with a full record anyway.

In your case this looks to be the same, so I wouldn't bother. The value in these top ups is really only there for people retiring sooner and those without other sources of income in retirement. Where it's more marginal is if you may decide to retire earlier - in which case topping up those 2 years now may be better value than doing so in the future.

And of course, as always, there's nothing to say that the state pension will be the same or even exist in the future.

MSE's page has more info: https://www.moneysavingexpert.com/savings/voluntary-national-insurance-contributions/

That’s where i am stuck at the moment, i went to pay the £300 one, clicked the link, (will probably not do the £800 one) and it asks me for a long code which i’ve never seen before. A weird system, so i will try contact them in the week.

I will hit 35 years before i am 60 and i don’t expect to earn enough to retire early anyway. Retiring 10 years early living off private pension isn’t going to happen unfortunately.

 

[Hagar]

If you can you should pull in all the years you can. 35 years minimum for entitlement may not stay the same. Also while working £800 may not seem a lot but it is a months full pension when retired.

 

[MichaelAwkward]

You forget peace of mind and insurance. What if you take a year or two out to care for parents or children? What if you go abroad for a couple of years? What if your retirement fund is mismanaged, say someone does a Maxwell?

Per the link, you get free NI credits under the following circumstances:

- Caring for a child in the family: As long as you are/were between 16 and state pension age, and the family member is/was under 12 and not your child. See our separate 'grandparent's credits' guide on this for more details.

- Statutory sick pay: You are/were on it and not earning enough for a qualifying year.

- Unemployed and actively looking for work: You needn't have been claiming jobseeker's allowance, but will need to prove you were looking for employment.

- Employment and support allowance: Eligible for it, but not claiming it.

- Caring for a sick/disabled person: If it is/was for at least 20 hours a week.

- On jury service: You are/were on it and aren't/weren't self-employed.

- Wrongly imprisoned: As long as your conviction has since been quashed.

- A foster carer (kinship carer in Scotland): Since 6 April 2010.

- On statutory maternity, paternity or adoption pay: You are/were on it and didn't/won't earn enough for a qualifying NI year (additional statutory paternity pay also counts).

- Spouse of a member of the armed forces: You're married to, or are a civil partner of, a member of the armed forces and went with them on an overseas posting (additional eligibility rules apply here).

- On a Government-approved training course: You are/were on one, are over 18, and weren't sent on the course by Jobcentre Plus.

As for pension fund mismanagement, I'm pretty sure those specific funds were filled by other banks and the government? You will almost certainly have recourse in those situations. Our pensions system is thankfully one of the most heavily regulated and protected in the world.

Plus it's so easy these days to put private funds into a sensible SIPP invested in index trackers that you'd be stupid/unaware not to do so, quite frankly.

 

[MichaelAwkward]

That’s where i am stuck at the moment, i went to pay the £300 one, clicked the link, (will probably not do the £800 one) and it asks me for a long code which i’ve never seen before. A weird system, so i will try contact them in the week.

I will hit 35 years before i am 60 and i don’t expect to earn enough to retire early anyway. Retiring 10 years early not living off private pension isn’t going to happen unfortunately.

Yeah, it's a bit of a faff but at least ensures your payment ends up in the right place. If it was easier to do, you'd have people paying all sorts of money to HMRC and the overhead in dealing with them would be a nightmare.

It also ensures vulnerable people aren't paying needlessly by routing them through the future pension centre for advice first.

 

[Quartz]

That’s where i am stuck at the moment, i went to pay the £300 one, clicked the link, (will probably not do the £800 one) and it asks me for a long code which i’ve never seen before. A weird system, so i will try contact them in the week.

They give you the code and you either use it on the website or you use it as the BACS reference at the bank if the transaction exceeds your daily limit.

 

[Pipe & Slippers]

Say you get to 60 and are a few years short for whatever reason, you won’t be drawing the state pension until at least 67 (probably be 70 or more by then). Wouldn’t it make more sense to get to state retirement age, or between stopping work and actually drawing the pension, and pay for extra years then?

 

[MichaelAwkward]

Say you get to 60 and are a few years short for whatever reason, you won’t be drawing the state pension until at least 67 (probably be 70 or more by then). Wouldn’t it make more sense to get to state retirement age, or between stopping work and actually drawing the pension, and pay for extra years then?

Exactly why it makes less sense to buy full years in particular now if you're a long way from state pension age. Even if you retire early on a private pension/savings there are ways of getting NI credits as detailed above, or just from working part time.

With the partial years it's marginal and needs to be weighed up against your future plans.