Will more years increase State Pension estimate?

[MyNameIsUrl]

A friend has 42 years contributions and an estimate of £137 per week. The estimate is based on contributions up to 2015/16. He was contracted out for part of his working life.

As he has now two more years contributions (he is still working) will the amount go up? And will it keep going up if he makes more contributions?

[Alaric]

As he has now two more years contributions (he is still working) will the amount go up? And will it keep going up if he makes more contributions?

I think £ 137 is the maximum which I think is earned by 30 years. The contracted out benefit will be in a private scheme somewhere.

[mc2fool]

A friend has 42 years contributions and an estimate of £137 per week. The estimate is based on contributions up to 2015/16. He was contracted out for part of his working life.

As he has now two more years contributions (he is still working) will the amount go up? And will it keep going up if he makes more contributions?

Yes and yes. If the "starting amount", which is calculated on contributions up to 5-Apr-2016, is less than the full new state pension amount, currently £159.55, then any additional contributions from 6-Apr-2016 onwards will increase the state pension, up to the full new state pension or reaching state pension age, whichever comes first.

https://www.gov.uk/new-state-pension/how-its-calculated

[mearnsfool]

If we take your friends numbers for 2016 2017 and inflate them to this tax year the pension will increase to approx £140.43 that is basically a 2.5% inflation increase.

You advised they have two further years to contribute. That could be 2017 / 2018 and 2018 / 2019 or it could be he is working 2017 / 2018 just now and he has two further years to work after that.

Each year worked gives a further £4.55 per week state pension for each further year worked. Therefore if he has two years to contribute that increases their state pension to £149.53 a week and if they have a further 3 years to work including this year that would equate to approx a week £154.08 state pension.

In all cases the last year they can contribute NI to their pension is the April 5th before their state pension age.

Therefore it looks if they will get a state pension a bit below the maximum amount of the new state pension today of £159.55 a week. Their occupational pension will include a further sum to make up for the contracted out period. They will of course get further inflation increase of which 2018 / 2019 will increase the amount by 3%.

I suggest they log on to their personal tax account and they will get an up to date number there.

[earlsgate]

based on my own experience with similar numbers and remaining years of contributions to be made, I would say your friend will get around £148 if the 2 remaining years are paid in.

spoke to a retired friend of mine recently, who is 61 and has worked in education, as suspected he seemed totally unaware of the contracting out, and its reducing his pension payout. Seemed to think it was really unfair, and did not realise it was down to having made smaller contributions to NICs as he paid into his work scheme.

At least my bad news means he could do something about it in the last 4 years even if he were to be self employed and paid voluntary contributions?