Retiring part way through a tax year

[puffster]

What level of earnings is required to add another year of NI contributions to the state pension? I ask because I am hoping to retire early on in the new tax year so I will only have a months worth of earnings. If it is too small, will I be offered the option to do some kind of top up to make up a full years NI contribution?

Regards, Puffster

[swill453]

That was asked and answered recently viewtopic.php?f=30&t=2887&start=20#p30970

You can make voluntary contributions, I'm not sure whether you'll be "offered" the opportunity or whether you have to DIY.

Scott.

[mc2fool]

Here you go: Rates and allowances: National Insurance contributions

You may also find useful: Voluntary National Insurance

However, before you start, if you haven't already, I recommend you Check your State Pension. You can do it online, but even if you do I'd recommend you also call the Future Pension Centre and ask for a statement to get it on paper.

The transition from the old to new state pension systems is complex and, if you haven't checked already, you may find either that there's no point in adding any more or, conversely, that you may need to add more than you thought to get the full new state pension.

Having done that, then pose your question to them, in writing, again to get an answer on paper.

It used to be the case that if you left employment and didn't take up new employment they'd write to you about your NI options, but I have no idea if they still do that.

[mc2fool]

BTW, I don't believe it's as simple as just multiplying the weekly lower earnings limit by 52 and seeing if you've earned more than that in the period you were working.

"There are some other complexities to the system. If you earn at least £112 a week - £5,824 a year - in a single job, that year will count towards the State Pension.

However, if you have two jobs and earn £56 a week in each - which still amounts to £5,824 over the whole year - you can’t combine the two together for National Insurance purposes.

That means you won’t be treated as having paid National Insurance and won’t be building up your NI record for that year." https://pensionslatest.blog.gov.uk/2015 ... e-pension/

That implies it's not just about the total amount.

[swill453]

That implies it's not just about the total amount.

True, but the OP said they earned one month's salary from one job. If that happened to be more than £5,824 then I think it will count.

Scott.

[mc2fool]

True, but the OP said they earned one month's salary from one job. If that happened to be more than £5,824 then I think it will count.

I very strongly recommend that the OP gets that confirmed (or otherwise) in writing and for his specific case.

[puffster]

Thanks for the replies, I was hoping not to have to contact the DWP but the documents referenced are unclear (to my mind). I shall add it to my to do list.

Regards, Puffster

[tjh290633]

What level of earnings is required to add another year of NI contributions to the state pension? I ask because I am hoping to retire early on in the new tax year so I will only have a months worth of earnings. If it is too small, will I be offered the option to do some kind of top up to make up a full years NI contribution?

Regards, Puffster

Usually the year in which you retire does not count for NIC purposes. They only use the last complete year.

That's if you have reached state pension age. There are means whereby you can add extra years if you are short of the full number required.

TJH

[Fluke]

However, before you start, if you haven't already, I recommend you Check your State Pension. You can do it online, but even if you do I'd recommend you also call the Future Pension Centre and ask for a statement to get it on paper.

The transition from the old to new state pension systems is complex and, if you haven't checked already, you may find either that there's no point in adding any more or, conversely, that you may need to add more than you thought to get the full new state pension

I've just done this, the online statement tells me that my weekly estimate based on my NI record to 6/4/16 is £135.39 a week, it tells me that with another 5 years contributions I could get the maximum of 155.65 a week, but it also tells me that I have 36 years of full contributions. I thought it only had to be 35 to get the full pension. I'll wait for the paper statement and then put the question to them in writing.

[DrBunsenHoneydew]

That will likely be because some (6) of those 36 years were contracted out because you were paying into another pension scheme, and don't carry full value for the state pension. So you need another 5 to make 35 full-value years.

Alternatively, there may be a mistake - there is a news item today about errors in the online quotes that have been given out.

[mc2fool]

I've just done this, the online statement tells me that my weekly estimate based on my NI record to 6/4/16 is £135.39 a week, it tells me that with another 5 years contributions I could get the maximum of 155.65 a week, but it also tells me that I have 36 years of full contributions. I thought it only had to be 35 to get the full pension. I'll wait for the paper statement and then put the question to them in writing.

A common misconception due to not having read all the blurb provided

You've been contracted out at some point, and your COPE, which you can see by scrolling down the online page and clicking on how contracting out has affected your pension income, will be at least £20.26.

If it is exactly £20.26 then your "starting amount" for your pension has been calculated under the transition rules for the new system, being the max. of 35 years * £155.65/35 (i.e. £155.65) minus the cope of £20.26. If it is more than £20.26 then your "starting amount" for your pension has been calculated under the old system, being the max. of 30 years * £119.30/30 (i.e. £119.30) plus £16.09 of additional state pension.

Either way, that's now irrelevant. Your "starting amount" at 6-Apr-16 is £135.39 a week and as that's less than £155.65 you can keep adding additional years (irrespective of how many years you've already got), with each one getting you an extra ~£4.45pw, until you reach £155.65 or the year before state pension age, whichever comes first. (All figures current year ones.)

[mc2fool]

That will likely be because some (6) of those 36 years were contracted out because you were paying into another pension scheme, and don't carry full value for the state pension. So you need another 5 to make 35 full-value years.

Alternatively, there may be a mistake - there is a news item today about errors in the online quotes that have been given out.

Yes, it's 'cos he contracted out, but no, that's not the arithmetic, it's a lot more complex than that.

Do you have a link to that news item? The online system still is in "beta" and I've always recommended folks to get a paper statement, but I'd still be interested in seeing that article...

[DrBunsenHoneydew]

It was in the paywalled Sunday Times but see this http://citywire.co.uk/new-model-adviser/news/millions-hit-by-govt-state-pension-forecasting-tool-error/a993805

[mc2fool]

Thanks, although the article seems to be conflating a couple of different, albeit related, things (as well as using out-of-date terminology, like RDA).

One is the apparent cockup in the revaluation rates used by the tool for GMPs for some people, but then HMRC goes on to talk about the reconciliation of GMP amounts (which is something that should be completed by 2018) making it sound like it's all the pension schemes fault! Typical ...

[Fluke]

If it is exactly £20.26 then your "starting amount" for your pension has been calculated under the transition rules for the new system, being the max. of 35 years * £155.65/35 (i.e. £155.65) minus the cope of £20.26. If it is more than £20.26 then your "starting amount" for your pension has been calculated under the old system, being the max. of 30 years * £119.30/30 (i.e. £119.30) plus £16.09 of additional state pension.

Either way, that's now irrelevant. Your "starting amount" at 6-Apr-16 is £135.39 a week and as that's less than £155.65 you can keep adding additional years (irrespective of how many years you've already got), with each one getting you an extra ~£4.45pw, until you reach £155.65 or the year before state pension age, whichever comes first. (All figures current year ones.)

Thanks mc2fool it was actually more so would have been calculated under the old system. Makes sense now. Good links