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State pension

Discussion in 'Retirement' started by susanrk, Jul 20, 2020.

  1. susanrk

    susanrk Occasional commenter

    Apologies if this has been asked many times before. I retired from teaching last Summer and am due to get my state pension in 2025. I've looked it up and will be about £10 a week short unless I 'buy back' 3 years. Is this worth doing and how do I do it?
  2. rikkitar52

    rikkitar52 New commenter

    1.how much is pay back for 3 years
    then we can do the calculation
    if u dont do it you lose 40 a month for say 20 years around 10 thousand
    so if it cost less than 10 thousand go for it and pay back
    susanrk likes this.
  3. diddydave

    diddydave Lead commenter

    You can see on the checking page which I presume is what you have done...it is unlikely you have any gaps that you can fill up now but you still have 5 years between now and 2025 so plenty of time to buy those missing three years: https://www.gov.uk/check-state-pension

    You can pay 'voluntary' contributions to buy a year.
    At the moment there are two types of voluntary (this is something the chancellor has his eye on as one of them is much cheaper than the other and can be paid by the self-employed - he gave a very big hint in his first corona press briefing that this will change) https://www.gov.uk/voluntary-national-insurance-contributions/rates

    As a self-employed person, or - as is quite often appropriate for retired teachers - an invigilator or examiner you are allowed to buy the cheaper one.

    Class 2 costs £3.05 a week
    Class 3 costs £15.30 a week

    Given that each year you 'buy' adds about £4 a week to your state pension then both are good value.
    For class 2 you would recover the cost within a year of drawing your pension, the class 3 would take just under 4 years.

    You contact HMRC and ask to pay the voluntary contributions...and that's it.
    eljefeb90, susanrk and Lara mfl 05 like this.
  4. susanrk

    susanrk Occasional commenter

    Thank you so much. Definitely worth doing though I don't qualify for the lower rate.
  5. Lara mfl 05

    Lara mfl 05 Star commenter

    Rememer also, when doing your calculations. one needs only 26 'qualifying weeks' in a year, so you may only need a few week's worth. I know because of my supply I found often I'd got 22- 25 weeks missing in a year, so not that much to make up. When you actually get thro' to a 'person' I found them really helpful with their advice.
    susanrk likes this.
  6. susanrk

    susanrk Occasional commenter

    Can you pay the contribution as a lump sum annually do you happen to know?
  7. FullTiltBoogie

    FullTiltBoogie New commenter

    Yes, you can either pay by monthly direct debit or in a lump sum (about £780 for class 3 from memory). If you ring the HMRC on 0300 200 3500 they give you the 18 digit number you need to quote when making a bank transfer. They were very quick and helpful when I rang. This is the relevant web page: https://www.gov.uk/government/organ...rance-enquiries-for-employees-and-individuals
    susanrk likes this.
  8. diddydave

    diddydave Lead commenter

    You can pay it annually and you can even wait a few years before doing so. (Up to 6 years): https://www.gov.uk/voluntary-national-insurance-contributions/deadlines

    In that way you can be sure you need to. Suppose you get a part-time job or start up a business etc etc, you may find that you contribute enough without having to rush to buy the next 3.
    susanrk likes this.
  9. ikon66

    ikon66 Occasional commenter

    So I’m 62, pension age of 66 I can wait until I’m almost 66 and decide if I want to pay the 4 years it says I’m short of full pension?
  10. diddydave

    diddydave Lead commenter

    Exactly...though to get the lower class 2 ones you'd need to let HMRC know that you are one of the groups that would qualify to pay it now. They may get shirty if you tried to tell them you were self-employed in 4 years time but didn't inform them at the time!
    susanrk likes this.
  11. ikon66

    ikon66 Occasional commenter

    I wouldn’t qualify for lower payments but doing the maths I’d be better off in the long run depending on how long I’d live after 66. Never really considered it but with interest rates so poor it maybe a better investment of just over £3000
    eljefeb90 likes this.
  12. eljefeb90

    eljefeb90 Senior commenter

    Definitely a wise investment. If you die at 67, tough tamales!
  13. JanE60

    JanE60 New commenter

    Seek advice as some years are cheaper than other years when it comes to "buying"!
    susanrk and ikon66 like this.
  14. emerald52

    emerald52 Star commenter

    @eljefeb90 if you’re dead it won’t matter!
    eljefeb90 likes this.
  15. Dunteachin

    Dunteachin Star commenter

    I got a breakdown of what I would have to pay, and worked out that I wouldn't see any profit from my investment until I'm about 73.
    It all depends on how long you live, obviously.
    I get my state pension next year.
    ikon66 likes this.
  16. diddydave

    diddydave Lead commenter

    Really?...I had it in a much shorter time frame:
    Class 2 costs £3.05 a week
    Class 3 costs £15.30 a week

    Given that each year you 'buy' adds about £4 a week to your state pension then both are good value.
    For class 2 you would recover the cost within a year of drawing your pension, the class 3 would take just under 4 years.
  17. stopwatch

    stopwatch Lead commenter

    ..... unless you get yourself a job as an invigilator? Assuming that there are still going to be exams and that invigilation will still happen, it is worth looking at.
  18. lizziescat

    lizziescat Star commenter

    Indeed, I worked on the basis that an investment of about £3000 over four years would ‘pay out’ a guaranteed index linked return of over £ 800 p.a for life .
    I couldn’t find anything close to that in any other savings/investment scheme.
    and I’ll ‘break even’ well before I’m 70
    @Dunteachin I m guessing you’re about the same age as me so feel free to PM me for more specific details if you wish.
    eljefeb90 and Lara mfl 05 like this.
  19. Dunteachin

    Dunteachin Star commenter

    Thanks, Lizzie. I have notes and calculations from a phone call, last year, to the State Pension people. The chap told me which years I could buy back, and how much it would be for each year.

    All I have to do is phone HMRC and set it up.

    I haven't done it, yet. Indecision crept in...

    I'll have a re-think.
    lizziescat and Lara mfl 05 like this.
  20. lizziescat

    lizziescat Star commenter

    Ahh, perhaps the difference.
    I didn’t buy back any years, - ie plugging gaps in my working life record that wouldn’t have made any difference to my pension as I had over 35 years anyway. But what I did buy were 4 years after I retired by making voluntary contributions for the years of the new state pension ie from 2016 - 2020.

    Have you enquired whether you are eligible for this? Although if you have worked in any of those years since retiring from teaching (I’m assuming you have) and thus paid NI by that route then you’re not eligible as you have contributed to the new state pension via that route.

    edit: you have a PM
    Last edited: Aug 4, 2020
    Lara mfl 05 likes this.

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