Pickled Pension Advice
This is a guest post by Riz Din as part of Speaker’s Corner Sundays.
Please pass this information on to anyone you know who has incomplete National Insurance (NI) payments over the past six years:
- Under the current National Insurance (NI) regime you can make up for incomplete payments going back up to six years. It currently costs £421.20 to buy a missing year of NI contributions but the government has cottoned on that in terms of returns on investment this represents too good a deal, and from April 6 the yearly contribution will be increasing by almost 50% to £626.60.
While around 15% of men fail to qualify for a full state pension due to insufficient NI contributions, this figures rises to a staggering 70% for women.
Because each person’s circumstances are different please read this article in the Daily Telegraph and contact the Pensions Advisory Service for further advice.
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Filed in: Economics,Sex equality
I think this information could be particularly relevant for:
- Older folk who have recently been made unemployed and haven’t claimed unemployment benefit (your NI gets paid for you by the state when you sign on).
- Expat Brits abroad who have neglected their NI contributions, deciding to deal with the issue when they get back. You still can, be it’ll cost a lot more.
- Folk who have left the workplace for family reasons.
It is probably a good deal for younger people with gaps in their NI record but perhaps less so, because from April 2010 the pensions rules are being overhauled and the number of qualifying years for the full basic state pension (which is currently £90.70 a week) are being slashed to 30, so you’ll be able to handle a few gaps in your NI record without detriment. The current requirement for a full basic state pension is 44 years for men and 39 years for women. It’s not all good news however, because the pension age is being raised.
There are many other changes, and it can get pretty complex, so do contact the Pensions Advisory if you are not sure about something.
Thanks for this Riz. Maybe it is a lack of understanding on my part, but it seems to me that National Insurance is becoming increasingly pointless as a stand-alone tax. What does it achieve? Why not just merge N.I. employee contributions with income tax?
I agree Rumbold. Perhaps the reason is that it leaves less room for stealth taxes!
Do you think the state pension will still exist in 25 yrs time?
Beavis – hard to say. When looking that far ahead, the Mad Max films and Waterworld provide the best guidance.
Riz, this is priceless advice. I know a few people who were on the wrong end of incomplete or nonexistent NI contributions, including the Chairwoman. Can I just add that spouses can make contributions for their non-working spouses, which would have solved the Chairwoman’s problem?
Any Pickly husbands whose wives do not work (and vice versa) should look into this, as if (heaven forbid) something happened to you, making the payments could make the difference between your wife having a full state or widows’ pension and having bugger all.
My widows’ pension was indeed virtually bugger all, but my retirement pension is eighty per cent of the full amount (which in itself is hardly generous) as my own contributions were added to the Chairman’s contributions.
Anyway, Pickly husbands, make sure you pay as many contributions as possible.
Riz, i’m liking your answer, i’ve already got the leather trousers…
Any Pickly husbands
lol!?
the Mad Max films and Waterworld
I’m gonna get my motorbike souped up.
Have you taken the training wheels off yet? Heh.
that’s it Rumbold – at the next PP meetup I’m gonna run you over
Katy, CW – it is a bit of a con job, me thinks, that the government hasn’t advertised this opportunity more widely. I understand they are in a dire fiscal situation, but we are talking about people in potential situations of poverty here.
On the upside, after April 6 this year, women’s pensions are being much improved with the ability to make back payments for a further 6 years going back to 1975, versus just the past 6 years. This is good for women who took time out in the 70′s to raise a family, for example. Alas, it only applies to ‘to women who reach pension age between 6 April 2008 and 5 April 2015 and already have at least 20 qualifying years on their record’, but it’s still better than nought.
Also, I want to hit the government over the head with a big stick for the way they’ve reduced the years required from 39 to 30. Basically, it comes in to force on April 6 2010 in big bang fashion, so if a woman turns 60 a day after this date she only needs 30 years of NI, but if she turns 60 a day prior, then she has to collect a further 9 years of NI to get her qualifying years up to 39. They could have put some kind of scaling mechanism in place to make the transition fair, but no.
Sunny, Beavis – I will join you with my old racer bike from the garage, and I will start growing my mullett now. In the famous words of many an american…’bring it!’
I didn’t realise a hairdryer on wheels could get up to the speeds needed to damage anyone…?
Heh Leon. I was thinking that as well. Perhaps Sunny means to knock me down with the basket on the front?
And note, even if you are short under the current rules you may find it doesn’t matter when the rules change (I think 2010….check before acting). At the moment you need 40 years to qualify for full pension. That will drop to 30. So even if you have missed a few years it may not matter. CHECK. They have told me I could buy back contributions but also that it would not affect my pension.
And note, even if you are short under the current rules you may find it doesn’t matter when the rules change (I think 2010….check before acting). At the moment you need 40 years to qualify for full pension. That will drop to 30. So even if you have missed a few years it may not matter. CHECK. They have told me I can buy back contributions but also that it will not affect my pension.
TomNightingale,
You are quite right to reinforce Riz Dins’ final paragraph about checking…
Though, I have checked and I can confirm that you are right about the qualifying years dropping to 30 as of 2010. Which means that I do not have to buy back years, which I should have otherwise have thought necessary.
I wouldn’t have even checked, or known where to check, without this article, which improved an otherwise crap weekend.
Yeah, me too Douglas. I was naggingly aware that my overseas time had left me short but I never had the spare to make it good. This is probably one of the few bits of positive news I’m likely to get this year.
Thanks for raising this, Riz.