Even if your State Pension forecast shows you as having paid 35 years of National Insurance Contributions you might not get a full State Pension.
There was a big change to the State Pension system back in 2016 and this has resulted in the government trying to make things simpler going forward but with lots of complications in trying to cobble together all of the old rules.
Let me explain why you might not have built up a full State Pension even though you have 35 years on your record and what you can do about it.
You might not get a full State Pension if you contracted out.
Your State Pension forecast will show you your current position.
The full new State Pension which was brought in on the 6th April 2016 is currently £179.60 per week (2021/22 tax year).
Normally, you need to have paid 35 years of National Insurance contributions to qualify for the full new State Pension.
However.
Back in the day many workplaces offered pension schemes that allowed you to ‘contract out’ of the State Pension.
This resulted in you and your employer paying less National Insurance and instead getting an additional contribution into your workplace pension. The idea being that the extra contribution into your workplace pension should cover the loss of State Pension.
The government didn’t think it was fair that people who had contracted out of the State Pension should still get the same full new State Pension as those that didn’t contract out.
If you had contracted out in the past then the Department for Work and Pensions will work out your new State Pension by doing two calculations:
What you would have been entitled to under the old State Pension scheme using 30 years National Insurance contributions and any additional payments under SERPS.
What you are entitled to under the new State Pension scheme using 35 years National Insurance contributions minus a deduction for the years you were contracted out.
Whichever is the higher resulting figure from these two calculations will be your starting point for the new State Pension.
So this is why you might not get a full State Pension even with 35 years National Insurance contributions.
Interestingly, some people find they actually have a higher State Pension forecasted than the new standard £179.60 per week.
This is because these people had built up more State Pension benefits than the new rate by April 2016. Again, the government felt it wouldn’t be fair to reduce what they had previously built up so they allowed the higher rate to remain, but no further State Pension could be built up.
You might not get a full State Pension but you might be able to top it up.
I’ve done another video on the benefits of topping up your State Pension.
Thankfully, if you are in the position of having previously contracted out and therefore don’t have a full State Pension then you may still be able to top up even if you already have 35 years of qualifying National Insurance contributions.
The key thing to remember here is that if you are buying added years through voluntary National Insurance contributions, you only get benefit by topping up years from 2016/17 onwards. Trying to top up years before this is worthless.
Whilst you don’t want to rely on the State Pension to fund your retirement it is still a good foundation. As I’ve said in my previous article, topping up your State Pension is generally a good deal.
#StatePension #ContractingOut #NationalInsuranceContributions…(read more)
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As we approach retirement age, most of us look forward to receiving a full state pension. But the reality is, even if you have made 35 years of National Insurance contributions, you may not receive the full amount. Here are some reasons why you might not get a full state pension:
1. You contracted out of the additional state pension
Contracting out was a scheme that allowed people to pay lower National Insurance contributions, but in exchange, they gave up their entitlement to the additional state pension. If you contracted out for some or all of your working life, you may not receive the full state pension.
2. You have gaps in your National Insurance record
To receive the full state pension, you need to have made contributions or received credits for 35 years. If you have gaps in your National Insurance record, for example, due to unemployment or caring responsibilities, you may not have accumulated the full 35 years.
3. You reached state pension age before 6 April 2016
The state pension was reformed in 2016, and the rules changed. If you reached state pension age before 6 April 2016, you will be entitled to the old basic state pension, which is lower than the new state pension.
4. You have a reduced rate of entitlement
Under the new state pension system, you need to have made at least 10 years of National Insurance contributions to be entitled to any state pension at all. If you have made fewer than 35 years of contributions, you may receive a reduced rate of entitlement.
5. You received a transfer of National Insurance credits
If you received a transfer of National Insurance credits from a former spouse or civil partner, this may affect your entitlement to the full state pension.
In conclusion, if you want to ensure that you receive the full state pension, it’s important to check your National Insurance record regularly and take action to fill any gaps. You can do this by paying voluntary National Insurance contributions, for example. Remember, the state pension is just one source of income in retirement, and it’s important to have a range of income streams to support yourself in later life.
Those of us who have paid in aren't intitled. 5hose who haven't paid in are more intitled.
The video states that you can only pay NI contributions for the last 6 years…..this isn't currently the case. You can backdate payments up to 2006 (16 years) but that is coming to an end on 31st July 2023. From that date you will be limited to 6 years backdated NI contribution payments.
What I find most annoying ( and may be missed by many that do not check) is that the government tax/pension website states clearly that you need 35 years full NI contributions to receive the full state pension. I have checked my personal statement and it clearly says that I have 35 years full NI contributions but also need to pay another 3 years full contributions to qualify for the full pension. So "full years contributions" may or may not actually be "full years" but show as "full years" without any indication as to which ones are "full years" and which are not actually "full years".
Awesome content.
I have finally gained access to my pension account and can now review its details. I wanted to seek your advice regarding whether I should pay for all the shortfalls or just a few specific years that I have missed. I have attempted to contact the future pension center for guidance, but unfortunately, it has been difficult to reach them and obtain any advice. Therefore, I am reaching out to you in search of expert advice.
So far I've got 4 years of full contributions, 11 years I did not contribute enough, so I've got 28 years to contribute before 5 April 2051
Should I make up the payment shortfalls in full or are there other considerations to take into account?
I greatly appreciate any guidance you can provide on this matter. Thank you for your assistance.
Big ups to everyone working effortlessly trying to earn a living while building wealth. I’m 60 and my wife 54 we are both retired with over $3 million in net worth and no debts. Currently living smart and frugal with our money.Retirement is not an end, but a new beginning.Your dedication today will pave the way for a future filled with financial security and the freedom to pursue your passions Saving and investing lifestyle made it possible for us this early even till now we earn monthly through passive income.
Great explanation, thank you
I don't get the bit about some people getting more than the state pension.
My retirement forecast is going down each year. I got my 35 years in when I was made redundant in 2010 and moved abroad.
I can understand it being less but I can't understand why it is decreasing
I looked at my forecast one year before I reached State Pension age, and it showed the maximum entitlement. Several weeks before reaching my 66th birthday, the amount indicated was £30 per week less – even with 39 qualifying years. Being contracted out in the public sector, as well as leaving the workplace early, caused this. I have never received a satisfactory explanation as to why the figures on HMRC’s website changed so dramatically, but I do know that I was never going to get the maximum amount because of the contracting out – a government decision, not one made by individuals. As it was, the amount indicated on my Government Gateway account was still £20 per week less than the maximum contracted out State Pension, even with 39 qualifying years. Finding this out a few months before State Pension age was a blow ……thankfully, I was able to buy some additional years, bringing my contributions to 44 qualifying years, but HMRC’s website did not hold accurate records for me (and for several other of my contemporaries). HMRC seems to wait until it collates formal National Insurance Records for an individual before an accurate forecast is listed on an individual’s account. The advice on this video clip, while interesting, only gives a broad explanation, and I wish I had looked into the matter in more detail myself. Unfortunately, the reality for a number of taxpayers can be quite different. I’ve forwarded the video to some friends, tho’, to explain the factors taken into account when calculations are made. Thank you.
Your better off having your own pension plan just buy shares every month during your working life.
I paid 35+ years, a lot of those years were "contracted out" I got the lower figure, in fact the lowest figure they could work out. My spouse gets £100 more than I do every 4 weeks.
The online government forecast, does that take into account contacted out?
Not sure why you have chosen 35 years ? Most of us have worked from the ages of 15 to the age of 65 yet receive nothing like £179 a week despite not having any gaps. My only time I had off was a week in the 1970’s when I was sick but even then my contributions were paid by my employer (though no wages for that week). As for ‘topping up’, I would have thought 50 years of full time work would have paid for that?
I have paid 36 years contributions, but will I still receive full state pension if I made no more contributions?
State pensions will be means tested. So don't save. Spend all your money and then when you're old you'll be one of those that need help, poor you.
Gov is not going to reward you for saving money, they're going to punish you because you have too much.
So spend it. We'll all get universal basic income by then
Even if you don't qualify for full state pension. They will make it up by giving you pension top up also the less you get the more you can claim in other benefits. So don't top up your state pension. 30% people will won't make state pension age, and the rest will be ill before state pension age and have to finish early or be to ill to enjoy retirement. So live for today and let tomorrow sort it self out .enjoy life .
So I have 49 years full contributions, I paid in to SERPS and Graduated Contributions, still no full pension any idea why?
Thanks for the video, very informative. I have paid 40 yrs contributions towards my state pension however i have 1 tear where I was contracted out due to having my daughter but I was unable to fill this gap. I’m told i’m entitled to COPE payment as the reason i lost a years contributions was due to child benefit payments (this was 1977-78) and home responsibilities protection. Have you any idea what this is?? Thanks
Hi Carl.. Can you help to tell me if you have now completed 35 yrs Tax Returns and still have a long way to go till retirement…. can I stop paying any further voluntary contributions to Class 3? As I'm self employed…. as I would be paying for nothing? Will I lose the 35 yrs I have paid in if I no longer make any further voluntary contributions? Thank you.
Many thanks Carl lots of useful information that points me in the right direction.
that mic is really quiet.
Hi Carl. Thanks for a great video but I'm a bit confused. I have a Police pension and retired 2009 after 30yrs. Everyone was contracted out then. I started a new job a Yr later and have paid full NI. Would I get reduced state pension but topped up by Police pension. What happens to the last 12 years that I paid full Ni. I am 63.
Thank you Carl that was most helpful.
Yet another video