National Insurance arrears.


R

Ret.

The gov't is not doing much to advertise the implications of the changes to
the State Pension.

My wife recently sent off for a Pension Forecast. She was not expecting much
of a pension because she has spent more time raising a family than going out
to work. It turns out, however, that she has ten years of qualifying
contributions, backed up by ten years of 'Home Responsibility Protection'.
Because the number of qualifying years have been reduced to 30, this means
she will get 20/30's of the full basic pension (as things stand at the
present).

She also, however, has the opportunity to make voluntary contributions for
nine years in the past when she either paid no contributions, or
insufficient for a qualifying 'year'. We can buy back those 9 years for
£3,200 which would give her 29/30's of the full basic pension - and which
would be recovered in less than three years of pension payments. A
no-brainer really and we will be doing so.

Although we don't have to repay all those nine years of arrears in one lump
sum, we learn from yesterdays Financial Mail, that if we don't pay these
arrears by next April, the annual charge for a year's arrears will be going
up from £420 to £630 - a 50% increase! There was nothing to that effect in
the bumph that came with the pension forecast! I think that far more should
be done to let people know about these changes which can have a dramatic
effect upon their financial situation in retirement.

Ret.
 
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R

Roy Norris

The gov't is not doing much to advertise the implications of the changes to
the State Pension.

My wife recently sent off for a Pension Forecast. She was not expecting much
of a pension because she has spent more time raising a family than going out
to work. It turns out, however, that she has ten years of qualifying
contributions, backed up by ten years of 'Home Responsibility Protection'.
Because the number of qualifying years have been reduced to 30, this means
she will get 20/30's of the full basic pension (as things stand at the
present).

She also, however, has the opportunity to make voluntary contributions for
nine years in the past when she either paid no contributions, or
insufficient for a qualifying 'year'. We can buy back those 9 years for
£3,200 which would give her 29/30's of the full basic pension - and which
would be recovered in less than three years of pension payments. A
no-brainer really and we will be doing so.

Although we don't have to repay all those nine years of arrears in one lump
sum, we learn from yesterdays Financial Mail, that if we don't pay these
arrears by next April, the annual charge for a year's arrears will be going
up from £420 to £630 - a 50% increase! There was nothing to that effect in
the bumph that came with the pension forecast! I think that far more should
be done to let people know about these changes which can have a dramatic
effect upon their financial situation in retirement.

Ret.
Hi,

Is it actually worth bothering to pay additional NI contributions at
whatever price? I thought "overlapping benefit" rules operated to
wipe out a wife's pension if the amount she could draw on the husbands
contributions exceeded that available on the strength of her own
contributions. Have the rules changed?

Roy
 
A

Andy Pandy

Roy Norris said:
Hi,

Is it actually worth bothering to pay additional NI contributions at
whatever price? I thought "overlapping benefit" rules operated to
wipe out a wife's pension if the amount she could draw on the husbands
contributions exceeded that available on the strength of her own
contributions. Have the rules changed?
But IIRC the maximum a wife can get based on her husband's contributions is 60%
or so (or might be 2/3rd's - google NP46). If she can get more than that by
buying extra years then it'll be worth it.
 
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R

Ret.

Roy said:
Hi,

Is it actually worth bothering to pay additional NI contributions at
whatever price? I thought "overlapping benefit" rules operated to
wipe out a wife's pension if the amount she could draw on the husbands
contributions exceeded that available on the strength of her own
contributions. Have the rules changed?
Yes the rules have changed - quite significantly. For women retiring after
April 2010, they now only require 30 qualifying years of NI contributions to
qualify for a full pension - previously it was 39 years. Also those women
will have included any years that they were not working but claiming child
benefit (known as Home Responsibility Protection). Under the old rules my
wife would only have had 10 qualifying years - and would have had to 'buy
back' 29 years to obtain a full pension (which in practice would not have
been possible under the old rules). Under the new rules she now has 20
qualifying years and only has to buy back 10 years to qualify for a full
basic pension. It will cost us around £3,600 to buy back those ten years -
but so long as she lives for three years beyond retirement age that will be
fully paid back.

Ret.
 

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