[UK State Pension] Age 45 – 70? Can you pay £800 to boost your state pension by £5,000…

[Mike Teavee]

Am sure most people are aware that they can pay Additional Voluntary Contributions (AVCs) to top-up their UK State Pension if they're no longer working / paying National Insurance in the UK but what I wasn't aware of was there is a deadline of April 2023 for back-paying AVCs longer than 6 years ago... 

 

Also worth noting that if you're not UK Resident for tax you might be able to pay National Insurance contributions at Class 2 rates (I was when I was working in Singapore & have continued to do so now I'm retired in Thailand) which would make the £800 quoted more like £155 & "Payback" would be approx. 7.5 months  

 

 

[BritManToo]

Buying years before 2016 (under the old pension rules) will probably not increase your pension.

[Mike Teavee]

54 minutes ago, BritManToo said:

Buying years before 2016 (under the old pension rules) will probably not increase your pension.

For some people it does & for others it doesn't, I can't say that I fully understand it all (especially as I was "Contracted Out" for most of my career) but I decided to err on the side of caution & bought the missing years anyway (cost me £955 for 7 years in 2017) & have been paying (Class 2) AVCs each year since (I think I hit 35 years this year so will be stopping after April). 

 

It did seem to increase my pension forecast but I will be having a chat with them when I'm next in the UK to see whether I should be claiming some of the money back (1 of the years was 2016/2017 so will make a difference).

 

Last time I spoke to the department they were very helpful so if in doubt just ask them.

 

 

 

Edit: To add to my confusion, my Contributions say this.... 

You have:

• 39 years of full contributions
• 10 years to contribute before 5 April 2032
• 2 years when you did not contribute enough

[1 of the 2 missing years was a miscalculation on my part where I underpaid by 50p so they are supposed to be waiving that]

 

But my Pension Forecast says this... 

 

 

My "Plan" is to keep paying until I hit the maximum Pension, this may mean that I've overpaid but I'm OK with that, especially as for the past 14 years I've been paying a much reduced rate. 

Edited November 1, 2022 by Mike Teavee

[lamyai3]

On 11/1/2022 at 8:00 AM, Mike Teavee said:

For some people it does & for others it doesn't, I can't say that I fully understand it all (especially as I was "Contracted Out" for most of my career) but I decided to err on the side of caution & bought the missing years anyway (cost me £955 for 7 years in 2017) & have been paying (Class 2) AVCs each year since (I think I hit 35 years this year so will be stopping after April). 

Anyone who worked in the SERPS era was more than likely contracted out of the state scheme, which will change the number of qualifying years required. The Future Pension Centre told me that the number of years for a person to hit maximum could be anything between 35 and 47 years - in my case 38 full years would be needed.

 

The new state pension figures are much easier to calculate, each year buys currently £.5.29 pw (1/35 of £185.15). Pre 2016 amounts depend on how many contracted out years you had, in my case each pre 2016 year bought around £4.73 pw, requiring an extra 3 qualifying years to max things out.

Obviously it's worth calculating all the years that can be paid between 2016 and retirement age first and then making up any shortfall from the pre 2016 ones. Class 3 payments are well worth the money, and you got an absolute bargain with the class 2's.

Edited November 3, 2022 by lamyai3
Typo

[BangkokReady]

How do you actually pay for missed years?  This is something I have never seen explained?

[BangkokReady]

On 11/1/2022 at 6:50 AM, Mike Teavee said:

Also worth noting that if you're not UK Resident for tax you might be able to pay National Insurance contributions at Class 2 rates

How?

[Mac Mickmanus]

1 minute ago, BangkokReady said:

How do you actually pay for missed years?  This is something I have never seen explained?

Contact the DWP and they will tell you how you can pay

[BangkokReady]

4 minutes ago, Mac Mickmanus said:

Contact the DWP and they will tell you how you can pay

Can I email them?

[Mac Mickmanus]

2 minutes ago, BangkokReady said:

Can I email them?

Can you open up your own personal online DWP account ?

You may need a UK address or telephone number .

I do know a UK tax agent who can get it sorted out for you , PM me if you want his contact details 

[BangkokReady]

31 minutes ago, Mac Mickmanus said:

Can you open up your own personal online DWP account ?

I've got the online thing.  I can see my NI number, all the years I've paid, along with the ones I've missed.  It just never says anything about how to pay.

[Mike Teavee]

1 hour ago, BangkokReady said:

Can I email them?

Not that I’m aware of, need to call them & they will tel you how much AVC you can back pay & send you instructions for setting up a direct debit for future payments. 
 

1 hour ago, Mac Mickmanus said:

Can you open up your own personal online DWP account ?

You may need a UK address or telephone number .

I do know a UK tax agent who can get it sorted out for you , PM me if you want his contact details 

Can set an account up using a Thai mobile number, I’m forever forgetting mine so have set up 5 or 6 over the years, never with a UK mobile number .

IIRC just need your passport details & National Insurance Number 

[partington]

On 10/31/2022 at 11:50 PM, Mike Teavee said:

Also worth noting that if you're not UK Resident for tax you might be able to pay National Insurance contributions at Class 2 rates (I was when I was working in Singapore & have continued to do so now I'm retired in Thailand) which would make the £800 quoted more like £155 & "Payback" would be approx. 7.5 months  

Just to make it clear: you are not eligible to pay Class 2 AVCs unless you are living AND working abroad.

 

 Because you are retired and presumably neither working or self-employed, you are no longer eligible to continue to pay class 2 contributions, so beware (although the chances of anyone finding out are very low!)

 

Clearly stated here, https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions 

and relevant excerpt:

[Mike Teavee]

11 hours ago, partington said:

Just to make it clear: you are not eligible to pay Class 2 AVCs unless you are living AND working abroad.

 

 Because you are retired and presumably neither working or self-employed, you are no longer eligible to continue to pay class 2 contributions, so beware (although the chances of anyone finding out are very low!)

 

Clearly stated here, https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions 

and relevant excerpt:

That was what I suspected, I did inform HMRC I was leaving Singapore to live in Thailand, but am not sure I specifically mentioned that I would no longer be working.

 

I'm "Retired" in the sense that I don't work but at 56 I won't receive any Pension income until I'm 60 so they may well have just assumed that I am still working.

 

 

Great information/link which also answers @BangkokReadyquestion about how to go about paying AVCs when living abroad.... 

If you were living or working abroad

Fill in form CF83 at the end of leaflet NI83. Send the form to HMRC using the address on the form.

[topt]

On 11/5/2022 at 6:02 AM, Mike Teavee said:

 

If you were living or working abroad

Fill in form CF83 at the end of leaflet NI83. Send the form to HMRC using the address on the form.

And be prepared for a long wait and the reply is usually by letter so again a delay.

 

They are currently quoting up to 16 weeks for a payment to show as credited to your list of payments - I paid in June for the last financial year and it wasn't shown online until October.

 

[Mike Teavee]

46 minutes ago, topt said:

And be prepared for a long wait and the reply is usually by letter so again a delay.

 

They are currently quoting up to 16 weeks for a payment to show as credited to your list of payments - I paid in June for the last financial year and it wasn't shown online until October.

 

True, but the process seems to start from when they receive your contact so if you contact them before April 6th you will be able to make payments as at that date rather than losing a tax year even if it is June before you get a response.  

 

Lol, I'm still waiting for them to update my 2017-2018 year payments (apparently I've underpaid & I know it was a 50p error I made that they said they were going to waive as it would cost them more money for me to pay it) but no rush, I'll phone them when I'm next in the UK (May) to get it sorted ???? 

 

 

 

Edit: For anybody who is interested, I back paid AVCs for the 2010-2017 Tax years but made a 50p miscalculation, hence the query with my 2017-2018 record... All AVCs were at Class 2 & have been paying at Class 2 since then... 

 

 

Edited November 17, 2022 by Mike Teavee
Having problems with Pics

[topt]

48 minutes ago, Mike Teavee said:

True, but the process seems to start from when they receive your contact so if you contact them before April 6th you will be able to make payments as at that date rather than losing a tax year even if it is June before you get a response.  

Not sure what you mean by losing a tax year?

I have been paying for a few years and they contacted me in April 2022 re 2021-22 tax year which I did not bother to pay until June.

To be clear they won't allow you (as far as I understand it) to pay for future years presumably because the rates can change.

[kevinbraysford]

you can only pay back last 6 years.if you missed say 2010 to 2015 you cannot pay for them years.

[partington]

19 minutes ago, kevinbraysford said:

you can only pay back last 6 years.if you missed say 2010 to 2015 you cannot pay for them years.

Definitely not true.

 

If you are a man younger than 71 or a woman younger than 69 you can pay for years from 2006 to 2016, but you only have a few months left to do it- until April 2023.

 

Clearly stated here https://www.gov.uk/voluntary-national-insurance-contributions/deadlines

[Mike Teavee]

1 hour ago, topt said:

Not sure what you mean by losing a tax year?

I have been paying for a few years and they contacted me in April 2022 re 2021-22 tax year which I did not bother to pay until June.

To be clear they won't allow you (as far as I understand it) to pay for future years presumably because the rates can change.

You can never make future payments (except setting up a direct debit which is how I do mine). 

 

Per the 2 replies above, you're normally only allowed to backpay 6 years AVCs BUT because of the changes to Pensions in 2016 you can pay for earlier years (See OP on this thread, this will come to an end on 5th April 2023).   

 

Now we're in 2022 going on for 2023 the 6 years becomes more important as If you waited until April 6th 2023 to contact them then you wouldn't be able to backpay for years prior to April 2016 or even the 2016-2017 tax year. 

 

Contacting them in June for any one of the previous 6 years is not a problem... Contacting them in June for payments 6+ years ago will be a problem from next year... That's why I suggested guys with multiyear missing contributions contact them before April 

 

 

Edited November 17, 2022 by Mike Teavee

[Mike Teavee]

19 minutes ago, partington said:

Definitely not true.

 

If you are a man younger than 71 or a woman younger than 69 you can pay for years from 2006 to 2016, but you only have a few months left to do it- until April 2023.

 

Clearly stated here https://www.gov.uk/voluntary-national-insurance-contributions/deadlines

Thanks... That's exactly what the video in the original post was trying to highlight 

 

[Mike Teavee]

50 minutes ago, kevinbraysford said:

you can only pay back last 6 years.if you missed say 2010 to 2015 you cannot pay for them years.

Normally it is a max of 6 year prior BUT because of the changes to Pensions in 2016 you have until April 5th 2023 to backpay AVCs prior to 2016 (I have it in my head that it's a maximum of 10 years but might be confused with something else), as it was I needed to back pay 7 years from 2010 as until then I was paying NI in the UK albeit working overseas. 

 

Funny story I got a full refund from UK Gov for tax paid during 2008/2009 & 2009/2010 tax years as I'd paid tax on my income in Singapore - Not a sausage back for NI payments though

Edited November 17, 2022 by Mike Teavee

[topt]

16 minutes ago, Mike Teavee said:

you can pay for earlier years

As per the link from @partington above the key phrase for others who are considering it is 

Quote

if you are eligible

My understanding, and happy to be corrected, is that it is whether at your contribution level in 2016 (no of years) whether you would have received more under the old basis or under the new rules and that is (so I was told in some depth when I queried it 4/5 years ago) defines whether it is worth paying contributions for non full years before 2016. 

The only way to really find out is to have that conversation with the Pension Advisory Service, or whatever it is now called. I remember making an appointment at the time and they called me here in Thailand.

 

Money Mail Online had numerous articles about this where individuals had paid in ,000s of pounds extra to cover missed years only to find out it was going to make no difference to their final state pension. Some of those payments were eventually recovered....... 

[topt]

5 minutes ago, topt said:

Money Mail Online

https://www.dailymail.co.uk/money/pensions/article-10927867/How-state-pension-Steve-Webb-launches-site-help.html

Quote

Filling blanks for certain years - particularly those before 2016/17 - can sometimes have no impact on your state pension, particularly if you were contracted out and have already paid in 30 years by April 2016

 

[Mike Teavee]

1 hour ago, topt said:

The only way to really find out is to have that conversation with

Absolutely this.... 

 

As I've said in a previous post, I was able to pay at class 2 rates (< £155 pa) so I took a punt & paid £955 for 7 years but if I had to pay at class 3 (approx. £800) I would have approached things differently.

 

On balance I think I've overpaid (in terms of years) & underpaid (In terms of I should have been paying class 3 for the past 2 or 3 years) but I figure it will more or less even out by the time I'm done ???? 

 

 

 

 

 

 

 

 

[RayC]

This whole area is a minefield of confusion. I made some voluntary contributions earlier this year and was informed that paying AVCs for years prior to 2016 would not increase my pension. If ever there was a case of caveat emptor it's here.

 

(As an aside, presumably AVCs will increase by the rate of inflation (?) which means that anyone buying extra years from 6 April 23 will probably have to fork out an extra +/-£90 per year).