State Pension Top-Up – Voluntary Class 3 NICs
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As the majority of my NI contributions were contracted out, despite 38 years of NI contributions, my potential state pension is only £119, not the £155 anticipated. I retired 5 years ago, have not worked since. On calling the NI helpdesk, I was advised that if I paid voluntary Class 3 contributions, this would improve by £4 per week, for each year I paid back. So in Sept 2016 I paid £2.5k covering the missing 4/5 years. This resulted in no improvement at all. On chasing again a few weeks ago, I was told that I had been incorrectly advised for my specific case. The way the cutoff at April 2016 was made, my additional contributions would still not have brought me near the threshold, so effectively my pension was ‘increased automatically’ to the basic £119 p.w. I have been advised to seek a refund, which I did on 27th Feb. I await a response. I have however been advised that 2016/7 contributions will be effective. I have also asked for confirmation of this.
Yes, as I said in my reply on the other post – there are two systems. You get a base pension for your contributions to the old system, then you need to make more contributions via the new system to get your pension up to the limit.
I had the same problem as you with contracting out – I have 40 years of contributions, but I’m still five years short.
I’m surprised you were able to make top-ups to the old system that didn’t help. Good luck with the refund.
From what I gather, everyone who is due to retire after April 2016 has been given a new starting figure to calculate their new state pension. To arrive at this figure they take the higher figure based on applying the old and the new systems so no-one loses out.
In my case the higher starting figure came from applying the old system using the contracted out rate so although I have years when I could make voluntary contributions, these will not improve my starting point and hence make no difference. Sadly I gather there are others like Erith who have made voluntary contributions but not gained any benefit. They do ask you before paying to make sure you have been advised.
You can make contributions from 2016/17 under the new system which adds 1/35th of the max pension – the price of buying additional years is fixed for two years following the year in question although you can still look back 6 years. Note that Steve Webb (ex pensions minister) made the recent comment that the attractive returns on voluntary NICs would be an easy win for any future government that is strapped for cash.