Eligible years for state pension: I have 34 and HMRC says that’s enough to get the full weekly income
I am an Irish citizen. I lived and worked in the UK between 1990 and the end of 1996. Since then I have moved and lived abroad.
After a few years I contacted HMRC’s National Insurance department about continuing to pay premiums.
They advised me to pay Class 3 voluntary contributions, which I have been doing ever since by direct debit. All gaps from previous years have been compensated. I will be 66 years old in July 2025.
However, I noticed that no direct debit has been made from my account since the last direct debit in April 2023. I contacted the bank and was told that no direct debit requests had been made by HMRC.
I accessed my online NI file which said: “You have: 34 years of full contributions; 2 years of contribution obligation before April 5, 2025; 2 years of not contributing enough.’
I called HMRC and the gentleman told me that the system indicated that I had paid enough and there was no need to pay anymore. How can that be if I haven’t paid for the entire 35 years?
I don’t want to miss any payments as I expect to receive a full state pension when I retire. What should I do? I would be grateful for your advice.
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Steve Webb answers: One of the most common questions I get asked about the new state pension is: “How come I’m not getting the full rate if I’ve paid into the system for 35 or more years?”
In a way, your question is the opposite: “How come I seem to be getting the full rate even though I haven’t paid for 35 years?”
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The answer to these two questions depends on how the new state pension is designed. In this column I will try to explain how each scenario can arise.
As regular readers of my column will now know, the calculation of the new state pension (which affects those who reached state pension age after April 5, 2016) is done in two steps.
The first step is to determine an “initial” or “base” amount based on social security contributions up to April 5, 2016.
The second is to take into account all NI contributions made from 2016/17. Let’s look at each point in turn.
Firstly, the “starting amount” for 2016. This is intended to ensure that people who already had a good state pension record when the new system was introduced are not among the losers. This is done by awarding you the higher of two amounts:
– What you would have gotten under the old system if it continued; This is essentially a full old-style basic pension (currently worth £156.20 a week) for those who have been in the system for 30 years, plus any ‘additional’ state pensions you have built up – mainly under the SERPS system introduced in 1978; OR
– What you would have gotten under the new system if it had always existed; This is a full flat rate pension (currently £203.85 per week) for those who have been in the system for 35 years, minus a significant deduction for those who have paid the reduced, “contractually negotiated” NI contribution rate for years have.
In the second step, contribution years (including voluntary contributions and NI credits) from year 16/17 are taken into account.
In each of these years, 1/35th of the full weekly rate will be added, or an additional £5.82 per week on top of current rates. This continues until the pension entitlement reaches the maximum flat rate (currently £203.85), but during these years you cannot go above the flat rate.
Useful links to top up your statutory pension
Now let’s look at how these rules can mean that some people under 35 still receive a full pension, while others over 35 do not receive a full pension.
Starting with your case, HMRC appear to be saying that your starting figure for 2016 plus any contributions you have made since 16/17 has now brought you up to the standard figure. There is therefore no advantage for you from paying additional contributions.
Your account shows that you are from 17.16. up to and including 23.22. have made full (voluntary) contributions for each year, i.e. a total of seven years.
If you receive £5.82 on top of your starting amount each year, this means your contributions will increase by around £40 after 2016.
And if your total pension is now £203.85, that means your starting amount in 2016 must have been around £164 (in today’s money).
One way your starting amount could be at this level would be if your years of working in the UK in the early 1990s had given rise to significant SERPS claims – for example if you had a well-paid job and were not ‘rolled over’ into a workplace pension ” became .
A combination of your basic pension entitlement up to 2016 (just under the full 30 years at this point) plus your SERPS could give you £164 by 2016, making it £203.85 today.
I would like to stress that I can only make guesses based on the figures you have provided and that you may want to check all this with the Department for Work and Pensions’ Future Pension Center, but what you have reported seems entirely plausible.
Turning now to the reverse case of people over 35 not reaching the full amount, this is largely due to the way previous “outsourcing” affects the calculation I have described.
Receipt of a state pension during your stay abroad
Some people live in countries where their state pension is frozen at the level set when they moved abroad, or at the start of their receipt if they were already abroad at the time. writes: This is money.
But it depends on where you live, because the government has individual agreements with some countries but not with others.
Find the rules for frozen state pensions and a full list of affected countries here.
As you can see, those who have paid in at a reduced, “contractually negotiated” NI rate for many years (because they received a workplace pension or similar) would receive a large deduction from their initial 2016 amount if it were based on the would be based on New Rules.
Instead, they very often receive an initial amount from 2016 under the old rules – a full basic pension for 30 years, but not much else.
In this case, a starting amount of around £156.20 (the current full basic pension) or slightly above will not be uncommon.
Although each year after 2016 increases the pension by £5.82, it would take nine years to safely reach the new flat rate.
Given that we are only in 2023/24 and this is the eighth year since the new system was introduced, there will be many people who retired between 2016 and this year who have simply run out of years, to accept the new flat rate.
It is worth noting that although such people sometimes feel like they have been cheated by not receiving a “full” pension, they have generally coped very well with the new state pension.
If the old system had continued, they would most likely have received just a basic state pension of £156.20 and nothing else, so in many ways this group is the windfall winners of the new system, assuming they still have a few years left April 6, 2016 to offset some of the impact of earlier contracting.
Ask Steve Webb a pension question
Former pensions minister Steve Webb is the uncle of This Is Money’s Agony.
He’s available to answer your questions, whether you’re still saving, quitting your job, or juggling your finances in retirement.
Steve left the Department for Work and Pensions after the election in May 2015. He is now a partner at actuarial and advisory firm Lane Clark & Peacock.
If you would like to ask Steve a question about pensions, please email him at firstname.lastname@example.org.
Steve will do his best to respond to your message in an upcoming column, but he will not be able to respond to everyone or correspond privately with readers. Nothing in his answers constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
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If Steve can’t answer your question, you can also contact MoneyHelper, a government-backed organization that provides free pension support to the public. It can be found here and has the number 0800 011 3797.
SteveWe receive a lot of questions about state pension forecasts and COPE – the Contracted Out Pension Equivalent. If you write to Steve on this topic, here he responds to a typical reader question about COPE and the state pension.
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