I have a question regarding my National Insurance contribution record which directly affects my state pension.
I am 62 years old and have worked full time in education throughout my career, retiring early at age 55 to be my husband’s caregiver. Incidentally, he passed away six months ago.
I am now investigating my position on the state pension. I am fully aware of the effects of outsourcing. There are a number of years that are marked as ‘not full’ and I am in the process of redeeming them.
Academic records: Why did I get free state pension credit during my studies, but none during my college years? (Archive image)
However, it appears that the four years in which I followed full-time studies from 1976 to 1980 (three years in license and one year in PGCE) were not counted and it is too late to redeem them.
It seems strange considering that the previous year, when I was in sixth grade (1975-76), was actually counted.
I did a bit of detective work and found great differences in the way people are treated. For example, I have spoken to three people so far who say that their years of schooling were counted as full years.
Then I spoke to others who are in the same situation as me. There doesn’t seem to be any rhyme or reason why people are treated so differently.
I would be grateful if you could educate yourself, not only for me, but for the many others who might be in the same situation and who, like me, will not be able to access the full amount of the state pension without those extra years.
SCROLL DOWN FOR HOW TO ASK STEVE YOUR RETIREMENT QUESTION
Steve Webb responds: The rules for national insurance credits when you are young or studying can be quite surprising and changed in 2010 for those who become adults after that date.
What is “subcontracting”?
Steve explains how it works and could affect your state pension here.
Most people would assume that your national insurance record is automatically protected while you are in higher education, but it is not.
On the other hand, many people approaching retirement today benefit from a credit system that applied as a teenager, regardless of their choice to study.
In April 1975, the government of the day introduced what was called “starting credits”, which began in the year in which you turned 16.
Under the starting credit system, you got one free year on your national insurance record for the year you turned 16 and the following two years.
These credits were granted even if you were still studying. In your case, the starting credits were probably introduced too late for you to enjoy them for your entire time in sixth grade, but you got a year of credits.
The idea was to ensure that people who stayed in school beyond the minimum school leaving age did not lose in terms of NI records.
In order not to discourage those who studied abroad, it was not even necessary to be in the UK to qualify for the start-up credits. The starting credit system operated for several decades but was abolished for 16-year-olds from April 6, 2010.
Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below
For university students, there is no special NI credit system (apart from any overlap with the period covered by starting credits).
Some people in college might earn credits if they worked part-time or had family responsibilities, but in most cases those years will show up as a gap in their NI record.
To some extent, this system penalizes higher education students by not giving them credit for their NI record.
However, it is still perfectly possible to get a full state pension even with a three or four year gap in your lifetime NI record during a period of graduate study.
The new public pension system grants a full pension to those who have contributed at full rate for 35 years (ignoring the effects of the “contraction”), but those who left school at 18 are potentially around 48 years old. working life before reaching retirement age. who is now 66 years old.
This means that it is possible to spend some time studying or otherwise outside paid work and still receive a full state pension.
In your case, it is possible that even if you had obtained credits for your period of university study, it would not have affected your state pension.
When your new state pension is established, the DWP will review your NI record in 2016 and calculate a “starting amount” upon which contributions after 2016 are built.
This 2016 starting amount is the higher of the amount you would have obtained under the old rules (30 years for a full basic pension plus any SERPS – State Earnings Related Pension Scheme) or under the new rules (35 years for a flat-rate pension complete minus a deduction for subcontracting).
Why do some voluntary supplements NOT improve your state pension?
Learn more here on how to check for and avoid errors. Steve Webb explains the refills here in a previous response to a retired teacher.
For many teachers, who have been largely ‘outsourced’, it will be the calculation of the old rules that will dominate.
Since it only requires 30 years of contributions before 2016 for a full basic pension, you may well have accrued this amount since the mid-1970s anyway, despite the gap during your period of university study. .
If you are considering paying voluntary NI contributions to increase your state pension, you should check before doing so that it will actually make things better.
There is a high risk that contributions from years prior to 2016/17 will not increase your final pension.
Ask Steve Webb about the pension
Former Pensions Minister Steve Webb is This Is Money’s Agony uncle.
It’s ready to answer your questions, whether you’re still saving, quitting work, or juggling your finances in retirement.
Steve left the Department for Work and Pensions after the May 2015 election. He is now a partner in the actuarial and consulting firm Lane Clark & Peacock.
If you would like to ask Steve a question about pensions, please email him at [email protected]
Steve will do his best to respond to your post in a future column, but he won’t be able to respond to everyone or correspond privately with readers. Nothing in his responses constitutes regulated financial advice. Posted questions are sometimes edited for brevity or other reasons.
Please include a daytime contact number with your message – it will be kept confidential and will not be used for marketing purposes.
If Steve is unable to answer your question, you can also contact The Pensions Advisory Service, a government-backed organization that offers free assistance to the public. TPAS can be found here and its number is 0800 011 3797.
StevWe receive many questions about the state pension forecast and about COPE – the equivalent of contracted retirement. If you write to Steve on this topic, he answers a typical reader question. here. It includes links to several of Steve’s previous columns on state retirement forecasting and contracting out, which might be helpful.
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