US SS, UK Pensions and WEP

My wife just paid back some 6 years of contributions and each year of payback was just over £5 per week in gross pension  (can't remember the exact amount - but DWP future pensions will quote you over the phone). I certainly considered it worth it - even after the tax impact (20% or 40%).

Good to know.  Just found this on the MoneyHelper(ex-PensionWise) website:
Each additional qualifying year works out to be an extra £5.29 a week (or £275.08 a year) in State Pension, based on 2022/23 rates.

Still a no brainer for me even @ a 40% tax rate. Don't forget the UK OAP is also forecast to increase by 8% next April as part of the Triple Lock (even after the governments' one year 'cop-out' this year)

Just by way of a little further background for those who may be interested and may be undecided in whether or not it's worth buying into extra UK State Pension entitlement:

For those who are entitled to a UK State Pension - you can check your current forecast here:

https://www.gov.uk/check-state-pension

If you find that you are entitled, but fall short of a full entitlement (currently £185.15 per week), your forecast should show if you are eligible to buy further entitlement. You need to pay special attention to the dates and how far you may be able to go back. This is very different to the US system that does not allow you to purchase further credits (you have to earn them!).

Currently each additional year of UK entitlement that you buy back gets you an additional £5.29 (pre-tax) per week of pension (subject to the current maximum of £185.15 per week).

Buying back an additional year of entitlement is achieved by purchasing 52 weeks of voluntary class 3 contributions - these are currently set at £15.85 per week.

So here's the maths:

If you are entitled, then buying one year of Voluntary class 3 NIC will cost you £824.20 (52 x £15.85). and for that you will receive an additional £5.29 per week of pension (for as long as you live). This until next April is worth an annual £275.08 of pre-tax pension. This pension is also index linked as part of the triple lock guarantee - which has been confirmed this week in Parliament - and is likely to be 10% next April (depends on September's annual inflation).

And here's a simple grid to illustrate the payback, depending on your own top tax bracket:
   

Additional NIC Cost  £824.20 Additional Pre-Tax Pension    £275.08 ROI in Months)    0%    36 20%    45 40%    60 45%    65     Current Triple Lock Forecast    Additional Pre-Tax Pension    £302.59 ROI in Months)    0%    33 20%    41 40%    54 45%    59

So currently the maximum payback (i.e. time you need to live post drawing of pension!) even for a top rate tax payer is 65 months and this is likely to reduce to 59 months next April and reduce further depending on future year increases.

Like I said in an earlier post, it's surely a 'no brainer' and given current stock market performance, represents a great investment, unless of course your life expectancy is less than the payback period.

Thanks, really helpful information Smitch. I pay Class 2 voluntary contributions and this works out even less at around £15 per month. It really does make sense to fill in any gap years so as to maximise your record.

If only voluntary contributions were allowed with SS!