The Times - UK (2020-10-17)

the times | Saturday October 17 2020 1GM 57

Money

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avers who have already quali- fied for a maximum state pension are being told to pay thousands of pounds in extra national insurance. An online tool devised by the De- partment for Work and Pensions (DWP) is making incorrect calculations that suggest people will not get a full payout unless they top up their contributions. The calculations affect workers who reached state pension age after April 6, 2016 (when the system changed), but who had already built up the 30 years of national insurance contributions (NICs) required to qualify for a full pension before that date. The new state pension got rid of the layers of com- plexity in the old system by scrapping the additional state pension top-up. To qualify for a full new state pension, you need 35 years of NICs, although any entitlement built up under the old system is protected. The full new state pension is worth £175.20 a week. However, many people with a full national insurance record get less because they were contracted out of the additional (also known as second) state pension during their careers. Those with gaps in their record can buy missing years of NICs at a cost of £795.60 for each year. You can check your contribution record on the DWP

website — but if its calculator sees any gaps in your record before 2016 it rec- ommends topping them up, even though there may be no need to. For example, someone who had clocked up 28 years of NICs, but whose record showed five years when they didn’t pay enough national insurance, would be told by the government com- puter to top up all five years. However, they only need 30 years of contributions before 2016 to qualify for the maximum pension, so adding more than two years would be pointless. Gillian Gibson, 64, a teacher from Bridgnorth in Shropshire, went on to the DWP website to see if she should boost her contributions. She has been doing voluntary work since 2013 and even though she had 35 years’ worth of NICs by 2016, for many of these she had been contracted out of the state second pension. The DWP website said that when she retires in 2022 she would get £140.06 a week based on her national insurance record. It also said that if she paid the top-up of £795.60 for the next two years she could boost this to £155.08 a week. However, she was then told, incor- rectly, that if she also topped up the un- worked years from 2013 she could get a pension of £170.10 a week. In fact, topping up these years from before the state pension rules changed

in 2016 would have made no difference to her overall entitlement. Gillian was being told to pay £2,386.80 for nothing. A total of £119 million was paid in retrospective national insurance by workers last year, according to HMRC — a 297 per cent rise from £30 million in 2016 and an all-time record. The DWP pension checker was devised when Steve Webb was pensions minister. Webb, who is now a partner at the consultancy Lane, Clark and Pea- cock, said: “I think it is little short of scandalous that they continue to send out information like this.” Baroness Ros Altmann, who was pensions minister from 2015 to 2016, said: “I was very nervous about the new system. I was told that people could not get their money back if they paid extra voluntary national insurance to make up missing years unnecessarily. “I believe the system is so complicat- ed that people should get financial advice before deciding whether to pay for added years. There are still no clear risk warnings on the government’s website

that you may be wasting your money by paying voluntary contributions.” Tom Selby, a pensions expert from the wealth manager AJ Bell, said: “This is an issue with a tool that could have been used by thousands of people, so the DWP needs to urgently investigate how many people have made contributions based on dodgy state pension data and ensure that they are fully refunded. “Failure to do so will leave the government facing accusations of creating its very own pensions scandal.” The DWP said its pension forecast- ing tool was only a guide, and that everyone using it should call its Future Pension Centre phone line, although it admits that the service “is limited at present to individuals who are six months away from reaching state pension age” because of Covid-19. A spokesman said: “At no point was Ms Gibson informed or encouraged that making contributions for tax years pre-2016 would be in her financial in- terest. We always urge individuals to seek advice before making payments.”

Beware of

the state

pension

top-up trap

A glitch in a government calculator could lead

thousands of people to pay pointless national

insurance contributions, writes David Byers

The DWP tool suggested that Gillian Gibson pay £2,386.80 to boost her national insurance contributions for no reason

cent. The market is up almost 32 per cent since March and has risen 11.8 per cent overall this year. While most of the money going to China was from pension funds, private investors have also been taking a punt. The Investment Association, the trade body for the funds industry, said that after withdrawing £87 million from China funds in the first quarter, investors then put in £200 million in the next five months. The bet on China has paid off so far. FE fundinfo, a research group, calculat-

Investment trusts focused on China have also done well. The £1.87 billion Fidelity China Special Situations trust has returned 60 per cent this year. JP Morgan’s £450 million China Growth & Income trust has done even better, with a return of 76.9 per cent. Rebecca Jiang, co-manager of the JP Morgan trust, highlighted investment opportunities in companies such as Meituan-Dianping, the Chinese equiv- alent of Deliveroo, and Bilibili, a Chi- nese video-sharing platform themed around animation, comics and games.

Jason Hollands from Tilney Group, a wealth manager, said the performance of the Chinese stock market had been impressive, but added: “Much of the return has been down to two Chinese mega-stocks: Alibaba, the ecommerce giant, which makes up 20.7 per cent of the MSCI China index and whose shares are up 42 per cent since the start of the year, and Tencent Holdings, the internet conglomerate, which makes up 14.2 per cent of the index and whose shares are up 50 per cent.” Mark Atherton

How Captain Tom

led a banking

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Pages 60-61

ed that despite the coronavirus dip, China funds produced a return this year of 25.8 per cent, compared with 12.8 per cent for US funds, 9.1 per cent for global funds and a loss of 16.5 per cent for UK funds. The Baillie Gifford China fund returned 44.1 per cent.

77%

rise in the value of JP Morgan China Growth and Income trust this year

30 years

of contributions

needed for a full

penson under the

old system

Perfect timing? Investors poured billions into China during lockdown

B

ritish investors have benefited from the surge in Chinese stocks after pouring in £3 billion when the market slumped at the start of the year. Morningstar, the financial research group, said that there were net inflows of £1.8 billion into China Equity funds in the nine months to the start of October. This was despite investors pulling a net £1.26 billion from China funds in January, February and March, when the coronavirus was at its height and the stock market fell just over 10 per

What should you do?

6 Topping up one missing year of national insurance contributions costs £795.60, and effectively gives you an extra £232 a year pension, rising with inflation. Over a 20-year retirement that is a better return than you’d get on an investment. 6 You can check your contributions at gov.uk/check-state-pension. It will show any missing years. 6 Before you pay for extra contributions, check that it will be worth it. There is usually no point having more than 30 years of contributions before 2016. 6 Call the DWP to double check, and if you are still confused, consult a financial adviser.

The Times - UK (2020-10-17)

Money

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