December 31, 2006

PhDs & Pensions

I was reading through Government pensions regs today and stumbled across something. It turns out that in order to quality for full state Pension you need to be paying NI contributions for 44 years. If you expect to retire at the normal age of 65, then you need to be paying contributions from the the age of 21. This is quite worrying, since if you are even doing a Masters within the normal time frame you are effectively ruled out of a full state pension.

If you are doing a PhD you are probably going to be 4 years down, and if your PhD roles over to year number 4 (which I believe happens for the majority of PhD students) you will be missing nearly 10% of the required time.

The minimum basic pension is £20.51/week and the full basic pension is £82.05/week, with the requirements of 11 and 44 years respectively. If we assume that its a linear scale between minimum and maximum state pensions, then it works out to £1.86/week lost for every year down on the full pension, or £9.32/week for the hypothetical PhD student.

The current life expectancy within the UK is 78.54 years, and rising rapidly. Lets say this hypothetical average PhD student lives until they are 85, to account for the rise in life expectancy before our generation dies, that means that the total cost is £9692.8. Admittedly this ignores the time value of money, but I the figures already have several assumptions in them, before I begin to predict average Interest rates for the next 60+ years.

As far as I can tell from the pamphlet I read, the government makes allowances for people caring for relatives, if they are job seekers or if they are on long term disability allowance, but not for people trying to advance our level of Scientific understanding! I can also see why the government wouldn’t give you a full pension if you haven’t worked to your complete potential. The real contradiction here is that I have a government funded research grant! The state’s position is that they think thats its worth paying someone to do the work – but refuse that person pension contributions.

- 2 comments by 1 or more people Not publicly viewable

  1. bugger.

    31 Dec 2006, 18:37

  2. Drac

    There is a solution for you. Its not great, but it is a solution.
    Do some part-time work – for a proper company so you get payslips with PAYE tax and NI contributions. Claim the tax back being you are a filthy student.

    About 2 years later Her Majesties Thieves and Crooks (Otherwise known The Inland Revinue) will send you a letter that gets paraphased thusly:
    You worked some of year X. However you did not make enough NI contributions during year X to count towards your state pension. If you wish to make this year count towards your state pension for when you retire please send us a cheque for £Y.

    Given that I don’t think the state pension system will survive till when we reture I’ve decided to keep my £Y every time I’ve gotten one of these.

    06 Jan 2007, 14:47

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