State pension NI contributions

TomC_3

I have just received a letter from the Inland Revenue, saying that my NI contributions for 2003-04 were not enough to count towards my state pension. I was a student at the time, and was only working during the holidays. The letter basically says if I want that year to count towards my pension, I need to pay them £250.20, or I will not get the full amount. The letter stresses it is a voluntary payment - I do not have to pay it.

Being 21, I've never really thought about pensions up until now! My question is simply: is it worth my while paying this (given we are always hearing on the news about how the state pension will gradually be falling over time) - or shall I do something else with the money.

Many thanks.

CIS

You dont't need to pay it but it may help in future towards your pension if you do.

To get a full state pension you need 44 qualifying yrs, your full working life is a maximum of 49yrs. Therefore you get 5 yrs leeway, so if you need to plan as to whether you will still be able to achieve a full pension without paying for that year.

Iam only 24 and I still believe that the pension would not change that radically before I retire (mind, Iam an ex State Pension advisor with the pension service).

I would suggest getting a state pension forecast, either online at https://www.thepensionservice.gov.uk or tel: 08453000168, this will give you an idea on whether you can miss this year and still get a full pension.

ssuming that the government wont do anything too radical (unlikely, the state pension is still the best return you would get.

Pay £250 to secure that 1 yr, and you'd get a return (at todays rates) of about £95 a year from 65. With most people living at least 10 yrs past SPA, thats £950 in return for £250. Once its in payment it will laways increase, neber decrease.

Remember, you can pay it for up to 6 yrs after its due.

al_yrpal

At the moment if you pack up work at 60 or later, and you haven't got 44 years in, I think the government pays the NI for you until you are 65. But who knows what will happen in 40 years time?

CIS

Everyman (and in some cases women) will get automatic credits noted on their account for each full tax year between 60 and SPA, during which they are not ouitside the UK for more than 6 months of the year or liable for class 2 contributions.

These go on to your record and will be used to cover the year in question providing it is not already a qualifying year through other means.

Technically even if you have over 44 yrs, you still can build up qualifying yrs, but only the 44 yrs are counted towards your pension.