Need some guidance about national insurance contributions please

happyhero

Hi, I recently got a letter from HM Revenue & Customs about my National Insurance Contributions but I dont know what to do for best, can anyone help please.

I stopped working in 2005 and started trying to make a living out of stocks and shares which I have built up over several years, all within ISA's so no tax etc. and I am not claiming any support, although it is tough at the moment.

When I stopped work in 2005 I got a forcast and found out that I had just reached 30 years towards my basic state pension and that the amount you needed to get full state pension was changing to 30 years, so great I think! Don't need to pay them anymore!

I am 47 now by the way.

Anyway this letter says I have 30 years and that is what I need to get full state pension but it also says there is a gap in tax year 2006-07 and that I can pay £362.40 to make 2006-07 count as well.

My obvious question is why would I pay any more if I have my 30 years, but they sort of answer that in this letter although I don't really understand the implications, ie is it worth doing?

They say

"If you do not pay then 2006-07 will not count towards my basic state pension or bereavement benefits that are paid to your husband or wife if I die and they are under state pension age"

but my wife is also 47 (6 months roughly between our birthdays) so surely this is highly unlikely (we have kids too if this has any bearing on the situation).

It aso says

"You need to think carefully about how many more years you might earn before you reach state pension age because you might get 30 years without making up the gap. But it's important to note that the rules for bereavement benefits are different. For these, you need up to 39 qualifying years for a woman and up to 44 for a man. You may want to take this into account when deciding whether or not to make up the gap in your NICs"

Please can anybody guide me here, I am a little lost what to do?

Any help appreciated.

seven-day-weekend

I'm not sure what they are telling you but it may be to inform you that NI Contributions count for other things other than State Pension - some Contributory Benefits for example - and that you may not qualify for these if you do not pay any more NI, as they rely on RECENT payments of NI Contributions.

In other words, you may have enough for your pension, but will need to continue to pay NI if you want to qualify for other benefits..

Hopefully someone will come along soon who knows a bit more!

happyhero

seven-day-weekend wrote: »

In other words, you may have enough for your pension, but will need to continue to pay NI if you want to qualify for other benefits..

Thats what I thought but in my case are the benefits going to make much difference to me, ie my Wife and I are the same age?

seven-day-weekend

They may well make a difference if you ever need to claim Incapacity Benefit (now called Employment Support Allowance) or other contribution-based benefits.

happyhero

So would you advise that even though I have 30 years, and do not have a traditional type job where I pay NICs, that I should keep paying it until I have the 44 years or should I do something else?

If I am going to get full state pension with the 30 years I have, it does make me wonder whether it is worth paying it for any other reason. I know that I can but should I bother?

seven-day-weekend

I do not have the expertise to answer your question as I am not a pensions professional.

It might be a good idea for you to contact an IFA (Independent Financial Advisor ) and/or a Benefits Specialist at the CAB to enable you to reach a decision.

Errata

happyhero wrote: »

So would you advise that even though I have 30 years, and do not have a traditional type job where I pay NICs, that I should keep paying it until I have the 44 years or should I do something else?

If I am going to get full state pension with the 30 years I have, it does make me wonder whether it is worth paying it for any other reason. I know that I can but should I bother?

People who are employed have to pay NICs, they're not excused NICs as soon as they've got enough qualifying years for their SRP. I would have thought the same rule applied to the self employed.

seven-day-weekend

Errata, yes it does, the self-employed pay Class 2 and sometimes Class 4 as well, but if they only have a low income (which I'd assumed from the OP as he said things were 'tough' ), they can apply for an exemption and not pay them. I assumed this was what the OP was referring to.

OP, if you DO earn enough to pay them you have no choice - they have to be paid!

happyhero

Yes thats right we have virtually no income, my shares which I am trying to live off are hopeless at the moment, bringing very little money in, and I have checked and even if I made a million pounds would still not be classed as an income for tax etc as they are totally within ISA's, the way I planned them to be. Unfortunately this fact does not help me much at the moment as things are so poor. I did ok with them before but I am no wizard with them and you need to be to make money now.

As for my wife, she has a job at the local primary school catering and only does 2 hours a day giving a total income of less than £3000 a year.

As I said our circumstances are a little unique and I have checked and was told I do not have to pay NICs, it even says I don't have to pay any more on the letter unless I want to. I don't really know what I am, obviously I am not employed but I am also not self employed either as I do not do a job as such (ie dealing with shares in my Isa), I am not really unemployed although that may be the only classification that would come close except I take no benefit as an unemployed person and am not seeking work, crazy really. I hope to stay this way unless I can't cope anymore and need to bring in some more income which does look like a possibilty with the current climate.

So my problem now is whether to bother or not with payments, as I can make payments if I choose to, but with current conditions it will be hard to find extra cash although I will attempt to, if it is worth it.

seven-day-weekend

I personally think it is worth it, self-employed contributions are less than £4 a week (I think) and will entitle you to benefits if you are too sick to work.

I know that it probably won't affect you at the moment, but you don't know what will happen in the future; you have twenty years before you can draw State Pension..

Just my personal advice.

EdInvestor

The basic point is this: there's no point in paying more NICs from the state pension point of view as you already have enough.

You are not employed in any sense of the word, so you are not required to pay any NICs.

If you think you might want to claim certain benefits in future which are based on having an up- to- date NIC contribution record, then it may be worthwhile paying.Suggest you research what benefits you might be entiled to (incapacity benefit would be the obvious one, the bereavement issue is a red herring).

You can pay NICs up to 6 years in arrears, so if it became necessary/possible to claim benefits later, you could update your record with a lump sum.