Shortfall in National Insurance Contributions

dweep

dweep back again, having problems completing the previous unfinished post ..please read on.....

....I want to go on paying NIC's towards my pension.....

In regard to this, the HMRC site advise that "You need to earn a minmum of £87 per week and £4524 per year in 2007-2008 for it to count as a qualifying year"

As I will not be employed every week of the year, I will miss the first qualifying criteria of earning £87 per week, but do I qualify by earning the annual amount, even though I will only be working about 5 months of the year ?

I obviously will not be signing on as unemployed during the other 7 months as it is my choice not to work.

EdInvestor

At the moment NICs are only credited on a full year basis, so looks like you will have to pay voluntary contributions.The new rules will enable weekly credits, which will fix this problem.

dweep

Dweep here trying to bring last 2 posts together in case they have been misunderstood due to the gap in postings.

What I am basically asking is......

If I work for a few months in each tax year (ie 5months) and I earn a minimum of £4524 in tax year 2007-2008, will my pension record be credited? I had always assumed that if you were an employed PAYE worker (as opposed to a self-employed person) you did not get your pension "account" credited unless you had made 52 weekly payments ayear. Hence my worry that the tax offic will say (when I come to retire) "Sure you've earned £4524+, in tax years 2007-2008, and also in 2008-2009, but as you earned this over 5 months(instead of 12months) we cannot credit your pension "account"

Ed investor, I have just seen your post, thanks for your reply. It would seem that if I did earn £4524 over 5 months, I could always make up the other 7 months with class 3 voluluntary contributions ?? Is this correct ?? Will class3 voluntary contributions be accepted by HRMC even though I have chosen not to work during the 7 months. I always asumed that ou could not contribute towards you pension "account" if you had not worked or were not looking for employment.

EdInvestor

I think you'll have to ask the Pension Service whether you have to pay for 7 months or whether you'll have to pay for a full year.I suspect the latter is the case under the old rules, but the former will be the case under the new rules.

dweep

Can you please advise on this very basic point, so I have as much info as possible if I contact the pension office.

What is the criteria for making voluntary contributions (class 3 I believe).

Can they be made by someone who chooses not to work ?

I had always thought that you had to have a good reason for not working (while still being able to make NI contributions to your pension) ie ...

unemployed and signing on, or off sick with a doctor's sick note, under these circumstances your pension "account" would automatically be credited. I vaguely recall that over the years there have been changes made particularly to help women who have lost out due to looking after their children or elderly parents etc. What I cannot gather from reading HMRC website or from reading financial advisors in the Sunday Times or Observer, is the exact circumstances under which people can top up their pension (usually up to 6 years back). The general advice seems to be that everyone should do this if they can (and it suits their individual circumstances.) I often wonder when I read letters to these financial advisors (and the advisors reply), the basis on which that particular question is answered, as the advisor cannot know the particular correspondants unique work (or lack of it, and why)history. So I have assumed that some of them will not have worked because they chose not to and now wish to get in as many years worth of NI conributions in order to increase their pension entitlement later.

So really the most important question still is .... if I choose to work 5 months of this tax year, can I at the end of it, pay voluntary contributions for the 7 months I have chosen not to work, so that it counts as a "qualifying" year re my pension ??

EdInvestor

dweep wrote: »

Can they be made by someone who chooses not to work ?

Yes.

What I cannot gather from reading HMRC website or from reading financial advisors in the Sunday Times or Observer, is the exact circumstances under which people can top up their pension (usually up to 6 years back).

Anyone can buy missing years on a voluntary basis.

So really the most important question still is .... if I choose to work 5 months of this tax year, can I at the end of it, pay voluntary contributions for the 7 months I have chosen not to work, so that it counts as a "qualifying" year re my pension ??

You will have to check with the Pension Service over whether you will have to pay 7 months or 12 months worth of NICs.

dweep

I think I have it !

From what I gather,(within the prescribed time limit) anyone who has gaps in their employment record, for whatever reason, can just say to the National Insurance Office ...."I haven't paid NIC's for X number of months in my last tax year, I'd like to make Voluntary Contributions to make this up so I have the requisite amount of NICs (for pension purposes)." ....and they will say "Yes that's fine, you need to pay us 26/29/33 weeks (or whatever number is owed) and we'll stick that in your NI account, so you now have a complete year of NICs." No questions asked, as it were. If this is the case then I will cease to worry. And boy has this been worrying me.

NeilW

I'll pop a note on this thread as well.

Currently there is a concession in place that allows you to buy class 3 NI contributions for all the tax years from 1996/7 onwards. This is due to a computer glitch earlier this decade.

What this means is that you can purchase 14 years of class 3 NI before April 2010. If you add this to the usual 16 years of Home Responsibility Protection *and* you retire just after April 2010, then you have the 30 years required to get a full state pension in your own right.

Note that the state pension forecasting system doesn't give accurate information at the moment, and is unlikely to be updated before Autumn *2008*!.

However to get the full 14 years you really need to act before April 2008 and buy back at least the oldest of the standard years (2002/2003 probably), and the NI 'sale' ends for most people in April 2009.

So if you have a poor record, or you know a housewife who is close to pension age can you let them know.

I very much doubt if the 'NI sale' is going to get as much publicity as the Pension Act provisions.

jamesd

dweep, phone the Pension Service. If you ask they will go through every year in your life and tell you how much you were credited for NI, whether it was a qualifying year and if you can fix it.

Do be kind and write the years, numbers and if it was a qualifying year down so you don't need to ask again, though - it takes a while.

dweep

NeilW, that is interesting... any chance that anything about this concession is on HMRC's website, or anywhere else for that matter ?

jamesd, I recently got sent a letter listing my past contributions. I have a query about a section in it when I know I was signing on as unemployed, (and I should have had my pension account credited) but they appear not to have credited it, but I will take that up with pension office.

My concern has always been with tax years 2007-2008 and 2008-2009 and ensuring that I make NI contributions (at whatever stage of these tax years) for these two years. I think EdInvestor has answered my question on that, ie, anyone who has the sort of gaps I will have can top up to give themselves the complete 2 years mentioned.