Voluntary Class 3 Contributions

le_loup

Can anyone help?
The Direct Gov and Pensions Advisory websites have contradictory information concerning the rates of Class 3 NI rates for the 2007/8 tax year.
DG say £7.80 pw
PAS say £12.05 pw
Any idea who is right?
Essentially I want to find the cheapest years to select for someone who reached retirement age in May last year with 26/30ths state pension and who has not paid contributions for the last 15 years. So, at the moment they could select any four of the last 15 years and pay before 6th April to get the extra and backdated to last May.
Thanks.

JOHNGT

PAS is correct £12.05 pw for 2010/11.

Full NICs rates here:

http://www.hmrc.gov.uk/rates/nic.htm

le_loup

But DG says not at:
http://www.hmrc.gov.uk/stats/tax_structure/table-4.pdf
which I got to from here:
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/NationalInsurance/Voluntarycontributionsandtoppingup/DG_190078

Perhaps I'm misunderstanding.

JOHNGT

Direct Gov says £12.05 too?

"National Insurance shortfall - buying additional years of voluntary Class 3 contributions
From 6 April 2009, if you reach State Pension age between 6 April 2008 and 5 April 2015 you may be able to pay voluntary Class 3 contributions for up to an extra six years - going back to 1975-76 - to make up any gaps in your National Insurance contributions record.
You can do this on top of making voluntary Class 3 contributions for the last six tax years or for any of the tax years for which there are extended time limits in which to pay - see the section above. You pay at the current weekly rate - so if you pay by 5 April 2011 the rate is £12.05.
You've got six years from the date you reach State Pension age in which to pay the voluntary Class 3 National Insurance contributions."

May be an exception if you are buying back 2005-06 at £7.35 a week, but generally no exception for other years.

"Voluntary Class 2 or Class 3 National Insurance contributions for the tax year 2005-06


You may be able to pay voluntary Class 2 or Class 3 National Insurance contributions for the 2005-06 tax year at the original rates of £2.10 (Class 2) or £7.35 (Class 3) if you:

• reach State Pension age on or after 6 April 2010
• make the payment by 5 April 2012"

Loughton_Monkey

Your confusion is to do with looking at the rates as they were at the time and what they are now.

As a rule, if you want to buy 'back years' you pay the current rate of £12.05

JamesU

LeLoup, Also had to look into this for somebody recently. Various confusions on this thread, best clarified precisely so this can be sorted out properly before the 6th April.

(i) As LM and JOHNGT mention, for 07-08 you are looking at the original cost (your link, £7.80/wk=£405.60). But after two tax years the price can increase in line with newer rates and has done, now costing £12.05/wk=£626.60.

(ii) You can only buy back the required four years contributions from the last six years now, but there are two important ones to buy at cheaper rates (bolded):

05-06 £382.20 (care with time deadline to purchase, and fixed price by HMRC dispensation at present)
06-07 £626.60 (has increased now to higher rate of £12.05/wk)
07-08 £626.60 (has increased now to higher rate of £12.05/wk)
08-09 £421.20 (price by HMRC dispensation, increasing from Apr 2011)

Best thing to do is to phone HMRC on 0845 915 5996, ignore all options, wait for reply and ask them to confirm the above prices based on NI and DOB (NI. DOB, address, full name will be requested). Then ask for full address (Benton Park, Newcastle) and send cheque to HMR&C.

(iii) With SPA you mentioned in May 2010, the above costs are correct as shown in the PAS table below under column "SPA between Apr 2010-Apr 15, 20+ years":

PAS 2010-11 table with purchase costs:
http://www.pensionsadvisoryservice.org.uk/media/362175/class%203%20nics%202010-11.pdf

PAS general link with info on NI voluntary contributions:
http://www.pensionsadvisoryservice.org.uk/state-pensions/voluntary-national-insurance-contributions


You can save around £450 if these are paid for this March rather than after 6th April. Careful you do not loose the opportunity to buy 05-06 (six year deadline), and note that 08-09 will almost certainly increase to £626.60 from 6th April onwards (see** reference to this being increased in table above).

JamesU

le_loup

JOHNGT wrote: »

May be an exception if you are buying back 2005-06 at £7.35 a week, but generally no exception for other years.

"Voluntary Class 2 or Class 3 National Insurance contributions for the tax year 2005-06



You may be able to pay voluntary Class 2 or Class 3 National Insurance contributions for the 2005-06 tax year at the original rates of £2.10 (Class 2) or £7.35 (Class 3) if you:

• reach State Pension age on or after 6 April 2010
• make the payment by 5 April 2012"

Yep, saw that so that would be one of the potential four years but also saw this:
at PAS:
http://www.pensionsadvisoryservice.org.uk/media/362175/class%203%20nics%202010-11.pdf
so am still confused!
I guess I should trust DirectGov more than PAS but will ring DG on Monday.
Thanks for all your help guys.

le_loup

JamesU wrote: »

but there are two important ones to buy at cheaper rates (bolded):

05-06 £382.20 (care with time deadline to purchase, and fixed price by HMRC dispensation at present)
06-07 £626.60 (has increased now to higher rate of £12.05/wk)
07-08 £626.60 (has increased now to higher rate of £12.05/wk)
08-09 £421.20 (price by HMRC dispensation, increasing from Apr 2011)
JamesU

Mmmm, that's what PAS are quoting as "cheap" years too.
So looks like, I'll go for those two before 6th April, but will phone HMR&C on Monday just to ensure that this is correct.
Thank for a very fulsome explanation.

dougz_2

What is the actual deadline to buy 08/09 at £8.10pw?
PAS gives contradictory dates in different places on its website.

Their pdf says this year:
£8.10** ** The cost of this years will rise in April 2011.
http://www.pensionsadvisoryservice.org.uk/media/362175/class%203%20nics%202010-11.pdf

Their Voluntary National Insurance Contribution Planner says next year:
£8.10** ** The cost of these years will rise from 6 April 2012.
http://www.pensionsadvisoryservice.org.uk/online-planners

strawberrylane

I too noticed this confusion of dates on the PAS website.

The correct date by which NICO must receive your class 3 contribution for the tax year in question (08/09) in order for you to qualify for the £8.10pw rate is 5th April 2011.

le_loup

And, at least for someone who reached retirement age after 5th April 2008, payment this month gives, not only the higher payment but it gets backdated to the time of retirement.

Source: BBC Money Box Live 2/3/11 Transcript:
http://news.bbc.co.uk/1/shared/spl/hi/programmes/money_box/transcripts/money_box_live_02_03_11.pdf
page 10

Nothing about this on any of the "official" websites as far as I can see.

Edit: Yes there is:
http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/@shared/documents/digitalasset/dg_180387.pdf