Voluntary class 3 contributions - relaxed timescales under 2016 Flat Rate Pension

momist

I have had a reply from Ask Justin at candidmoney.com
http://www.candidmoney.com/askjustin/872/buy-extra-pension-years-to-boost-flat-state-pension
which included the following useful information:

"It is proposed to extend this for those who reach state pension age on or after 6 April 2016, giving them until 5 April 2023 to make voluntary contributions for the tax years 2006/07 to 2015/16. These contributions will be at the 2012/13 rate of £13.25 per week for contributions based on the 2006/07 to 2010/11 tax years if paid by April 2019.

The flat state pension proposals (called the Pensions Bill) is currently going through Parliament and due to see the light of day (i.e. gain 'royal assent') during Spring 2014, you can track progress here."


This is exactly the information I was looking for, and shows that there is no hurry to buy back years, at the moment. Of course, as the world's financial worries multiply the goal posts will be moved again, and the proposal given above may be pie in the sky.

I've already decided, and bought the four most beneficial years, a combination of the oldest and the better value. I will only invest in more once the law has been finally passed, I'll then need another five.

SnowMan

momist wrote: »

I have had a reply from Ask Justin at candidmoney.com

Justin's interpretation of the HMRC information is different to mine in respect of the 2010/2011 and 2011/2012 tax years. I don't know if he has separately asked HMRC precisely what they mean given the HMRC paragraph is ambiguous.

In 2012/2013 you would have been in time to buy the 2011/2012 tax year at the 2011/2012 rate of £12.60pw (in fact you are in time up to 5th April 2014). So I had read the HMRC information to say that 'higher rate provision would not apply', to mean that you won't have to pay more than £12.60pw provided you pay before 6th April 2019.

That is both consistent with the wording and the logic (backed up by what Steve Webb has said) of not forcing people into a decision about paying class 3, because of existing time limits, until they knew their foundation amount. It is also consistent with HMRC's decision to suspend sending out deficiency notices; HMRC should be sending out deficiency notices for 2011/2012 if failure to pay by 5th April 2013 will mean the rate will go up.

However Justin has taken 'higher rate provision' to mean for the 2011/2012 year, higher than the 2012/2013 rate of £13.25pw.

The ambiguity of what HMRC meant for the 2010/2011 tax year was discussed earlier.

In this HMRC tax information and briefing note (before single tier was brought forward to 6th April 2016 from 6th April 2017) it says

Current law
Section 13(6) of the Social Security Contributions and Benefits Act 1992 (SSCBA 1992) and the Northern Ireland equivalent provides that Class 3 contributions paid after the end of the tax year to which they pertain should be computed by reference to the highest rate between when they were due and paid.

....................

For the 2010/11 (2011-12 in the case of Class 2) to the 2015/16 tax years inclusive the rate payable will be the rate as set out for the year in the relevant Re-rating Order provided they are paid before the 5 April 2019 after which normal rules will apply and the rate payable will be the highest rate between the tax year the contributions relate to and the year in which they are paid.

I may contact HMRC to ask them to clarify their wording as only they can know.

SnowMan

I have subsequently emailed the HMRC contact (Hasan) in that HMRC tax information and briefing note, to ask which interpretation was correct for 2010/2011 and 2011/2012 in respect of payment before 6th April 2019.

Hasan replied straight away :T:T

Dear SnowMan,

I can confirm that for a person who reaches SPA after 6 April 2016 and so will receive a Single Tier Pension the time limits for paying voluntary contributions and the higher rate provisions will be modified.

They will be allowed to voluntary contributions from the 2006-07 to 2015-16 tax years inclusive up to 5 April 2019. The rates payable for the 2010-11 and 2011-12 will be the rates that applied for those years i.e. £12.05 and £12.60 respectively.

So it is sensible to delay paying for 2011/2012 (the cost is £12.60pw whether it is paid before or after 6th April 2014, provided it is paid before 6th April 2019) and it is confirmation that 2010/2011 can still be purchased at the old rate of £12.05pw up to 5th April 2019.