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State Pension and voluntary NI contributions

My mum has applied for her state pension and has been told she has
25 years worth of NI contributions. She has not been working or claiming
any state benefits since 2005.

I've had a look at the HMRC website but find it all a bit confusing. I
assume she can pay voluntary NI contributions (I understand you can go
back as far as 6 years) to HMRC, but is it weekly or do they want a
lump sum? She couldnt afford a lump sum.

Also, if it's a weekly contribution, would the weekly cost for 2007-08
class 3 contributions be £7.30 or would it be for the current yearly
rate of £13.55?


Many thanks in advance.

Comments

  • Suggest your mum gets a "Statement of National Insurance Account" (see http://www.hmrc.gov.uk/ni/intro/check-record.htm). This will clarify how much needs to be paid for the missing years and when it needs to be paid by.

    Unfortunately for her, my understanding is that it must be paid as a lump sum, although I agree that the HMRC website is confusing and I can't find a clear statement on it.

    I am also disappointed that the State Pension claim form, that I assume she has completed, didn't make it clear what she would have to pay to increase her entitlement.
  • Thanks SeekTruth.

    I found this on the HMRC site (had to break the link to post it):
    www. hmrc.gov.uk /nic/ca5603.pdf

    It kinda looks like you can setup a monthy Direct Debit to pay them?
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    When will your mother reach SPA? As the number of years needed to get the full basic SP will change soon.

    Also, does she have any S2P? Is she a widow?
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    When will your mother reach SPA? As the number of years needed to get the full basic SP will change soon.

    The OP says
    My mum has applied for her state pension
    which would indicate that she is either of or approaching
    pension age under the current system? In which case she seems to be five years short of a full basic state pension?
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/200618/how-to-increase-your-state-pension-2010-15.pdf

    It would seem that a lump sum payment is required?
    http://www.hmrc.gov.uk/payinghmrc/class3nics.htm
  • atush wrote: »
    When will your mother reach SPA? As the number of years needed to get the full basic SP will change soon.

    Also, does she have any S2P? Is she a widow?

    The end of March 2014.

    No she doesnt have S2P and no shes not a widow.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Two points.
    (i) The govt plans to bring in a scheme that would allow her to buy some S2P during a six month window in 2015-16. You might like to keep an eye out for progress on this idea.
    (ii) Is she aware of the deal she'd get if she deferred taking her pension? It pays a far higher rate of return than any savings scheme I know. For every year of deferral she can take the reward as a 10.4% boost to her pension.
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210220/DWP024.pdf

    I don't know how these would interact with her trying to buy more years.
    Free the dunston one next time too.
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 15 February 2014 pm28 11:34PM
    xylophone wrote: »
    The OP says which would indicate that she is either of or approaching
    pension age under the current system? In which case she seems to be five years short of a full basic state pension?
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/200618/how-to-increase-your-state-pension-2010-15.pdf

    It would seem that a lump sum payment is required?
    http://www.hmrc.gov.uk/payinghmrc/class3nics.htm

    I did get that, but just because someone applied didn't mean they were eligible? And I was wondering if they were a widow as that would have implications re S2P?

    Lots of things are changing inlc the number of qualifying years and how spouses w/o full contributions are treated so it doesn't hurt to confirm.

    and knowirg the rate that deferrment would bring is a good idea as it might be better than paying for extra years?
  • kidmugsy wrote: »
    Two points.
    (i) The govt plans to bring in a scheme that would allow her to buy some S2P during a six month window in 2015-16. You might like to keep an eye out for progress on this idea.
    (ii) Is she aware of the deal she'd get if she deferred taking her pension? It pays a far higher rate of return than any savings scheme I know. For every year of deferral she can take the reward as a 10.4% boost to her pension.
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/210220/DWP024.pdf

    I don't know how these would interact with her trying to buy more years.

    For someone that:
    a) reaches State Pension Age before 6 April 2016
    and
    b) will have fewer than 30 years of NI contributions
    and
    c) can afford to purchase additional years and/or defer taking the State Pension

    then by my calculations they are much better off buying extra years than deferring.

    Buying extra years: pension increased by approximately 30% of amount expended and yearly increases in line with Basic State Pension (currently 'triple-lock')

    Deferring: pension increased by 10.4% of amount expended and yearly increases in line with CPI.

    I acknowledge that if you defer then the expenditure (actually a foregoing of income) takes place over a period rather than being a lump sum up-front.

    The details of the scheme to introduce Class 3A contributions (to buy additional S2P) have not yet been announced, but I think it is stated that the cost will be 'actuarially neutral'. I think this means that it will be a much poorer option than either purchasing extra NI years or deferring.
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