How do I make voluntary National Insurance Contributions?

cashmonger

If this is the wrong section please move to relevant one.

I was asked by my mum to look at what contributions I had made and since I've been self employed and low earning they have been paid for me. However there are two years where I was paying it but it said it isn't a full year. If I complete these two years then I will be eligible for the basic pension of 10 years.

we were on the main website where it gave information about the past payments etc but we couldn't find information anywhere on there about how you actually make payments.

So could anyone fill me in how I go about actually making a voluntary payment so I can get this nuisance out of the way.

[Deleted User]

Try this form

https://www.gov.uk/government/publications/national-insurance-application-to-pay-voluntary-national-insurance-contributions-ca5603

hugheskevi

You will need 35 qualifying years for a full pension under the system coming into force on 6th April. Once you have 35 qualifying years any extra will be worthless.

The pension system changes frequently (eg, it isn't too long since you would have needed 44 qualifying years, then it changed to 30, and from 6th April to 35), so as you have 36+ years to go to retirement, there is a high risk that the contributions could turn out to be money entirely wasted.

I wouldn't be making the voluntary contributions in your position, unless the amount required to purchase the years is trivial.

cashmonger

hugheskevi wrote: »

I wouldn't be making the voluntary contributions in your position, unless the amount required to purchase the years is trivial.

It is its like 200 quid or something if that counts as trivial. I wouldn't pay it myself but my mum wants to.

Hmm I thought 10 years entitles you to something basic? or that will change?

So if the 10 year thing will be null then there is no point or am I understanding you wrong?

RickyB2000

As I understand, 10 years is the minimum required to get any state pension. Anything less and you get zip. Of course, what is the probability of you getting to 10 over the next 40 years?

RickyB2000

I have gaps as well. It doesn't worry me massively. If it was only a couple £100 to correct, I may be tempted as I do want to stop work early and that would be a cheap contribution. You could retire in 27 years, or aged 59 with full 35 years (if rules don't change). Or 25 years aged 57 with full 35 years if you make these payments.

Otherwise, I believe you could retire early and contribute towards any gaps in the intervening years, but that could be costly.

GunJack

cashmonger wrote: »

That is my thinking as well but my mum is very neurotic about such things and she gets irate since she has seen some unfilled years in my contibutions she is going to keep harassing me about them. Hates to see anything going to waste. Which I do too but not beyond the point of reason like she does.

IF you were to top-up those extra 2 years of pre-2016 NI, you'd probably need to do it very quickly (i.e. before the new State Pension comes in in Apr 16), or they may well be wasted. You may be better ensuring you get qualifying years from Apr 16 onwards.

E.g. if you have 8 years already, you will get a starting amount for newSP based on those 8 years under the old system. Each year under the new SP will earn you 1/35 of full newSP so make sure you contribute enough NI to qualify. So, if your 8 years (old system) equates to say £30 a week starting amount, you'd need (£155.60-£30=) £125.60 for full newSP, or (£125.60/£4.32=) 29 years of contributions post Apr 16.

hugheskevi

It is its like 200 quid or something if that counts as trivial. I wouldn't pay it myself but my mum wants to.

It isn't that much, but more than trivial. Investing it in voluntary NICs would be a high risk investment with the most likely outcome being that all of it is lost. However, some policy changes are possible which could see a big benefit from having a full contribution record, eg, if the rules in future were to change to something like you can retire after 45 years of contributions or State Pension age, whichever comes first - although I should emphasise that there are no such proposals around at the current time. If you retire very early (so you would not otherwise reach 35 qualifying years), or went to work overseas are other scenarios in which the contribution could be of value.

Hmm I thought 10 years entitles you to something basic? or that will change?

Every year you work and earn above £5,965 you will get a qualifying year.

10 years will be the minimum years needed to receive a payment when you reach State Pension age, which for you will be 68+. There is no benefit to have 10 qualifying years until you reach State Pension age.

35 years will give you the maximum payment possible (between 10 and 35 years you get a pro-rata amount of the full pension). Anything above 35 years is worthless.

[The position may be slightly different for you due to transition between the current and future system, but any differences will be minimal at your age]

I really don't see the point in it myself since I plan on saving my own money over my career but my mum is absolutely adamant that a state pension is of utmost importance though I fail to see the logic myself if I have no problems saving my own money.

It isn't about whether you will have State or private income, rather, that you are highly likely to qualify for a full State pension in any event. Hence making voluntary contributions is likely to be a complete waste.

That is my thinking as well but my mum is very neurotic about such things and she gets irate since she has seen some unfilled years in my contributions she is going to keep harassing me about them. Hates to see anything going to waste.

You should point out that her plan is most likely to see the entire voluntary contribution going to waste (well, it would be a voluntary tax donation, which isn't quite a waste I suppose)

cashmonger

hugheskevi wrote: »

You should point out that her plan is most likely to see the entire voluntary contribution going to waste (well, it would be a voluntary tax donation, which isn't quite a waste I suppose)

Could you better explain why it would be a waste so I can tell her. She knows about MSE forum and so will have respect for what is said on here.

I still don't understand it properly but will have to tell her in a coherent argument for her to 'buy it'.

Just because I will qualify either way? I think I said that already to her but she said 'yes but you never know when the rules are going to change'. I wasn't really listening at the time so not too sure but think that was what she was arguing that it is best to qualify for the basic one asap to get on the ladder.

GunJack

cashmonger wrote: »

Could you better explain why it would be a waste so I can tell her. She knows about MSE forum and so will have respect for what is said on here.

I still don't understand it properly but will have to tell her in a coherent argument for her to 'buy it'.

Just because I will qualify either way? I think I said that already to her but she said 'yes but you never know when the rules are going to change'. I wasn't really listening at the time so not too sure but think that was what she was arguing that it is best to qualify for the basic one asap to get on the ladder.

posts 8 & 9

RickyB2000

Basically, every year you work you accrue NI credits. You need 35 NI credits to get a full state pension (under new rules). Every year you work over 35 adds no extra benefit (but you still have to pay NI until you hit state pension age). So, you have eight years credit. You need 27 years more paying in full NI to get max state pension.

So, if you think you will not pay in 27 more full years, then buying the extra now makes sense. If you think you will pay in 27 or more full years, paying the extra two now is basically just giving money to the government. If you work 27 years, two of those years NI is thrown away.