National Insurance Gaps

kilby_007

Hi,

I have 2 gaps in my NI, both from when I was a student. It's too late to pay for one of those years (2003) but the HMRC website says I can make up the shortfall for 2009 by making a payment of ~£350. Is it worth me doing this, VS what extra it will add to my state pension? I've paid up 15 years of NI in full so far and I'm 32, so likely to work at least another 20 years (35+ total) which is what I understand is required now to be elligible for a state pension.

bigfreddiel

If you can easily afford £350 then pay it, you never know what may happen in the next twenty years, you may need forty years worth by then!

jamesd

Under the rules that apply to you at the moment you will get the maximum possible state pension entitlement by having a bit under 35 years counting*. It's likely that your state pension age will be 70 or even higher due to increasing life expectancies. That's so many years between now and state pension age for you to be working and paying NI, claiming means tested benefits or receiving child benefit and getting credits that it doesn't seem worthwhile to pay the £350 now.

There's always the chance that the rules could change in the future, they did increase from 30 to 35 years in April 2016 at the time the state pension basic level also increased substantially. But the rules before 30 were closer to 50 years (depending on gender) plus earnings-related portion with no cap. Nothing prevents a return to that sort of system except the trend away from it.

Where the £350 now could help is if you plan to retire so early that you wouldn't get to 35 years by working or credits and would have to buy extra years anyway. In 2009 I purchased enough back years to get me to the point where I'd have to work or buy to only age 59 under the 30 years requirement. The increase to 35 years took that to 64 so my choice turned out to be better than I thought at the time. I'd have purchased more if I'd known about the coming change to 35 years...

*It's probably a bit under 35 years because you have accrued some earnings-related part under the previous system. If you worked only in the current since April 2016 system it'd be exactly 35 years.

SnowMan

kilby_007 wrote: »

Hi,

I have 2 gaps in my NI, both from when I was a student. It's too late to pay for one of those years (2003) but the HMRC website says I can make up the shortfall for 2009 by making a payment of ~£350. Is it worth me doing this, VS what extra it will add to my state pension? I've paid up 15 years of NI in full so far and I'm 32, so likely to work at least another 20 years (35+ total) which is what I understand is required now to be elligible for a state pension.

You seem to say that you've accessed the online state pension statement service (?)

If so you can see how much state pension amount you've earned so far, and hence how many post April 2016 years you need. Ignoring rounding you will need this number of years to get up to the full single tier pension of (in 2016/2017 terms) £155.65pw after which additional qualifying years don't add to your state pension.

Post April 2016 years required = (155.65 - state pension earned up to 5th April 2016)/4.45

It should show you that figure on the online system already (?) when it says 'if you contribute another x years before {State Pension Date}' although that might not allow for the 2015/2016 year yet.

There is no rush to pay, you have until 5th April 2019 to pay at the current rates, so I wouldn't make any decision until early 2019.

Because of all the unknowns it is impossible to give a simple answer as to whether it is worth it, as it all depends on whether you achieve the post April 2016 years required (and so the purchased year is wasted) and how the state pension qualifying rules, and the future ability and cost of paying class 3 contributions are changed in the future.