Voluntary NI contributions

Daisyone

I think I might have misunderstood how to make Class 3 contributions and would appreciate any advice.

I am 62 and receiving an occupational pension. My state pension is due Sept 2019.

As I had been contracted out almost all of my working life, I will receive the current 'basic' pension amount.

I am aware that I can pay class 3 and would potentially have three complete years contributions that would enhance my pension significantly.

I was assuming that I would be able to make one payment towards the end of the tax year ie keeping the money earning interest (albeit very little these days) for as long as possible.

However, I was just perusing https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/513609/CA5603.pdf and it only shows how to pay monthly or quarterly. It does state elsewhere that you have up to 6 years to pay.

So, can I do as I had anticipated and pay for 2016/17 at the end of the year or have I missed the boat for this tax year?

I assume there is no point in starting to make monthly/quarterly contributions now as I would end up with a partial year which would be no good.

If I can make a payment for a whole year, how do you go about it?

Thanks in advance for any help.

xylophone

"Deciding to pay
Before you decide to pay voluntary Class 3 National Insurance
contributions, you should get information about your
State Pension entitlement, including the number of qualifying
years you have to date.
To do this go to Get a State Pension statement at
https://www.gov.uk/check-state-pension
Alternatively you can contact the Future Pension Centre:
• if you live in the UK phone 0345 3000 168,
textphone 0345 3000 169
• if you live outside the UK phone +44 (0) 191 218 3600
For the Future Pension Centre opening hours
go to https://www.gov.uk/future-pension-centre
The information will be provided on a Pension Statement and
based on the current pension system.
Time limits and higher rates for late payment
You must normally pay voluntary Class 3 National Insurance
contributions before the end of the sixth tax year following the
tax year you are paying for, for them to count towards
State Pension and bereavement benefits. If you pay more than
2 years after the end of the tax year for which you are paying,
you may have to pay at a higher rate.
Due to the changes to the current State Pension for those who
retire after 5 April 2016, HMRC has extended the time limits for
payment to ensure you have enough time to decide if you would
like to pay. For more information, go to
https://www.gov.uk/voluntary-national-insurance-contributions
/deadlines


https://www.gov.uk/check-state-pension

"Use this service to find out how much State Pension you could get when you reach State Pension age.

The amount is based on an estimate of what your National Insurance record could be when you reach State Pension age.

You’ll also get information about how to increase your State Pension, if you can.

You can only use this service if you’re under State Pension age."

jamesd

First thing to do is to find out whether you are already above the flat rate level. Even a person who has been contracted out a lot might be since under the S2P system that followed SERPS there was some earnings-related increase above the basic state pension entitlement.

If you're within a year's worth of paying in of getting the maximum, do another check in say December because in roughly November the information for 2015-16 will be added.

You have the potential to get up a around £13 a week more from an extra three years if that won't take you above the flat rate maximum.

colsten

You can definitely pay in one go for a year. You can even pay for up to 6 "missing" years in arrears so in your case there's no rush to pay in this tax year, or the next.

molerat

You can actually pay for more than 6 missing years, anything from April 2006 - April 2016 can be purchased before April 2023 and before April 2019 at preferential rates. In op's case pre 2016 contributions are unlikely to be worthwhile though.

If you apply for a written NI record it will include a form showing you what is missing, how much it will cost and when it has to be paid by. Part of the form has " I have enclosed a cheque made payable to HMRC for the amount below".

Do you look after grandchildren whilst the parents are at work ? https://www.gov.uk/government/publications/national-insurance-application-for-specified-adult-childcare-credits-ca9176

xylophone

http://www.thisismoney.co.uk/money/pensions/article-3827421/Half-million-workers-state-pension-bargain-basement-rates.html

Daisyone

Thanks everyone.

I have already had my SP forecast and it IS only just above the minimum starting amount of around £120 (I have a tiny additional bit - only pennies really).

I have no 'missing' years contributions to make up.

I have already done the calculations to show me how long I need to live for the additional contributions to be worth it!

My question, which I don't think I stated very clearly, was really to do whether I should have been paying the class 3 contributions monthly/quarterly for this tax year rather than waiting until later to do it as a lump sum. The reason I asked is because the monthly/quarterly by DD is the only payment methods identified on the relevant application form. I wanted to make sure that I hadn't missed the boat for 16/17.

I guess if they say that you can make up contributions for up to 6 years then I will have to assume that I can do the lump sum method.

Thanks again to all who responded.

molerat

Yes you can make lump sum payments - done that. The price will remain at the historic rate until 2 years after the end of the year being purchased, for 2016 - 17 you need to pay by 5 April 2019, after that they increase to "current" rate until the end of 6 years - 2023 - when they can no longer be purchased. You will have to pay before you reach retirement age.

colsten

Superb guide about voluntary contributions http://www.royallondon.com/Global/documents/GoodWithYourMoney/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf

You'd have thought the DWP would produce something like this.....

Bootsox

I think what is confusing is there are really two kinds of NI contribution gaps:

1) One a physical gap, say if somebody went on a two year around the world backpacking trip in their twenties

2) The other kind of "gap" is a shortfall in NI contributions due to being contracted out

No. 2 probably affects a lot of people, the issue is discussed on Money Box:
http://www.bbc.co.uk/programmes/b07x12lz

colsten

You don't have a gap in NI years because you were contracted out. You still have the full years. Contracting out influences the amount of state pension you get - there will be a reduction in state pension as you will get more from your occupational pension. Sometimes considerably more. Some people may be able to make additional contributions but not all the ones who were contracted out can.

The Royal London guide I posted earlier explains it all in full, and helps you establishing whether you could benefit from voluntary contributions. I think the Moneybox feature you mention was to promote this guide.