Voluntary National Insurance - Yes or No?

[Deleted User]

Hi everyone,

I am currently early thirties and have been working outside the U.K for around five years. I could possibly be returning in around ten years or potentially not at all. I am struggling to decide whether I should make voluntary NI contributions in my absence. It seems the main uncertainty is exactly what the pension will look like in 40 years when it comes to retirement. The contribution I believe is around 2xx GBP annually, which is not too much and I am still thinking it may be worth a gamble? Has anybody else analysed this situation?

shortcrust

No one knows what will happen, but I'd personally prefer to be 68 (or 70 or 75!!) and thinking I'd wasted a few hundred quid in my 30s than 68 and wishing I'd got a full set of NI years behind me.

badmemory

If you look at SPs logically the main conclusion is that the way to upset the majority of voters would be to make the SP means tested. Unless the voting pattern in this country changes older people tend to vote more than younger. This is why they still haven't removed the triple lock. So with that in mind:-

If you keep your eye on the state pension age, we'll call it 68 for convenience. So you get to 40 & you have 10 years in the NI "bank" & you need 35 = do nothing as you've 28 yrs to go and only need 25 more. Get to 45 & you only have 23 to go = buy the 2 oldest yrs you can. And recycle until 68 or when the proverbial hits the fan & then stop.

Unfortunately (being a pessimist) with growth at 1.5% & inflation at 3% I personally expect the proverbial to hit the fan sooner rather than later.

Brynsam

ying_yang wrote: »

Hi everyone,
Has anybody else analysed this situation?

I don't think it is possible to 'analyse' so far in advance, in the absence of a crystal ball. If you can easily afford the contributions it might make sense, but you would have to make payments on the basis it could be money down the drain (or money well spent), but who knows?

pip895

I'm a little unsure on this but Class 2 is at the 2xx level - isn't that being fazed out April 2019? If you have to pay Class 3 I think you might be looking at 7xx. Might be worth grabbing the 2xx years whilst available - given the uncertainty not sure whether it would be worthwhile at the 7xx level or not - probably - if you could afford it without hardship.

Perhaps someone could confirm?

Terron

pip895 wrote: »

I'm a little unsure on this but Class 2 is at the 2xx level - isn't that being fazed out April 2019? If you have to pay Class 3 I think you might be looking at 7xx. Might be worth grabbing the 2xx years whilst available - given the uncertainty not sure whether it would be worthwhile at the 7xx level or not - probably - if you could afford it without hardship.

Perhaps someone could confirm?

Class 2 is less than £150 a year and is indeed ending in April 2019. After that you pay over £700 for class 3. If you qualify to make class 2 contributions it would be daft not to make them .

As a landlord I may or may not be able to make them, but am trying. I only need 1 year to maximise my SP.

Johnnyboy11

Pay £5k in Class 2 NIs for a full state pension, or pay £300k for an equivalent annuity. Yes or No?

wannabe_a_mum

If you are working overseas are you contributing to the NI equivalent scheme in that country? Contributions could be transferrable if there is an appropriate agreement in place?

bostonerimus

Terron wrote: »

Class 2 is less than £150 a year and is indeed ending in April 2019. After that you pay over £700 for class 3. If you qualify to make class 2 contributions it would be daft not to make them .

As a landlord I may or may not be able to make them, but am trying. I only need 1 year to maximise my SP.

I've been a UK expat for the last 31 years and paying voluntary NICs has been the best financial decision of my life because I paid Class II which has been very inexpensive.....the current rate is £2.85 a week and it was less in the past. This very low contribution rate for expats is now being replaced with Class 3 contributions which are £14.25/week which is still a good deal and I think this is a good bet/investment in your future. When you take the SP you should try to be resident in a country where it is index linked

I estimate that over my 35 years of contributions I've paid just £4k in NI contributions and if I'd invested that at 8.5% annual average return I'd have a pot of around £42k at age 67 when I will get the SP. I'm 57 now and I estimate the SP will be £10k/year in 10 years time when I start to take it. So if I was to take the £42k that my lifetime NI contributions might have been worth and buy a 2% annually growing annuity with an initial £10k payout, ie an annuity equivalent to the SP, and I live another 20 years, then that implies a rate of return of 25% and an initial payout rate of 25%. Or think of it like this; at £10k a year index linked it will only take me 4 years to be ahead if my £42k principal payment. That's the best annuity ever!

I also have 20 years of contributions into the US system and my UK SP will not change my US social security pension.......so I'll get two state pensions. You should check to see how any foreign schemes you contribute to interact with the UK system.

laineybabes

I paid a Voluntary NI payment via my bank using the 18 digit reference they supplied and have since confirmed the NI office have received it. I had a look at the previous threads on the forum and worked out the 18 digits referred to my payment and National Insurance number etc as detailed using the examples given. All good. I had a balance to pay for the same year (17/18) and received a letter stating "here is your 18 digit reference to make payment via bank", however the reference was 23 digits, it include five "9" s in the middle. All otrher details were as before, ie amount, Ni number etc. and ended with the letter "x" I therefore decided to omit the "9"s and use the remaining 18 digits to pay through my bank. I made the payment on 15th April and it was taken from account on same day. As of today 24th April, after telephoning the NI office, they confirmed they had NOT received my balancing payment. I am now worried that omitting the "9s" was not the correct thing, however I am convinced that the 18 digits I was left with is correct as it followed the same pattern and information as my previous payment which was fine. Can anyone suggest if they think I was ok to omit the details? HMRC have indicated I need to wait 10 days excluding the Easter holidays before they can start a trace. If nothing else I'm sure the payment will be found at the reference I paid it to!. Isn't it strange that when you make incorrect payments to non existing bank accounts they usually are bounced back into your bank within a week or so but not HMRC, they keep it in a suspense account!:)

OldBeanz

laineybabes wrote: »

I paid a Voluntary NI payment via my bank using the 18 digit reference they supplied and have since confirmed the NI office have received it. I had a look at the previous threads on the forum and worked out the 18 digits referred to my payment and National Insurance number etc as detailed using the examples given. All good. I had a balance to pay for the same year (17/18) and received a letter stating "here is your 18 digit reference to make payment via bank", however the reference was 23 digits, it include five "9" s in the middle. All otrher details were as before, ie amount, Ni number etc. and ended with the letter "x" I therefore decided to omit the "9"s and use the remaining 18 digits to pay through my bank. I made the payment on 15th April and it was taken from account on same day. As of today 24th April, after telephoning the NI office, they confirmed they had NOT received my balancing payment. I am now worried that omitting the "9s" was not the correct thing, however I am convinced that the 18 digits I was left with is correct as it followed the same pattern and information as my previous payment which was fine. Can anyone suggest if they think I was ok to omit the details? HMRC have indicated I need to wait 10 days excluding the Easter holidays before they can start a trace. If nothing else I'm sure the payment will be found at the reference I paid it to!. Isn't it strange that when you make incorrect payments to non existing bank accounts they usually are bounced back into your bank within a week or so but not HMRC, they keep it in a suspense account!:)

I think that paying a different reference number into a system that accounts for everyone over 16 as well as millions of foreign nationals and ex-pats, it would not surprise me when the system took some days to resolve the issue.