Voluntary Contributions

peanutbutter92

Hello, I was looking on my government gateway account at the state pension forecast and have seen that I have the following gaps in my NI contributions:

2010-2011 in full time education (uni) - could make £795.60 voluntary contribution
2011-2012 and 2012-2013 in full time education (uni) and part time work - could make £795.60 voluntary contribution
2013-2014 in part time work (volunteered to gain career experience in a different field) - could make £153 voluntary contribution
2014-2015 in full time education (uni) - could make £795.60 voluntary contribution
2015-2016 in part time work - could make £795.60
All other years are full. I'm 28 and currently work full time.

My forecast is showing entitlement to £175.20 if I continue to contribute for another 29 years. It says I 'cannot improve the forecast any further'. The website says I have until 2023 to make these contributions.

My question is, should I make voluntary contributions or not? 

molerat

You have 40 years left before state pension age to get those 29 years needed.  Very little point paying to fill the full priced gaps, 13-14 maybe depending on what you expect to be doing for the next 40 years.

peanutbutter92

I definitely won't be having children so won't be taking full time out of work. I may potentially move to 4 day work week for better work/life balance. I might take some time off to travel though so should have enough time to get the 29 years. Sorry I just wasn't sure if there was any disadvantage if I don't make the contributions. Thanks

mark55man

Currently having children isn't a problem as if you get Child Benefit you get that year counted for NI Contributions up to 12 I think.  But yes definitely keep an eye on it but you don't need to decide for a long while yet.  Although if a you are a few years short nearer the time, currently the amount you have to pay to get a years credit is seriously good value.

If you are really paranoid then there is a risk that over the years between now and then the amount you would need to pay to get the extra years increases (so less good value) or the amount of years you need goes up (so you might not be able to make them up, and be kicking yourself you didn't buy now).  However, I think both are extraordinarily unlikely.

Also such payment would only begin to be returned at state retirement age - If you were happy to forego the cash now, I would invest it in a pension - you get a tax rebate (into your pension) and over 30 years cautiously invested that would give you a block of money that you can withdraw at any point after 10 years before SRA which should be plenty of time to make up any years missing at that point (or go some way to compensate for any loss of income in the highly unlikely cases you can;t do it)   

peanutbutter92

Sorry I should have clarified, not having children isn't a financial decision I just meant the children/tax credits point won't be a factor for me at all ever.

Thank you, your response has given me a few things to think about.

mark55man

So if you plan to work through to retirement then NI should not be a problem - it is a bit complicated though, especially of you have very part time or varied jobs

This link is helpful, and there are a myriad of other links. The table in this link sums it up  https://www.gov.uk/government/publications/rates-and-allowances-national-insurance-contributions/rates-and-allowances-national-insurance-contributions

Broadly the Lower Earning Limit is the least you need to earn to earn entitlement its about £120 per week.  The the primary threshold (£180 per week) is the amount you need to earn after which you pay 12% stamp (it used to be stamps on a card) aka NI.  Then the upper earning limit (£962 pw) is the amount  over which you pay a reduced rate (2%).

The complication is, if you work in multiple jobs then these are not rolled up - so if you want to work at different things at least one needs to be over the LEL.  PAYE type NI are called Class 1

A similar regime applies for self employed people, but they would typically pay Class 2 (about £3 per week) if over their LEL.

Class III voluntary can be paid by anyone who needs to make up contributions £15 per week.  If your income is variable you can get credited weeks earned, and weeks not earned which would make topping up cheaper.  I think if you don't top up, it simply doesn't count as a year - so that is probably worth looking at if you have any part employed years (although in your OP its clear that's not the case)

balbs

Another (if slightly cynical) way of looking at it is me to think would I have forseen anything that has happened to the state pension system in 1986 up to now - answer no - so markman88 is correct, you have plenty of time (major changes are signposted well in advance but its keeping an beady eye out thats important) invest in a pension regularly and relax.