Making class 3 NI contributions, but now receiving NI credit via carers allowance

jingleberry

First, I'd like to thank every contributor to this forum for your wise counsel over the years. I have benefited enormously from reading these comments and I appreciate the time and expertise donated by others on here. I'm in a bit of a dilemma, I think I know what to do but the purpose of this post is to check if anyone can see any pitfalls. Its possible that others are in a similar position and this post might strike a chord with them as well. 
I am 63, 3 years from state pension age, retired, and living mainly on private pension income, except for a small job which does not pay enough to trigger NI contributions. When I retired my state pension forecast shows that I had 35 years full NI contributions but would receive less that the full new maximum state pension due to being contracted out for many years. In 2016, following the good advice on this forum,  I began making voluntary class 3 NI contributions, and I have been diligently checking my state pension forecast every year to make sure that these are having the expected effect. Sure enough,.as I get closer to state pension age the gap between the two figures on my forecast - what my state pension is worth now, and what it will be worth if I continue to make NI payments for as long as I am allowed, is slowly narrowing. My plan was to continue making these class 3 payments (monthly by DD collected by HMRC) for the rest of 2020/21, and for the whole of  2021/22 and 22/23 ( I reach SP age at the end of April 2023). 
I act as a carer for my very elderly mother and I recently successfully claimed carers allowance. I have just received a payment of £900 which is the agreed allowance backdated for three months to 20 April 2020. In the paperwork they sent me, DWP have said that part of the deal with carers allowance is that I receive an automatic NI credit for the time I receive the allowance. So on the face of it I no longer need to make voluntary contributions and I can rely on the NI credit to have the same effect on my SP. I would like to speak to DWP to check my understanding is correct but unfortunately due to the virus they are not taking calls of this type. In the absence of being able to speak to anyone at DWP my gut feeling is to cancel the HMRC DD straight away and sit back and wait until DWP catch up and begin taking calls. I am reluctant to disrupt the arrangements I have in place but I'm assuming that if necessary I could always make the class 3 payments retrospectively (perhaps if necessary after I reach SP age)  if it turns out that I have got it wrong or my carers allowance stops.
I was about to cancel the HMRC DD when I thought 'hold on a minute, the MSE forum might be able to help!' As always, any thoughts you might have would be most welcome.

molerat

https://www.gov.uk/national-insurance-credits/eligibility

Receipt of carer's allowance gives you class 1 credits automatically so if you cannot get through to them stopping the DD would seem to be a good idea.  When you do eventually get through you should ask for a refund of this year's payments as they were made on the premise of not receiving credits.  They are now fairly amenable to erroneous payment refunds.

jingleberry

Thank you molerat very useful to know. 

DairyQueen

^^^ This.

 I am a little younger than you and also receive carer's allowance for disabled mum.

I made voluntary NI payments for a few years before receiving carer's allowance but was then able to substitute this with the NI credit. I am now at max SP entitlement so the NI credit is no longer required for pension but it is still applied to my record. Definitely cancel the DD and request a refund. 

On a different note...

As you may be aware, be careful how much you earn as exceeding the earned income cliff-edge by 1p will result in the cancellation of carer's allowance. I think the max is currently £128 per week (net of certain expenses and 50% of any pension contributions). Pension income is excluded.

jingleberry

Thank you dairy Queen,  

AlwaysLearnin

Careful that any refund doesn't take you back to before when your carer allowance started - as it started 20/4 you won't get the full 52 weeks credit for this tax year for carers allowance alone. 

jingleberry

Thanks always learnin. I think if I cancel the DD now, Ive already paid about three months for 20/21 so that should be more than enough to compensate for the gap between the start of the tax year and the beginning of the allowance

NedS

jingleberry said:

Thanks always learnin. I think if I cancel the DD now, Ive already paid about three months for 20/21 so that should be more than enough to compensate for the gap between the start of the tax year and the beginning of the allowance

It doesn't work quite like that, so be careful. Although in your case I think you will be OK.

For the year to qualify based on NI credits, you need to have been credited 50 of the 52 weeks. As the tax year started Mon 6th April, and your Carers Allowance was backdated to Monday 20th April, it looks like you only missed the first 2 weeks of the year, so as long as you have Carers Allowance and are credited NI for the remaining 50 weeks you should be OK. Otherwise you must have paid a stamp in the weeks you were missing for the year to count (i.e, those first two weeks).

molerat

If OP receives a full refund of contributions paid there will be the opportunity to fill any gaps in the 20-21 tax year up until April 2023 at the same cost as originally paid, or up until April 2027 at an increased cost, so no real danger of losing out.

ljayljay

Related to this you can also qualify for the credit if you are a carer and don't meet the qualifying hours to receive the allowance. I finished work last year to visit and care for my mum every other day. She is in receipt of Attendance Allowance and therefore I was entitled to the credit as the minimum threshold is 20 hours per week as opposed to 35 hours to receive the allowance.

jingleberry

Thanks to all for your replies. As always, they are very much appreciated. There are a few interesting paragraphs in the bumph that came with the letter confirming my carers allowance had been agreed. Under the heading 'carers credit' it reads:
'National Insurance Credits for carers of working age can automatically protect your future entitlement to the basic elements of the state pension and bereavement benefits when carers allowance is not being paid for any reason. The credit may also help you build up some additional pension, sometimes called state second pension. Any additional pension you are entitled to will be paid with your basic state pension when you claim it.  Carers credit will cover periods of up to 12 weeks:
- before your carers allowance entitlement begins
- during any breaks in  care, and 
- at the end of any period of carers allowance entitlement.'
My carers allowance began on 20 April 2020 so the way I read this, the NI credits should apply for the preceding 12 weeks, so about the last 10 weeks of 2019/20 as well as filling in the two week gap at the beginning of 2020/21. 
This might be supported by my NI record for 2019/20 which I notice now says that I have voluntary contributions for 52 weeks, and national insurance credits for 10 weeks. Referring to the latter, the forecast says 'these may have been added to your record if you were ill/ disabled, unemployed, caring for someone full time or on jury service'.
Clear as mud right? I must say I always fund myself hopelessly confused whenever I try and navigate my way around the various rules and regulations relating to benefits and credits, and I have every sympathy for those who have to deal with this regularly. .