Completing National Insurance record when not working.

Chomeur

Reposting this discussion here, as suggested https://forums.moneysavingexpert.com/discussion/6287637/completing-national-insurance-record-when-not-working#latest 

Here's what's been said:

Me: "I reach the age of 67 in October 2035 which I believe that will be the state retirement age for men at that time. I currently have 24 years of NI contributions. You need 35 years in order to get the full state pension. I'm not currently working, but am able to afford voluntary contributions. I think they are about £300/year. By my reckoning, the logical thing to do would be to make voluntary contributions for each of the 11 years ending from April 2025 to April 2035, to get the total up to 35. I could make a start now, but if I do start working again at some time in the future, then I would be obliged to pay contributions, and I might end up with more than 35 years' contributions, which wouldn't help me.

Does that make sense? I could easily be missing something."

Savvy_sue "You can pay up to 6 years in arrears, so no need to do anything immediately. However I'd put the money aside now / on an on going basis: lots could happen between now and 2025."

missile: "Is this your guesstimate or have you obtained a pension forecast?
How likely are you likely to regain employment?"

olgadapolga: "I think you'd do well to post on the pensions board about this as the "35 years to get a state pension" isn't that clear cut for those of us who started paying NI contributions before 2016.

There's a calculation that would have been made to calculate a starting amount and then they work out how many more years are needed to reach the full state pension, although the number of years you have left to contribute should be showing on your state pension forecast (which is available online or by ringing the pensions people).

I don't think that your figure of about £300/year is anywhere near correct either, more like £700+/year if you're not self-employed.

But I could be wrong so probably best to post on the pensions board as the experts are over there  "

My figure of 24 years of contributions is based on having registered and checked online. I am self-employed, but have very limited income from it. £312.40 is what they advised me to pay last year.

I've no idea if I'll start earning significantly again, or not.

Dazed_and_C0nfused

I reach the age of 67 in October 2035 which I believe that will be the state retirement age for men at that time. I currently have 24 years of NI contributions. You need 35 years in order to get the full state pension

You are staring with a misconception.  You are under transitional rules so having 35 years is irrelevant.

Assuming you complete Self Assessment returns then you can make Voluntary Class 2 NI payments each year (whilst self employed) for £160/year.  No need to pay any more than that.

The thing you need to do now is check your State Pension forecast on gov.uk to see what you have accrued so far (usually to 5 April 2020 or 2021).  It is important you read past the likely headline of £179.60.

Only then will you know how many more years you need to accumulate.

Adding to your State Pension via voluntary Class 2 NI contributions is one of the investments you could ever make.  It could be an inflation proofed £5.13/week paid for 40+ years.  All for £160 😃

molerat

Firstly 35 years is not relevant to you as you have a pre 2016 history.  You may need 35 years but that will be a coincidence, you may need more or less than 35 to reach the full new pension amount.

What exactly does your SP forecast show ?  There should be 2 or 3 different figures.

Class 2 contributions are only £158.60 per year, class 3 is around £800. Not sure how that quoted figure for last year was worked out, maybe filling a gap with class 3.

If you have past gaps back to 2006-07 it may be worth filling some of them if they are cheap enough - how long have you been self employed ?

p00hsticks

Chomeur said:

Reposting this discussion here, as suggested https://forums.moneysavingexpert.com/discussion/6287637/completing-national-insurance-record-when-not-working#latest 

Savvy_sue "You can pay up to 6 years in arrears, so no need to do anything immediately. However I'd put the money aside now / on an on going basis: lots could happen between now and 2025."

although Savvy_Sue would have been correct in the past, changes due to the introduction of the new State Pension in 2016 mean that currently (until April 2023 I think ) you can make up missing years back as far as 2006, although in general pre-2016 years may or may not have an impact on your state pension forecast - the devil is in the detail (in your case, with only 24 years currently on your record, then at least six further pre-2016 years would increase your current forecast).

Terron

You don't just get pension increases from NICs. You also gain entitlement to certain benefits, so paying for years that don't help your pension is not a total waste.

If you are self-employed and make less than about £6,500 in a year you can pay voluntary class 2 or class 3. Class 2 are much cheaper, and oddly give entitlement to more benefits

Chomeur

OK, thanks, quite a lot to digest.

Dazed_and_confused, is it definitely correct that I have to file a self-assessment form to pay Class 2 contributions? It would certainly be worth doing that for the saving over paying Class 3. HMRC told me that I didn't need to file them any more a couple of years ago, so I stopped doing it. If you can point me to where it says this, that would be helpful. I spoke to someone from HMRC last year about making Class 2 contributions and he didn't mention it.

My national insurance record says:

"You have:

• 23 years of full contributions
• 15 years to contribute before 5 April 2035
• 13 years when you did not contribute enough"

I had thought that the 15 years were years which are available in which I can contribute. But I'm now starting to see that in fact it may be that I need to contribute a further 15 years. This seems to be stated on the other page which says Estimate based on your National Insurance record up to 5 April 2020 £106.62,  Forecast if you contribute another 15 years before 5 April 2035 £179.6. So it now seems that I need 38 years, not 35.

All  years from 2005-6 are full except for 2007-8 and 2018-19 and 2019-20. For the latter two, HMRC sent me a letter after I spoke to them saying that I could pay £153.40 and £159 in Class 3 contributions to make these up. But I had asked to pay Class 2, so it actually looks like maybe HMRC are confused on this! So that's what the £312.40 I referred to earlier relates to. I paid this money on 6th April this year, but it is not yet showing in my record. I don't know how long it usually take to come through?

In 2000-2001 I was working for six months, in this country, but the year is not full. I'm wondering if my employer didn't make the payments. It's too late to chase my employer now, as it is no longer in business, but it does seem poor that HMRC never send any written confirmation that your employer has made required payments.

So it seems I have 17 years, including 18-19 and 19-20 to make up the 15 years, so I probably won't go to the trouble of paying the 2007-8 amount. Terron I don't think that any of the other benefits would be available to me, as for one thing I probably have too much savings.

Dazed_and_C0nfused

As far as I'm aware if you wish to pay Class 2 NIC due to being self employed then completing a Self Assessment return is required.

If you look at the 2020:21 Self Assessment return and self employment pages on gov.uk you will see it is even possible to state you were self employed and don't need to provide income details (for the self employment) as a result of claiming the Trading Allowance.  But you can still pay Class 2 NIC.

If you have made good the 2018:19 and 2019:20 years then your forecast should eventually be updated to show you have accrued £116.88.

A further 12 years will take you to £178.45.

A 13th year will only add the final £1.15 so still worth paying £160 for but not nearly as good a deal if you had to pay Class 3 at c£800.

molerat

How much is 2007-08 ?  That is the decider on whether to bother or not.

Were you in a contracted out pension scheme ?  Does the forecast show a COPE amount ?  I suspect yes as the numbers don't make sense otherwise.

Chomeur

molerat said:

How much is 2007-08 ?  That is the decider on whether to bother or not.

Were you in a contracted out pension scheme ?  Does the forecast show a COPE amount ?  I suspect yes as the numbers don't make sense otherwise.

I don't know, I can't see how much 2007-8 would be online. Maybe I have to phone them up, but I suppose it's likely to be lower than current amounts, so would be worth doing.
Yes, I was contracted out. The COPE amount is £17.78/week. I wasn't aware of this. I thought that contracting out had just meant that more money had gone into my pension funds than it would have done otherwise. I do of course get annual statements of the funds in my pensions. So is this entitlement in addition to what I can draw from those funds? If it is then it's going to be split between more than one pension provider, so could be complicated.

molerat

Your NI record will show how each year was filled or how much it will cost at class 3 rates to fill.  It will only be lower than current amounts if part filled, years further back than 2 years are charged at current rates.

Chomeur

molerat said:

Your NI record will show how each year was filled or how much it will cost at class 3 rates to fill.  It will only be lower than current amounts if part filled, years further back than 2 years are charged at current rates.

This is all it shows me: