Deadline for Voluntary Class 3 NI contributions

sue_mcgorrigan

If you have been making regular voluntary class 3 NI contributions in regular instalments, can you continue to make them right up to the date on which you can claim your state pension.  I cannot get a categoric answer on whether you have to stop making voluntary contributions at the end of the tax year prior to the tax year in which your state pension begins.
For example, my partner has been paying £800 a year in quarterly standing orders to HMRC since July 2018.  His state pension will start in Dec 2023.  Should he stop making voluntary contributions now as any future payments would fall in the same tax year as the start of his pension.  If he continues, the next standing order would go out on April 17th 2022.  Obviously, he doesn’t want to carry on paying if the payments aren’t allowed and would therefore fail to enhance his state pension.

p00hsticks

sue_mcgorrigan said:

If you have been making regular voluntary class 3 NI contributions in regular instalments, can you continue to make them right up to the date on which you can claim your state pension.  I cannot get a categoric answer on whether you have to stop making voluntary contributions at the end of the tax year prior to the tax year in which your state pension begins.
For example, my partner has been paying £800 a year in quarterly standing orders to HMRC since July 2018.  His state pension will start in Dec 2023.  Should he stop making voluntary contributions now as any future payments would fall in the same tax year as the start of his pension.  If he continues, the next standing order would go out on April 17th 2022.  Obviously, he doesn’t want to carry on paying if the payments aren’t allowed and would therefore fail to enhance his state pension.

I'm not sure if they'll stop taking the payments automatically, but you are correct in saying that the NI year in which you reach State Pension Age doesn't count towards your State Pension entitlement.

However you say his pension wil start in Dec 2023 - is that a typo ? It isn't in the next tax year, which will run from April 6th 2022 to April 5th 2023.

If you mean Dec 2022, then yes, stop the standing order (after checking that the April payment is covering months in advance and not arrears). If you mean Dec 2023, then he can continue the payments if he needs the 2022-23 year to take his pension up to the maximum according to his forecast 

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

sue_mcgorrigan

Thanks for your reply.  Apologies, yes, it was a typo - the retirement date is Dec 2022.
He has been paying arrears for previous years for years when he wasn’t working since retiring in 2015.  This is because despite having 35 full years NI contributions, he wouldn’t be entitled to a full new-pension because he’d been contracted out by his employer.  He’s been making quarterly Voluntary class 3 contributions of £195 since July2018 and this week made a one-off payment of £1600.  The next standing order is due to go out on 17th April (which is in the same tax year that he’ll take his state pension).  

It is impossible (even after speaking to HMRC) to find out precisely which years any of these payments are for.  He doesn’t receive proper receipts detailing what the voluntary contributions have bought back. 

If it would buy him more state pension, we’d happily continue the quarterly £195 standing order untilDec’22 , but obviously we don’t want to if these payments will pay for a future year and not contribute to his state pension entitlement.  It seems impossible to find out this information.

p00hsticks

sue_mcgorrigan said:

Thanks for your reply.  Apologies, yes, it was a typo - the retirement date is Dec 2022.
He has been paying arrears for previous years for years when he wasn’t working since retiring in 2015.  This is because despite having 35 full years NI contributions, he wouldn’t be entitled to a full new-pension because he’d been contracted out by his employer.  He’s been making quarterly Voluntary class 3 contributions of £195 since July2018 and this week made a one-off payment of £1600.  The next standing order is due to go out on 17th April (which is in the same tax year that he’ll take his state pension).  

It is impossible (even after speaking to HMRC) to find out precisely which years any of these payments are for.  He doesn’t receive proper receipts detailing what the voluntary contributions have bought back. 

If it would buy him more state pension, we’d happily continue the quarterly £195 standing order untilDec’22 , but obviously we don’t want to if these payments will pay for a future year and not contribute to his state pension entitlement.  It seems impossible to find out this information.

No you don't want to continue the payments going forward - as I said before, contributions for the year in which you reach State Pension Age won't affect your entitlement.

I'm in a similar position to your husband, but am making voluntary contributions via monthly direct debit to reach the maximum. 

The standing order (or is it a direct debit ?) will be for the current year, so you want to get that stopped, as it won't achieve anything going forward. What prompted him to make the £1600 payment, and how did he make it ? If he phoned up HMRC to get a payment reference to fill in gaps for previous years then I believe that they usually ask you which years you want to make up.

I also understand that they now tend to ask if you've checked with the Future Pension centre as to whether the payments will increase his pension (years prior to 2016 may not do).

If he hasn;t done so already, I suggest that he calls them for their advice on what to do

https://www.gov.uk/future-pension-centre

It may be helpful to have a copy of his latest State Pension forecast and NI record to hand when he does so...

molerat

https://www.gov.uk/pay-voluntary-class-3-national-insurance states that quarterly payments are made in July, October, January and April so on that basis the April payment is in arrears for the 21-22 year.  He certainly should not pay anything towards 2022-23 as they will not count.  If he stops the payment now he will likely just have to pay the missed 13 weeks later.

p00hsticks

molerat said:

https://www.gov.uk/pay-voluntary-class-3-national-insurance states that quarterly payments are made in July, October, January and April so on that basis the April payment is in arrears for the 21-22 year.

That link also says that if you elect to pay quarterly HMRC will send you a bill each quarter - I would have expected that bill to confirm what year the payments are going to relate to.

molerat

p00hsticks said:

molerat said:

https://www.gov.uk/pay-voluntary-class-3-national-insurance states that quarterly payments are made in July, October, January and April so on that basis the April payment is in arrears for the 21-22 year.

That link also says that if you elect to pay quarterly HMRC will send you a bill each quarter - I would have expected that bill to confirm what year the payments are going to relate to.

Had to chuckle at that, this is a government department we are talking about

sue_mcgorrigan

Thanks everyone for your replies.  It seems from what you all say that he should pay the April quarterly payment onApril 17th, but stop the standing order after that.  

He had spoken to Future Pensions, but is still unsure of which arrears years his payments are for.  The quarterly bill is very generic with no detail.  He paid the£1,600 after speaking to Future Pensions.
The problem is, unlike with most financial transactions, you can see the result of your payments when you log on to see your NI record and state pension forecast  online.  It takes months to see an up to date accurate forecast and I think it’s only done once a year.

p00hsticks

molerat said:

p00hsticks said:

molerat said:

https://www.gov.uk/pay-voluntary-class-3-national-insurance states that quarterly payments are made in July, October, January and April so on that basis the April payment is in arrears for the 21-22 year.

That link also says that if you elect to pay quarterly HMRC will send you a bill each quarter - I would have expected that bill to confirm what year the payments are going to relate to.

Had to chuckle at that, this is a government department we are talking about

 Well, I've just dug out the Direct Debit notification letter I get sent each year from HMRC telling me when and for how much my monthly Class 3 voluntary contributions will be taken, and although not 100% explicit it's certainly strongly implied that they're covering the current year. I've also spotted that it says that 'We won't collect NICS for any weeks beyond State Pension Age', and that payments are collected (in my case monthly) in arrears. So it sounds as if - assuming that quarterly payments work the same way and that the OP needs the full 2021-22 year - then they should stop the standing order after the April payment has gone out to stop any further payments that won't be of any benefit. 

For interest, the letter also refers the recipient to the Future Pension Centre for help deciding if you need to make the payments

jem16

p00hsticks said:

molerat said:

p00hsticks said:

molerat said:

https://www.gov.uk/pay-voluntary-class-3-national-insurance states that quarterly payments are made in July, October, January and April so on that basis the April payment is in arrears for the 21-22 year.

That link also says that if you elect to pay quarterly HMRC will send you a bill each quarter - I would have expected that bill to confirm what year the payments are going to relate to.

Had to chuckle at that, this is a government department we are talking about

 So it sounds as if - assuming that quarterly payments work the same way and that the OP needs the full 2021-22 year - then they should stop the standing order after the April payment has gone out to stop any further payments that won't be of any benefit. 

I would read that to mean that they will continue taking payment until you reach SPA. As the OP doesn’t reach SPA till December 2022 they would still take payments in July, October and January 23 for the part up till SPA. It won’t of course make any difference to the state pension but this would be the same if you were actually working. 

I’d contact them and ask them to stop payments once the April payment has been made. 

Audaxer

sue_mcgorrigan said:

Thanks everyone for your replies.  It seems from what you all say that he should pay the April quarterly payment onApril 17th, but stop the standing order after that.  

He had spoken to Future Pensions, but is still unsure of which arrears years his payments are for.  The quarterly bill is very generic with no detail.  He paid the£1,600 after speaking to Future Pensions.
The problem is, unlike with most financial transactions, you can see the result of your payments when you log on to see your NI record and state pension forecast  online.  It takes months to see an up to date accurate forecast and I think it’s only done once a year.

I am surprised he was not asked what tax years that £1,600 payment should be applied to. I made a Voluntary Class 3 contribution in January this year for £780 after phoning HMRC on 0300 200 3500 for a payment reference number. I have done this for the past few years and when I phone to get the reference number, they ask what financial year the payment should go to, and I advise them. They usually say it will take a few months for the payment to show on my record, but I can phone in about 3 weeks time to check. At that time they usually then apply the payment and it appears on my online forecast a few days later.

If he only made the £1,600 payment this week, I think he could still phone HMRC on the above number and try to ensure the payment goes to the tax years with gaps that he intends the contribution to go to.