Guide discussion: Voluntary national insurance contributions

p00hsticks

sgx2000 said:

Hi 

I have a 70 year old colleague who gets a reduced state pension.

He retired at 58 on a council defined benefit pension.
The a year later decided he would return to work.

At 65 he got a reduced state pension due to missing NI years

Is he too old to buy the years?

Not necessarily too old, but possibly the years he's able to buy may not boost his pension.

Roughly speaking - if he's seventy now, then by my reckoning he retired in around 2010 and reached state retirement age in around 2017.

So it sounds as if all the gaps in his NI record  (possibly bar 2016-17) will be from 2015-16 or earlier. And therefore if he has more than 35 years, buying any more isn't going to boost his pension any further.

I'm also not sure we've ever resolved the question on this board of whether any retrospective voluntary contributions you make after you reach SRA are backdated or not, and if so how far back, but there have been reports that any re-calculation for those already in receipt of a State Pension does take a long time to happen....

callisto30

I’m wondering if anyone can help work out whether it is worth my paying for missing years before the chance disappears in April ‘23 and if so how many years should I pay? I am early 50’s  self employed with uncertain future due to the nature of my vocation. Years as a student, time working seasonally and being abroad has resulted in not full contributions. Additionally from 2005-2011 I was a full time carer for a close family member. There is now something called Carers Credit to help with  NI contributions for unpaid carers but I don’t think it existed then.

 I have 19 years full contributions 

14 to contribute before 2035

18 I didn’t contribute enough.

Estimate £100 per week

Forecast £174 per week 2035

I can improve forecast up to £185 per week

Two main questions: can you tell if it’s worth investing  plugging a five year gap from 2006-2011  at £824 per year therefore £4120 to pay? 

I wonder if paying  £4120 will increase my current estimate of £100 up markedly if I were to stop working much before 2035. For the sake of argument if I were to stop working in the next tax year and paid off the five years how much would my current  estimate of £100 have increased by?

Many thanks for any advise you can offer. 

p00hsticks

callisto30 said:

Two main questions: can you tell if it’s worth investing  plugging a five year gap from 2006-2011  at £824 per year therefore £4120 to pay? 

I wonder if paying  £4120 will increase my current estimate of £100 up markedly if I were to stop working much before 2035. For the sake of argument if I were to stop working in the next tax year and paid off the five years how much would my current  estimate of £100 have increased by?

Many thanks for any advise you can offer. 

With only 19 years in the bag, plugging the gap will definitely increase your forecast, although you may not need all five years - two would get you within a whisker of the full amount if you were to continue working.

Self-employed Class 2 NI is (currently) considerably cheaper than Class 3, so those forward years are going to be cheaper than filling gaps if you think you may be able to stay on as self-employed (unless they tighten up in this area, which is something that I believe has been threatened in the past.

molerat

You have £100 at April 2022 (100.51 ?)

By filling all the years going forward you will get £174 (£174.57 ?)

By buying some back years you can improve that to £185. (£185.15 ?)

Only you can decide on what will happen going forward.  Class 2 for the self employed are very cheap - around £163 per year.

So buying 2 of those old years will give you the opportunity to reach the full amount, any more will reduce the number you need going forward.

Each year you fill will increase your pension by £5.29

Boat_to_Bolivia

molerat said:

You have £100 at April 2022

By filling all the years going forward you will get £174

By buying some back years you can improve that to £185.

Only you can decide on what will happen going forward.  Class 2 for the self employed are very cheap - around £163 per year.

So buying 2 of those old years will give you the opportunity to reach the full amount, any more will reduce the number you need going forward.

Each year you buy will increase your pension by £5.29

I phoned the Future Pension helpline about paying voluntary contributions just recently, but they just referred me to an HMRC helpline.

I have 27 years full contributions with a forecast of £149 and need 7 more years contributions to get the full £185. Due to retire 2037 but obviously that may change.

I moved overseas 6 years ago so since then those years are the gaps in my NI record. I asked if it was worth paying at £824 a year to increase my pension to the maximum, Future Pensions said it's up to you?

On phoning the HMRC number I was given, I was advised to fill in a form (CF83) requesting to pay Class 2 at £163 a year, which I have. 

Are you saying Class 2 only apply to the self-employed?

Prior to leaving the UK I was both employed and self-employed and filed a SA for approx 4 years.

On my very basic knowledge and dodgy maths, I don't think it will be worth me paying the Class 3 @ £824 a year, but Class 2 will be worth it.

After reading your comment I'm wondering if I will be eligible for paying Class 2 for the missing years, or if I should look to pay voluntary NI from now on?

Thank you

Dazed_and_C0nfused

Boat_to_Bolivia said:

molerat said:

You have £100 at April 2022

By filling all the years going forward you will get £174

By buying some back years you can improve that to £185.

Only you can decide on what will happen going forward.  Class 2 for the self employed are very cheap - around £163 per year.

So buying 2 of those old years will give you the opportunity to reach the full amount, any more will reduce the number you need going forward.

Each year you buy will increase your pension by £5.29

I phoned the Future Pension helpline about paying voluntary contributions just recently, but they just referred me to an HMRC helpline.

I have 27 years full contributions with a forecast of £149 and need 7 more years contributions to get the full £185. Due to retire 2037 but obviously that may change.

I moved overseas 6 years ago so since then those years are the gaps in my NI record. I asked if it was worth paying at £824 a year to increase my pension to the maximum, Future Pensions said it's up to you?

On phoning the HMRC number I was given, I was advised to fill in a form (CF83) requesting to pay Class 2 at £163 a year, which I have. 

Are you saying Class 2 only apply to the self-employed?

Prior to leaving the UK I was both employed and self-employed and filed a SA for approx 4 years.

On my very basic knowledge and dodgy maths, I don't think it will be worth me paying the Class 3 @ £824 a year, but Class 2 will be worth it.

After reading your comment I'm wondering if I will be eligible for paying Class 2 for the missing years, or if I should look to pay voluntary NI from now on?

Thank you

I think your maths does need a brush up 😳.

£824 would normally buy £5.29.  Per week. With triple lock inflation protection (so likely £5.82/week from April 2023).  For the rest of your life (from State Pension age).

If you can find a better return for £824 please do let us know 😀

But if you have the chance to pay Class 2 instead of Class 3 then that's a bonus.

https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

Boat_to_Bolivia

Dazed_and_C0nfused said:

Boat_to_Bolivia said:

molerat said:

You have £100 at April 2022

By filling all the years going forward you will get £174

By buying some back years you can improve that to £185.

Only you can decide on what will happen going forward.  Class 2 for the self employed are very cheap - around £163 per year.

So buying 2 of those old years will give you the opportunity to reach the full amount, any more will reduce the number you need going forward.

Each year you buy will increase your pension by £5.29

I phoned the Future Pension helpline about paying voluntary contributions just recently, but they just referred me to an HMRC helpline.

I have 27 years full contributions with a forecast of £149 and need 7 more years contributions to get the full £185. Due to retire 2037 but obviously that may change.

I moved overseas 6 years ago so since then those years are the gaps in my NI record. I asked if it was worth paying at £824 a year to increase my pension to the maximum, Future Pensions said it's up to you?

On phoning the HMRC number I was given, I was advised to fill in a form (CF83) requesting to pay Class 2 at £163 a year, which I have. 

Are you saying Class 2 only apply to the self-employed?

Prior to leaving the UK I was both employed and self-employed and filed a SA for approx 4 years.

On my very basic knowledge and dodgy maths, I don't think it will be worth me paying the Class 3 @ £824 a year, but Class 2 will be worth it.

After reading your comment I'm wondering if I will be eligible for paying Class 2 for the missing years, or if I should look to pay voluntary NI from now on?

Thank you

I think your maths does need a brush up 😳.

£824 would normally buy £5.29.  Per week. With triple lock inflation protection (so likely £5.82/week from April 2023).  For the rest of your life (from State Pension age).

If you can find a better return for £824 please do let us know 😀

But if you have the chance to pay Class 2 instead of Class 3 then that's a bonus.

Thank you for your reply.

I know I'm perhaps being stupid, but @ £5.29 a week that would equate to an extra £276 addition to my yearly pension, after paying out £824??? (I was never very good at maths)

It would cost me £824 times 7 years and wouldn't that take me until I'm well beyond retirement age to see any returns.?

Am I missing something...as I said, and you confirmed, maths isn't me strong point.

Re your link, I have read it numerous times, but with everything HMRC related, it's far from simple.
 

Dazed_and_C0nfused

£824 would normally buy £5.29. Per week. With triple lock inflation protection (so likely £5.82/week from April 2023). For the rest of your life (from State Pension age).

So you pay £824.  Once.

In return you get £5.29/week.

Every single week.

From your State Pension age.

Until you die.

£5.29 x 52 = £275/year.  Call it £220/year after tax.

Say you reach State Pension age at 68 and live till you're 90.

£220 x 22 = £4,840

molerat

Am I missing something

Yes you are.  You pay a one off £824 and get £275 per year for the rest of your life for each year you buy.  Depending on your tax situation 3 to 4 years to recoup the capital outlay.  You could always invest that £824 in an annuity and receive around £33 per year - now which seems the better deal ?

Boat_to_Bolivia

molerat said:

Am I missing something

Yes you are.  You pay a one off £824 and get £275 per year for the rest of your life for each year you buy.  Depending on your tax situation 3 to 4 years to recoup the capital outlay.

Thank you, I understand now...I really was missing something. Many thanks