Guide discussion: Voluntary national insurance contributions

Brox2010

Brox2010 said:

Hi, any chance I could get some opinions as to whether it's worth it for me to boost my contributions? I turned 18/left school in 2005, but a combination of living abroad and degrees meant that I only contributed 1 full year (2010-2011) prior to 2016.

My forecast is £185/week from 2055 assuming I contribute another 25 years (so continue contributing yearly until I'm 61).

I have the option of making voluntary contributions on 9 of the unfilled years between 2006 and 2016. However I can't figure out if it's worth it? If I did make the contributions but continued working in the UK till I retired at some point in my 60s, am I right in assuming I effectively contributed extra years I didn't need to?

p00hsticks said:

Yes, if you're intending on working for those 25 years going forwards, I'd say that there is no point in going back to fill in past gaps now, it would just be a waste of money.

Just to clarify: If I  were to make voluntary contributions to the missing 9 years, and I continued working in the UK for another 16 years/until I was 52 (at which point I would reach the predicted £185.15), would I continue being taxed NI at the same rate until 66?
If not and I had to keep making contributions until 66, are there any advantages for doing so (i.e does the state pension increase accordingly?) or is it truly just wasted money?

molerat

Brox2010 said:

Brox2010 said:

Hi, any chance I could get some opinions as to whether it's worth it for me to boost my contributions? I turned 18/left school in 2005, but a combination of living abroad and degrees meant that I only contributed 1 full year (2010-2011) prior to 2016.

My forecast is £185/week from 2055 assuming I contribute another 25 years (so continue contributing yearly until I'm 61).

I have the option of making voluntary contributions on 9 of the unfilled years between 2006 and 2016. However I can't figure out if it's worth it? If I did make the contributions but continued working in the UK till I retired at some point in my 60s, am I right in assuming I effectively contributed extra years I didn't need to?

p00hsticks said:

Yes, if you're intending on working for those 25 years going forwards, I'd say that there is no point in going back to fill in past gaps now, it would just be a waste of money.

Just to clarify: If I  were to make voluntary contributions to the missing 9 years, and I continued working in the UK for another 16 years/until I was 52 (at which point I would reach the predicted £185.15), would I continue being taxed NI at the same rate until 66 68?

Yes, NI is deducted from employment income until you reach state retirement age which will be at least 68 if not 70 by then..

If not and I had to keep making contributions until 66, are there any advantages for doing so (i.e does the state pension increase accordingly?) or is it truly just wasted money?

The SP is based purely on making enough contributions to reach the maximum currently of £185.15.  Contribute less than the required number of years then you receive less but once you have hit that then you cannot add any more no matter how much NI you pay.

SiliconChip

pinnks said:

SiliconChip said:

pinnks said:

Out of interest, was she self-employed for that year?  If so, it is possible that she thinks she has paid but has in fact not actually been billed as her self-assessment amount due may have been reduced by HMRC reversing back out what was on her return.

No, employed (as indicated by the existence of a P60 )

My apologies - missed that snippet.  It is just that following the change in treatment of Class 2 in, I think, 2015, some people (including a friend) thought they were paying Class 2, when in fact, HMRC was reversing it all out.

If she was employed throughout at a rate above the lower earnings limit (currently £123 per week I think) and has P60s, then one struggles to understand why the years are not showing as full, either by payment of NI or Credits and to understand why it is taking so long for HMRC to resolve.  

To be fair to HMRC she only spoke to them a few weeks ago when she became aware of the issue so I expect it's in a queue to be addressed. They said that they would contact her if they needed any additional information to make the change, which they haven't done, so she's keeping an eye on her contributions record to see if they've done it.

SiliconChip

Dazed_and_C0nfused said:

pinnks said:

SiliconChip said:

pinnks said:

Out of interest, was she self-employed for that year?  If so, it is possible that she thinks she has paid but has in fact not actually been billed as her self-assessment amount due may have been reduced by HMRC reversing back out what was on her return.

No, employed (as indicated by the existence of a P60 )

My apologies - missed that snippet.  It is just that following the change in treatment of Class 2 in, I think, 2015, some people (including a friend) thought they were paying Class 2, when in fact, HMRC was reversing it all out.

If she was employed throughout at a rate above the lower earnings limit (currently £123 per week I think) and has P60s, then one struggles to understand why the years are not showing as full, either by payment of NI or Credits and to understand why it is taking so long for HMRC to resolve.  

Has she checked her Personal Tax Account (on gov.uk) to see if the income is being reported by her employer?

I'm pretty sure she has, and IIRC I've looked at it too when we were comparing what my account says to what hers says. The employer is a medical practice so I'd be surprised if they are issuing P60s but not reporting the income (although I did suggest to her that it might be a good idea if her coleagues check their records too in case there is a reporting issue).

GBinGB

I have been having no luck getting through to Future Pensions on the phone & imagine the situation will only get more difficult after Martin Lewis's programme on pensions tomorrow. I would be grateful if someone could advise whether I should keep trying or if won't be able to top up pre 2016 years so might as well wait until after April. My forecast is as follows:

Currently have 34 years which will pay £153.43
If I add 6 more years before 2028 I will get £185.15
I was contracted out from 1981 to 2009
My COPE is £51.65
In 2016 I had 33 years and 5 partial years
Since 2016 I have 3 partial years.

p00hsticks

GBinGB said:

I have been having no luck getting through to Future Pensions on the phone & imagine the situation will only get more difficult after Martin Lewis's programme on pensions tomorrow. I would be grateful if someone could advise whether I should keep trying or if won't be able to top up pre 2016 years so might as well wait until after April. My forecast is as follows:

Currently have 34 years which will pay £153.43
If I add 6 more years before 2028 I will get £185.15
I was contracted out from 1981 to 2009
My COPE is £51.65
In 2016 I had 33 years and 5 partial years
Since 2016 I have 3 partial years.

Well done for including all the salient information from the forecast.

The first question is - are you currently working or getting NI credits (e.g for being on certain benefits or looking after children) ? Or are you likely to be in the years going forward until 2028 ?

If so, then there's not going to be any need to backfill gaps, as you'll reach the maximum by then anyhow.

I don;t believe any of those pre-2016 years will add anything - with a COPE of over £50, your 'starting amount' as at the introduction of the new State Pension in 2016 would have been better under the old rules calculation, which only worked on a maximum 30 years, so buying more would not increase it. 

If the 2016-2017 year is one of those partial ones that you could make full at only a small costs then it might be worth you battling the phone lines to fill it before April,  before it goes off sale, but otherwise I would leave it until after April to pursue any further.

Silvertabby

GBinGB said:

I have been having no luck getting through to Future Pensions on the phone & imagine the situation will only get more difficult after Martin Lewis's programme on pensions tomorrow. I would be grateful if someone could advise whether I should keep trying or if won't be able to top up pre 2016 years so might as well wait until after April. My forecast is as follows:

Currently have 34 years which will pay £153.43
If I add 6 more years before 2028 I will get £185.15
I was contracted out from 1981 to 2009
My COPE is £51.65
In 2016 I had 33 years and 5 partial years
Since 2016 I have 3 partial years.

Based on that amount of contracted out service, and the fact that you had over 30 years as at 2016, it's a dead cert that any pre 2016 contributions won't increase your pension.

I've got tomorrow night's programme set to record, but I have to say that Martin Lewis doesn't always get it right...

He did a programme on tax, and assured a pensioner couple that he would DEFINITELY be able to save them some tax.  Turned out to be the married couples tax transfer, in which the non taxpayer (usually the wife) transferred some of her unused tax allowance to her husband.  I'm sure that we are not the only retired couple who both pay tax in our own right.


 

molerat

Another vote for pre 2016 years will definitely not add value.  Based on the figures above your starting amount at 2016 was £124.56 under the old rules and £95.11 under the new meaning the old rules wins so you are limited to 30 useable pre 2016 years and you already have 33.

GBinGB

Thanks for all your help. Not expecting to make any future contributions or get credits so I will wait until next tax year and buy my 3 partial post 2016 years at a total cost of approx £1200 and wait until nearer 2028 to see if I need to buy 3 more full years.

pinnks

I agree with the others about years to buy but might you want to consider filling some or all of those part years before the price goes up by 10.1% from April?  From April, years 2021/22 and 2022/23 will still cost the original rate for each of those years but 2020/21 and earlier will go up from £824.20 for a full year to £907.40 - appropriately apportioned for part years.