Guide discussion: Voluntary national insurance contributions

Dazed_and_C0nfused

Class 4 has absolutely no impact on your State Pension in any situation.  It is just tax in another name.

Class 2 NI is the (self employed) NI which builds up State Pension.

itsmeagain

Dazed_and_C0nfused said:

Class 4 has absolutely no impact on your State Pension in any situation.  It is just tax in another name.

Class 2 NI is the (self employed) NI which builds up State Pension.

Thanks but that still begs the question, if you reach state pension age part way through a self employed working year (where may have previously paid class 2), do you pay class 2 that final year and do you get a years stamp for it (when that year wasn't complete until after sate pension age)?

Erra_Pen

Hello, I checked my NI contributions back in 2018 when I discovered that from 90-94 I had paid only 1 week NI (I was a student at the time and didn't realise I was meant to pay!), but in 94-95 they had me down for 117 weeks! (how on earth did I manage that unless I was trying to backdate for the previous years??) and in 95-96 they had me down for only 51 (not sure how there was one week missing!). Then again 2001-03 I only have 21 weeks contributions because I was back studying and still didn't realise that I was meant to pay.
I wrote to the HMRC in 2018 querying this, but received no reply. I resent the letter in 2019 or 2020 and again, got  no reply.
Is there any need to worry about this? I am self-employed and have no work pension and pretty much no savings either, so will be reliant on the state pension when it kicks.
Thanks!

molerat

What is there to query ?  If you were not earning / receiving certain benefits you would not be credited with NI. There is no "have to pay" involved. There are many ways you can get more than 52 weeks in a year, different employments and benefits each can give a weeks credit for the same week, I have a few years with over 104 credits. Have you got an up to date SP forecast to see how you are doing ? That is the only way to tell if any of those gaps matter - but it is too late to do anything about them now unless you can prove gross negligence by HMRC . Are you paying class 2 NI ?  Without that you won't be earning towards your SP.

Kindalon

My wife was caught by the increase in retirement age for women and having "self retired" early for personal reasons did then not have enough years for a full pension. She used her savings to buy the additional years on the basis of what seemed a good return. Sadly she died before before reaching retirement age. I had already reached retirement age, but because she had only bought the minimum number of years so there was no addition to my pension. Also, because I was already retired, I was not entitled to any bereavement benefit. The net result of this is that she has thrown away several thousand pounds of savings for no benefit. 

I am not saying that buying additional years is not a good idea, but that there are risks and you may wish to consider the timing of when you buy them.

molerat

Kindalon said:

My wife was caught by the increase in retirement age for women and having "self retired" early for personal reasons did then not have enough years for a full pension. She used her savings to buy the additional years on the basis of what seemed a good return. Sadly she died before before reaching retirement age. I had already reached retirement age, but because she had only bought the minimum number of years so there was no addition to my pension. Also, because I was already retired, I was not entitled to any bereavement benefit. The net result of this is that she has thrown away several thousand pounds of savings for no benefit. 

I am not saying that buying additional years is not a good idea, but that there are risks and you may wish to consider the timing of when you buy them.

Like everything you take a gamble but for the vast majority it is a gamble that pays off handsomely.  MrsM is now just at break even point and I have 6 months to go for our combined £5K so looking forward to our free money.

p00hsticks

itsmeagain said:

Dazed_and_C0nfused said:

Class 4 has absolutely no impact on your State Pension in any situation.  It is just tax in another name.

Class 2 NI is the (self employed) NI which builds up State Pension.

Thanks but that still begs the question, if you reach state pension age part way through a self employed working year (where may have previously paid class 2), do you pay class 2 that final year and do you get a years stamp for it (when that year wasn't complete until after sate pension age)?

You stop paying NI (Class 1 if you're employed, Class 2 if you're self employed) when you reach State Pension Age. The year in which you reach state pension age doesn't count towards you state pension calculation, regardless of when during that yeat you reach SPA.  .

So you are correct in saying that people who reach state pension age on e,g, the last day of the tax year (April 5th) and are still working and have not managed to reach the maximum pension amount by the end of the previous tax year will potentially pay more NI than people who had been born the previous April 6th for no additional State Benefit.

But equally there will be a lot of people who reached the required number of years for maximum state pension several years before reaching state pension age. They are still required to pay NI until they reach state pensino age, even though it is no increasing their state pension entitlment. That's just the way NI works

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

,, And don;t forget that from next year, (as I understand it) although those continuing to work after state pension age still won't have to pay NI , they will have to pay the new Social Care Levy.

nigelbb

itsmeagain said:

Dazed_and_C0nfused said:

itsmeagain said:

p00hsticks said:

itsmeagain said:

If you've run out of time to get full state pension, (say 2 years short), can you delay your state pension for 2 years to buy the next 2?

No - only years up to the last complete tax year prior to you reaching State Pension Age will add years to your Pension calculation.

Deferring State Pension will result in an eventual increased state pension amount ,but only because you are deferring claiming it.

Ta. So if you reached the min state pension age and deferred taking your pension (because you decided to carry on working), do the HMRC stop taking NI contributions, or do you still have to still pay it without getting a years stamp for your contibution?

Update - just found the rules and it says that if you are self employed, you have to pay NI for the whole year that you reach state pension age.

If you are correct, you could reach SPA in April, and have to pay the remaining years NI without getting anything for that year - ouch!

That is only Class 4 NI, where there is a decent(ish) lower threshold.

You don't have to pay Class 2 NI.

Thanks - but that wasn't the question. We were talking about delaying state pension for a year or so to gain an extra year stamp. It was relating to the comment..  "No - only years up to the last complete tax year prior to you reaching State Pension Age will add years to your Pension calculation"

So, does that mean that you may have to pay class 4 NI for the year you reach SPA but get nothing for it because it was being paid 'during' the year you reached state pension age, not 'prior' to reaching?

No NI contributions are credited in the tax year that you receive state pension as you can never achieve a full year.

nigelbb

cllrknight100 said:

So this means you can't purchase years after you have claimed the state pension?

You can still purchase missing years after you have claimed the state pension but payment of increased pension will only be from the date of purchase so the pension is not backdated.

nigelbb

itsmeagain said:

p00hsticks said:

itsmeagain said:

If you've run out of time to get full state pension, (say 2 years short), can you delay your state pension for 2 years to buy the next 2?

No - only years up to the last complete tax year prior to you reaching State Pension Age will add years to your Pension calculation.

Deferring State Pension will result in an eventual increased state pension amount ,but only because you are deferring claiming it.

Ta. So if you reached the min state pension age and deferred taking your pension (because you decided to carry on working), do the HMRC stop taking NI contributions, or do you still have to still pay it without getting a years stamp for your contibution?

Update - just found the rules and it says that if you are self employed, you have to pay NI for the whole year that you reach state pension age.

If you are correct, you could reach SPA in April, and have to pay the remaining years NI without getting anything for that year - ouch!

National Insurance is just another form of income tax. You could reach the maximum of 35 years of National Insurance contributions in your early fifties & continue paying contributions while working for another 15 years until you receive your pension.