Guide discussion: Voluntary national insurance contributions

Geronimo23

 Many thanks for your helpful reply and for confirming that I need to pay for 8 years contributions . Thought so - but the 47 years  seemed to be so much higher than figures generally stated for accessing a full pension.  

Sorry for being ignorant - but what does SP2 mean ?

I took voluntary redundancy , early retirement  and  access to my work pension  in  2013. I did do a very small amount of self-employed work later in the year 2013 and until just into 2016 . I have relied on my work pension from then onwards. 

MJP61

£5820 contributed so far 
Only post 2016 NI years full (5 yrs)
Plan to work & pay full NICs for 5 more years

Should I top up 12 years (2006-2017) in full ?

MJP61

p00hsticks said:

molerat said:

MJP61 said:

So I am 40 years old, I have 8 years of full NICs and 10 missing ones prior to these.

Should I top up all 10 missing years if I want to retire early at 50 ?

Any advice welcome. Thank you.

More information needed to make any sensible comment

Current £.pp amount accrued up to April 2022
Number of pre 2016 NI years full
Number of post 2016 NI years full
Financial year you reach state retirement
Any COPE amount shown
Years which show not full and prices

I'm not sure if OP will be able to get a meaningful State Pension as yet as they don't yet have the ten years necessary to qualify for one ?  

£5820 contributed so far 
Only post 2016 NI years full (5 yrs)
Plan to work & pay full NICs for 5 more years

Should I top up 12 years (2006-2017) in full ?

molerat

Geronimo23 said:

 Many thanks for your helpful reply and for confirming that I need to pay for 8 years contributions . Thought so - but the 47 years  seemed to be so much higher than figures generally stated for accessing a full pension.  

Sorry for being ignorant - but what does SP2 mean ?

I took voluntary redundancy , early retirement  and  access to my work pension  in  2013. I did do a very small amount of self-employed work later in the year 2013 and until just into 2016 . I have relied on my work pension from then onwards. 

S2P is one of the general terms for the additional state pension, the part you were contracted out of.  With a combination of contracted out and self employment you were not getting much awarded.

At 2016 you were given the higher of what you had earned under the old or new schemes.  With a fairly long contracted out service, as witnessed by the fairly large COPE, the new scheme amount took a large hit but the old scheme amount did not have much additional pension attached so giving quite a low starting amount, a large number of years gave a relatively small return.

If you were not self employed for those checking years then class 3 will have to be paid.  2017-18 has 7 weeks worth of credits from somewhere.

I suspect that you will be able to reach the full £185.15 as those 2 checking years do not exist as far as the computer is concerned so it will not take them into consideration for buying hence the max £174.67 so you have 8 years that can be filled 2016-17 to 2023-24.

molerat

MJP61 said:

p00hsticks said:

molerat said:

MJP61 said:

So I am 40 years old, I have 8 years of full NICs and 10 missing ones prior to these.

Should I top up all 10 missing years if I want to retire early at 50 ?

Any advice welcome. Thank you.

More information needed to make any sensible comment

Current £.pp amount accrued up to April 2022
Number of pre 2016 NI years full
Number of post 2016 NI years full
Financial year you reach state retirement
Any COPE amount shown
Years which show not full and prices

I'm not sure if OP will be able to get a meaningful State Pension as yet as they don't yet have the ten years necessary to qualify for one ?  

£5820 contributed so far 
Only post 2016 NI years full (5 yrs)
Plan to work & pay full NICs for 5 more years

Should I top up 12 years (2006-2017) in full ?

If your account is only showing 5 but you have 8 that will mean you will likely also have the three freebie pre 2010 years when you were 16,17 & 18. With 8 years you will have £42.32.  That means you are 27 years short of the full amount with around 27 years to get there.  Your choices are  either contributing for each year going forwards until state retirement age or buying back years.  You can set up a direct debit to pay for years going forward once you have stopped work. Voluntary contributions are like a reverse life insurance, you only collect if you live long enough, if you don't make it all is forfeit.  You need to figure out exactly how many more years of contributions you will have going forward and decide if it is worth paying a considerable chunk of money up front with a slight possibility it will be for no return. Or you could later be entitled to benefits which give you credits right up to SPA.  if any of those gaps are cheap part paid it is likely worth picking them up

xylophone

Many thanks for your helpful reply and for confirming that I need to pay for 8 years contributions . Thought so - but the 47 years  seemed to be so much higher than figures generally stated for accessing a full pension.  

Highish COPE and early retirement from paid employment.

Sorry for being ignorant - but what does SP2 mean ?

 You were in a "contracted out salary related pension scheme" between  1978 and 2016.

Between 1961 and 1975 there was a rather stingy Additional State Pension known as Graduated Pension.

What you contracted out of was the Additional State Pension,  known as SERPS, ( State Earnings Related Pension Scheme 1978 - 2002) and State Second Pension (S2P) which ended in 2016.

You and your employer paid NI at the contracted out rate which was lower than the contracted in rate.

With regard to SERPS,  you would have accrued no additional state pension but it was possible for moderate earners to accrue some S2P, even if contracted out.

On 6/4/2016. the Govt introduced the new state pension system.

To establish "starting amounts" for NSP, two calculations were done for those who were part of the old system but whose state pensions would become due in the new.

The starting amount was the higher of

Old System

NI years/30 (max) x £119.30 (Full Basic) + (Additional State  Pension - Deduction for Contracting Out).

New System

{NI years/35 (max) x £155.65 (Full NSP)} - Contracted Out Pension Equivalent.

In your case, your starting amount was given by the old system calculation.

You had over 35 years NI, a starting amount under a full new state pension and a number of post 5/4/16 years before you reached the year before the tax year in which you would reach SPA.

Contributions/credits for those years could enable you to improve your forecast up to (but not exceeding) a full NSP.

See chart on P6 of this booklet, produced to coincide with introduction of NSP.

https://www.dpf.org.uk/explorer/files/TOPPING-UP-YOUR-STATE-PENSION-GUIDE.pdf

Geronimo23

 Thanks again for your prompt  and helpful response . It is much appreciated.

SiliconChip

SiliconChip said:

p00hsticks said:

SiliconChip said:

p00hsticks said:

SiliconChip said:

p00hsticks said:

pinnks said:

All years go up in April apart from 2021/22 and 2022/23, so if you do decide to pay 2016/17 onwards you will save 10.1% on 2016/17 to 2019/20 payments.

2016/17 won't be available to buy at all after April - the temporary extension to the years you can buy finishes then and it reverts to only being able to buy the six previous years - so only 2017-18 onwards.

I came here because you mentioned on another board that HMRC are currently processing queries from last September. If so then a query made today about 2016/7 would not be answered until the opportunity to purchase that year has ended. That can't be acceptable, so surely they ought to extend the purchase availability until all queries have been dealt with. [Note that this doesn't apply to me, I already have a full year for 2016/7, but it may apply to my sister who is waiting for a response to a query she made in January]

My understanding is that if you send a cheque to make voluntary contributions that it is received before the April deadline, then it will be accepted and processed. But I don't believe they will extend the deadline until all queries have been processed. For a start, they're never goingto get to a point where they can say that, and also people have had plenty of time (six years plus) to get it all sorted with a well publicised deadline, so can't really complain (although I'm sure they will) if they've left it until the last minute to deal with. 

So if you buy the 2016/7 year in order to beat the deadline but your unanswered query is whether you need to buy them or not, and the eventual answer is that you don't need to, will they cancel the purchase and refund the payment?

And they absolutely could get to a point where all queries up to a cut off date have been answered, but if their only cut off is the date for making the purchase then they can't use their failure to provide enough resources to answer questions received as a reason to deny the purchase at a later date (although I'm sure that's exactly what will happen in practice).

So, playing devils advocate, is there any reason why your sister has not queried long before now whether 2016/17 years would be beneficial to her forecast, and, having left it this late in the day, has opted to communicate by post rather than phone ?

The issue is that she did make NI contributions for 2016/7 and subsequent years but on checking her contribution record (which she only did recently) all those years are showing as empty. The Future Pensions Centre agreed that the years should be counted but they were unable to alter the record, that's something that HMRC have to do. She has spoken to HMRC by phone and they are investigating but so far they haven't made the alteration. Communication by post is a back up plan where she intends to send in her P60s with a request in writing to have the years counted. The problem is that if HMRC decide for some reason that 2016/7 shouldn't count and don't make the alteration then unless they do that in the next 6 weeks she'll be too late to take the alternative action of buying that year.

Just to provide an update on this, my sister spoke to HMRC a couple of days ago and they confirmed that the updates to show she has a full contribution record are in hand but they may take as much as 20 weeks to actually be applied. They've said that something has gone wrong somewhere in the automatic process but they're still investigating whether it's due to a submission error by the employer or a fault at HMRC (I suspect that she may never be told the answer).

BillB287

The Future Pensions phoneline is permanently unavailable.  Anybody else experiencing this problem? It just gives an automated choice then cuts off.  And there seems to be no way of making payments unless you go through this line to talk to them first.. Help!!!

Blacklab24

Based on information gleaned from other posts I think it would be beneficial for me to pay voluntary Class 2 contributions for four of the five years I was self employed up to 2020. I would be really grateful if someone could confirm this is the case as I have been trying to get through to the Future Pensions Centre for the last fortnight without success.

I’m 64, due to reach State Pension Age September 2024. Pension estimate up to 5 April 2022 is £147.25pw. Forecast if I contribute until April 2024 is £157.83pw. £157.83 is the most I can get. COPE estimate is £39.94pw.

I have 40 years of full contributions, 2 years to contribute before 5 April 2024 and 8 years when I didn’t contribute enough. The gap years are from 2014-15 to date, but for the five years 2015 – 2020 I was self employed and registered as such with HMRC. As our profits were low our accountant/tax agent advised me not to pay NI contributions, which was probably correct for the first year of self-employment 2015-16 as I already had 40 full years. But, as I have no contributions under the New State Pension scheme, can I pay voluntary Class 2 contributions for the 4 years 2016-20, and will it increase my pension?

My tax record shows

2016 to 2017

Year is not full

We are checking this year to see if it counts towards your pension. We’ll update your record when this is finished, you do not need to do anything.

2015 to 2016

Year is not full

You did not make any contributions this year

You can make up the shortfall

Pay a voluntary contribution of £824.20 by 5 April 2023. This shortfall may increase after 11 April 2023.

It appears that HMRC want me to pay Class 3 contributions rather than Class 2 for a period when I was self-employed, and I can’t pay anything for 2016-17 via their system as they’re still checking it. I’ve not been able to get through to HMRC either. Any ideas on my best course of action please?