Guide discussion: Voluntary national insurance contributions

molerat

Blacklab24 said:

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?

2015-16 will not add to your pension.  I assume all the SE years are showing as checking, that is why your forecast is showing the max achievable as current plus the 2 going forward - it completely ignores those years. You currently need 8 to get the full £185.15, 7 will get you to £184.28 and the 8th will add another 87p.  You have a total of 6 past years available to fill, 2016-17 to 2021-22, and another 2 going forward, 2022-23 & 2023-24.  You should be able to pay all those SE year gaps at class 2, you need to speak to HMRC.

Blacklab24

molerat said:

2015-16 will not add to your pension.  I assume all the SE years are showing as checking, that is why your forecast is showing the max achievable as current plus the 2 going forward - it completely ignores those years. You currently need 8 to get the full £185.15, 7 will get you to £184.28 and the 8th will add another 87p.  You have a total of 6 past years available to fill, 2016-17 to 2021-22, and another 2 going forward, 2022-23 & 2023-24.  You should be able to pay all those SE year gaps at class 2, you need to speak to HMRC.

Many thanks for confirming what I had figured out is correct. The only years I'm considering making contributions for are 2016-17 to 2019-20 as those years are the most cost effective way of boosting my pension. I haven't worked since 2020 and probably won't work in the next two years either, so I accept I won't get to a full pension, but an extra £21(?) a week or so for four years contributions at Class 2 is well worth the cost. I'll keep trying HMRC! Thanks again.

molerat

Blacklab24 said:

molerat said:

2015-16 will not add to your pension.  I assume all the SE years are showing as checking, that is why your forecast is showing the max achievable as current plus the 2 going forward - it completely ignores those years. You currently need 8 to get the full £185.15, 7 will get you to £184.28 and the 8th will add another 87p.  You have a total of 6 past years available to fill, 2016-17 to 2021-22, and another 2 going forward, 2022-23 & 2023-24.  You should be able to pay all those SE year gaps at class 2, you need to speak to HMRC.

Many thanks for confirming what I had figured out is correct. The only years I'm considering making contributions for are 2016-17 to 2019-20 as those years are the most cost effective way of boosting my pension. I haven't worked since 2020 and probably won't work in the next two years either, so I accept I won't get to a full pension, but an extra £21(?) a week or so for four years contributions at Class 2 is well worth the cost. I'll keep trying HMRC! Thanks again.

Even at class 3 they pay back gross in 3 years.

Blacklab24

molerat said:

Blacklab24 said:

Many thanks for confirming what I had figured out is correct. The only years I'm considering making contributions for are 2016-17 to 2019-20 as those years are the most cost effective way of boosting my pension. I haven't worked since 2020 and probably won't work in the next two years either, so I accept I won't get to a full pension, but an extra £21(?) a week or so for four years contributions at Class 2 is well worth the cost. I'll keep trying HMRC! Thanks again.

Even at class 3 they pay back gross in 3 years.

I'll certainly consider paying Class 3 in the next couple of years if circumstances allow. Thanks for the information molerat, your responses are very much appreciated.

OrangeArrows

I took early retirement from the NHS in 2011 and have not made any National Insurance contributions since.  Prior to that, I worked for a high street bank.  Consequently, I believe that I was ‘contracted out’ for my entire career.

I am due to start receiving my State Pension at the end of this year.  My National Insurance record says that I have 37 years of full contributions, but they would all have been pre-2016.

My State Pension Forecast estimates that I will receive only £142.09 a week based on my National Insurance record up to 5 April 2022.  It states that this could be increased to a maximum of £179.12 a week by filling shortfalls in my National Insurance record.

From the information that I have read here and on the HMRC website, I believe that I can only benefit by making post-2016 Class 3 voluntary NICs.  HMRC form CA5603 states, ‘You must normally pay voluntary Class 3 National Insurance contributions before the end of the sixth tax year following the tax year you’re paying for, for them to count towards State Pension.’  I think that means that I just have time to make voluntary NICs for the tax years 2016/17 through to 2022/23 (£5,769.40) to reach the £179 a week mark.

Like many others, I have been unable to get through to the Future Pension Centre helpline.  Does anyone concur that the assumptions I have made above are correct?  Alternatively, where have I gone wrong?

molerat

You can fill any gaps back to 2006-07 ... but any gaps 2015-16 and earlier will not benefit you due to already having in excess of 35 pre 2016 years.  You would need  9 years to reach £185.15 but that amount is not possible for you as you only have 7 years available, 2016-17 to 2022-23.  Paying those 7 will take you to your maximum possible £179.12 at £5.29 per year purchased, £6.03 short of the full pension.  2016-17 ceases to be available after July and many of those years will increase in price to £907.40.

Out of interest how much is your COPE, I suspect it may be particularly large.

OrangeArrows

Thank you so much for confirming that. 
I thought that I had to pay 2016-17 by 5 April, so that eases the pressure of trying to speak to them a little bit.
My COPE is estimated at £103.78 a week.

Sumselkb

Hello, I phoned today and managed to get through to HMRC about paying voluntary ni contributions and have been given an 18 digit reference number.

When I logged into my digital banking to make the payment it asks whether it is payment to a Personal account or a Business account. I am assuming I should select a Business account? I know the sort code and account number. For the account name I should type HMRC NIC Receipts?

Brox2010

Hi all, 

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 £185.15/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've opted not to make any contributions as I do intend on working in the UK for another 25 years so I figure I would be losing money if I made the contributions.

The question I have is that when looking at my 'Your National Insurance Contributions' page, it states that I have 

• 10 years of full contributions
• 32 years to contribute before 5 April 2054
• 10 years when you did not contribute enough

Why is there a discrepancy between the 32 years mentioned here and the 25 years mentioned in my forecast? Does this suggest that perhaps I should be making up the lost years?

molerat

Brox2010 said:

Hi all, 

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 £185.15/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've opted not to make any contributions as I do intend on working in the UK for another 25 years so I figure I would be losing money if I made the contributions.

The question I have is that when looking at my 'Your National Insurance Contributions' page, it states that I have 

• 10 years of full contributions
• 32 years to contribute before 5 April 2054
• 10 years when you did not contribute enough

Why is there a discrepancy between the 32 years mentioned here and the 25 years mentioned in my forecast? Does this suggest that perhaps I should be making up the lost years?

The 25 years is how many more you need to contribute to reach the max amount, 32 is how many more years there are (currently) before you reach state retirement