Guide discussion: Voluntary national insurance contributions

jem16

SwiftSuzie said:

What I think is that I should buy all 17 years that are available to me. My only qualm about simply going ahead now and paying it is that I was contracted out between June 1980 and February 1989, and I had a COPE figure on my forecast which I am sure was £23.35 on my online forecast (the forecast has now disappeared because I’m of SPA), and I wonder if this could in any way negate the benefit of buying some or all of these pre-2016 years. I note that Molerat has previously stated that in all cases 30 years prior to 2016 is always worth having, so I reckon I’m safe by buying the full 10 to have a total of 27 pre-2016, but in the absence of any sense from the government I would obviously like to be sure about my specific circumstances before shelling out the money.

Before you make any decision on paying Class 3 NICs have you been working whilst abroad? Also assuming you were working before you left the UK you may well be eligible to pay the very much cheaper Class 2 NICs. You’re basically talking roughly £163 vs £824 for the years in question. 

SwiftSuzie

Hi jem16. Thank you for replying. Yes, but I have a separate state pension here, so could not use that towards the UK one. I was working and paying continuously in the UK before I left, but of course that is over 30 years ago. Class 2 would be lovely of course, but I am told that it's Class 3 for me. I don't mind. My pension date seems very fortuitous as I said before, and I'm happy to pay so long as I knew that my COPE won't mess it up for me.

jem16

SwiftSuzie said:

Hi jem16. Thank you for replying. Yes, but I have a separate state pension here, so could not use that towards the UK one. I was working and paying continuously in the UK before I left, but of course that is over 30 years ago. Class 2 would be lovely of course, but I am told that it's Class 3 for me. I don't mind. My pension date seems very fortuitous as I said before, and I'm happy to pay so long as I knew that my COPE won't mess it up for me.

Who has told you that it’s Class 3 you have to pay?

I’m not talking about using your state pension in whatever country you are in towards your UK one. I’m talking about the fact that you are eligible to pay Class 2 for those years you want to buy as opposed to Class 3. There’s a huge difference in cost for 17 years. 

Here’s the info. 

https://www.gov.uk/government/publications/social-security-abroad-ni38

molerat

Your COPE will not affect anything, it is already accounted for. 

The starting amount was set at the higher of the old or new schemes.  Under the old rules you can use a maximum of 30 years so adding more up to that amount simply adds £3.98 (at 2016 rates because that is how it is calculated then uprated to today) per year.  If under the new rules you can use a a maximum of 35 years and the COPE is already deducted whether you have 20 or 30 years, it is a set amount so buying more just adds £4.45 per year. Each time you add a year the starting amount is recalculated and it can switch between the two.  If you do not know which scheme you are under then going up to the lower 30 maximum cannot fail to add value, it is only going beyond there that is problematic. Once at 30 adding more will not increase the old scheme amount.  The new scheme amount will increase but may still not be more the old scheme amount.

In your case the starting amounts were £74.44 old and £52.44 new so the old was highest. Worth £88.53 and £62.14 at 22-23.

Adding the10 pre 2016 years takes that to £114.20 old and £96.72 new.  £135.83 and £115.04 at 22-23.

If you were able to increase that by 13 years, so 30 total, it would be £126.13 old and £110.16 new. 

Adding one more, 31 total, keeps the old at £126.13 and the new increases to £114.51, still below the old scheme amount. 

If you were able to add 17 more, 34 total, the old would still be £126.13 and the new £127.85 so yes it would increase your pension but would only give you an extra £1.72 at a cost of around £3300 for the 4 additional years needed.

SwiftSuzie

Hi molerat. I'm so grateful for the time you've put into the reply. So do I buy the 7 post 2016 and some of the 10 pre 2016? Bearing in mind my pre 2016 is currently only 17 years? Many thanks. 

SwiftSuzie

Or reading you again are you just saying buy all of them but then adding further scenarios for context?

molerat

SwiftSuzie said:

Or reading you again are you just saying buy all of them but then adding further scenarios for context?

Yes, it was more an explainer of how the system works and the interaction of the up to 30 and up to 35 pre 2016 years and to try to reassure you that you can safely add as many pre 2016 years as you have available up to that 30 total, the only danger being going beyond 30.  All post 2016 years are safe buys in addition to pre 2016 purchases.  As I said in an earlier post it is all about understanding how it works.

SwiftSuzie

And as I understand it, the 7 post 2016 (that add £5.29 per week at last year's rate) are a no brainer and a must buy? Thanks.

molerat

They will all add value but post 2016 years will add more value than pre 2016, £5.29 against £4.73, and 20-21 & 21-22 are the best value.  So if prioritising and not going for as much as you can get it is 20-21, 21-22, any other post 2016 years, then pre 2016 years in that order,

pinnks

jem16 said:

SwiftSuzie said:

Hi jem16. Thank you for replying. Yes, but I have a separate state pension here, so could not use that towards the UK one. I was working and paying continuously in the UK before I left, but of course that is over 30 years ago. Class 2 would be lovely of course, but I am told that it's Class 3 for me. I don't mind. My pension date seems very fortuitous as I said before, and I'm happy to pay so long as I knew that my COPE won't mess it up for me.

Who has told you that it’s Class 3 you have to pay?

I’m not talking about using your state pension in whatever country you are in towards your UK one. I’m talking about the fact that you are eligible to pay Class 2 for those years you want to buy as opposed to Class 3. There’s a huge difference in cost for 17 years. 

Here’s the info. 

https://www.gov.uk/government/publications/social-security-abroad-ni38

I'm with Jem16 on this.  As you are not resident in the UK you are probably eligible to pay Class 2 voluntary NI, rather than Class 3.  Everything that molerat has told you about years and additions to your UK state pension stay the same but would cost £163 for each year purchased rather than £824.

As you are not resident in the UK, the process you need to follow to get things sorted is to complete form CF83 at the end of NI38.  If you were resident in the UK for at least 3 years (which I assume you were), worked in the UK immediately before you left (which you did), and worked abroad (employed or self-employed, which I assume is the case) then you should qualify for Class 2.  If you were not working for some years you might end up with a mix of Class 2 and 3.

Anyway, select Class 2 on the CF83, tick box 25 to indicate you want to fill historic gaps and leave the bank details blank as they relate to filling future years by direct debit.  In the covering letter that you need anyway, to add your work history overseas, add that if you do not qualify for Class2, then you would settle for Class 3.  

As long as HMRC has that form before 31 July your position is protected.  They are currently working on forms received last September, so it will be some time before they get everything processed.

HMRC will send you a schedule of years, amounts and how to pay, which you can check against what molerat has said, as the schedule doesn't always give the cheapest/best options, and then pay...

But don't just accept that you have to pay Class 3 if your situation fits with the description in NI38  (HMRC's view on this changed relatively recently, so perhaps what you were told was a while ago?)