Guide discussion: Voluntary national insurance contributions

Silvertabby

Not quite as simple as that.  Those of us in contracted out pensions schemes (1978 to 2016) paid reduced rate NI.

Our NI records do say 'full' for those years, but that just means 'full financial years' and doesn't differentiate between those who paid the full rate and those of us who didn't 

That came into play in 2016, when those of us under State pension transitional arrangements were given a 'foundation amount' pension calculation.  ie, very simply, those with SERPS/SP2 had those accruals protected, while those of us who had been contracted out were guaranteed at least the amount of pension we would have accrued under the old rules 

Forget '35 years' - that really only applies to those who only started work after April 2016 or, perhaps, someone who has never been contracted out.  Most of us on these boards are under the transitional protections/arrangements, each with our own very unique calculation.  In my own case, I needed 48 years (44 from working, 4 from paying voluntary Class 3s) of NI contributions in order to qualify for the full nSP.  But, from these boards, the widest spread appears to be 28 years minimum/50 years maximum.

rmackinnon

I simply relayed what I was told by the helpline, so their explanation of my situation. I worked for 44 years, had a gap of 3 years when I was a student at the start, and ended up with a shortfall between my forecast and my estimate of 2 years, due to being contracted out from 1982 to 2016 - which the helpline person said could not readily be seen in the system. Finally, regardless of how it happened, the potential impact of having been contracted out, e.g. a shortfall as in my case, should be explained more clearly in the guides, and perhaps in the system also.

jem16

rmackinnon said:

I simply relayed what I was told by the helpline, so their explanation of my situation. I worked for 44 years, had a gap of 3 years when I was a student at the start, and ended up with a shortfall between my forecast and my estimate of 2 years, due to being contracted out from 1982 to 2016 - which the helpline person said could not readily be seen in the system. Finally, regardless of how it happened, the potential impact of having been contracted out, e.g. a shortfall as in my case, should be explained more clearly in the guides, and perhaps in the system also.

The helpline may have been rather simplistic in its explanation to you but there are plenty of guideline out there. Your forecast would also have mentioned being contracted out as well as giving you a COPE figure. Countless explanations have been given on here too. 

So the information is readily available for anyone that wants to know more. Here are a couple. 

https://www.gov.uk/new-state-pension/how-its-calculated

https://assets.publishing.service.gov.uk/media/618118c8e90e07197e1665ea/contracting-out-and-the-cope-amount-in-the-online-statement-service.pdf

molerat

The problem is that "explaining it" would run to many pages and be of little interest or go above the head of many.  There are guides out there, both .gov and elsewhere, that are pretty good at giving an overview.  

Your forecast gives a COPE amount which is how much was deducted from your new pension starting amount at April 2016 if you were contracted out but calculating how that amount was arrived at is into rocket scientist territory so there is little point going further than taking the amount at face value. Understanding how that actually affects you is another thing, it is not a one size fits all, in my case the COPE was £74 but it only needed to be £19 to affect the starting amount. Explaining that on an individual basis would be a lost cause.

If you want to work out how the final pension amounts were arrived at and what you need to do about it the information is out there, many of us here can work it all out from 6 simple pieces of unidentifiable information from the forecast. We are not paid experts or trained so the knowledge must have come from somewhere.

HMRC were slated over too much information being put on the forecast so a dumbed down version was created and has been tweaked over the past few years to provide the information that the majority want / need, anything else will be provided on request much of which will go into eyes glazing over territory.  

Another problem is that many will not read beyond the big green box at the top and have been taken in by the (incorrect / simplistic) press headlines of 35 years.

westholm

I don't know whether this has been mentioned in the forum before but you can buy only six previous years of voluntary class 2 NI contributions relative to the current financial year. To go back as far as 2006 you need to pay the much higher class 3 NI contributions. This has been told to me by both the Pensions Service and HMRC, however the article does not make this clear. 

westholm

westholm said:

I don't know whether this has been mentioned in the forum before but you can buy only six previous years of voluntary class 2 NI contributions relative to the current financial year. To go back as far as 2006 you need to pay the much higher class 3 NI contributions. This has been told to me by both the Pensions Service and HMRC, however the article does not make this clear. 

It might be six years from start of last full financial year, i.e. 2016/2017, definitely not 2006/2007.

molerat

westholm said:

westholm said:

I don't know whether this has been mentioned in the forum before but you can buy only six previous years of voluntary class 2 NI contributions relative to the current financial year. To go back as far as 2006 you need to pay the much higher class 3 NI contributions. This has been told to me by both the Pensions Service and HMRC, however the article does not make this clear. 

It might be six years from start of last full financial year, i.e. 2016/2017, definitely not 2006/2007.

Not the first time they have been wrong.  Have you tried pointing them in the direction of the law on the matter ?

https://www.legislation.gov.uk/uksi/2001/1004/regulation/61B

westholm

molerat said:

westholm said:

westholm said:

I don't know whether this has been mentioned in the forum before but you can buy only six previous years of voluntary class 2 NI contributions relative to the current financial year. To go back as far as 2006 you need to pay the much higher class 3 NI contributions. This has been told to me by both the Pensions Service and HMRC, however the article does not make this clear. 

It might be six years from start of last full financial year, i.e. 2016/2017, definitely not 2006/2007.

Not the first time they have been wrong.  Have you tried pointing them in the direction of the law on the matter ?

www.legislation.gov.uk/uksi/2001/1004/regulation/61B

Thanks, so voluntary class 2 contributions go back to 6th April 2013? Has anyone here done that?

molerat

westholm said:

molerat said:

westholm said:

westholm said:

I don't know whether this has been mentioned in the forum before but you can buy only six previous years of voluntary class 2 NI contributions relative to the current financial year. To go back as far as 2006 you need to pay the much higher class 3 NI contributions. This has been told to me by both the Pensions Service and HMRC, however the article does not make this clear. 

It might be six years from start of last full financial year, i.e. 2016/2017, definitely not 2006/2007.

Not the first time they have been wrong.  Have you tried pointing them in the direction of the law on the matter ?

www.legislation.gov.uk/uksi/2001/1004/regulation/61B

Thanks, so voluntary class 2 contributions go back to 6th April 2013? Has anyone here done that?

You need to read it again, back to 2006-07.  It may be that you are ineligible to pay back that far for some reason, which you should ask them to clarify if so, but it is not a general rule.

westholm

molerat said:

westholm said:

molerat said:

westholm said:

westholm said:

I don't know whether this has been mentioned in the forum before but you can buy only six previous years of voluntary class 2 NI contributions relative to the current financial year. To go back as far as 2006 you need to pay the much higher class 3 NI contributions. This has been told to me by both the Pensions Service and HMRC, however the article does not make this clear. 

It might be six years from start of last full financial year, i.e. 2016/2017, definitely not 2006/2007.

Not the first time they have been wrong.  Have you tried pointing them in the direction of the law on the matter ?

www.legislation.gov.uk/uksi/2001/1004/regulation/61B

Thanks, so voluntary class 2 contributions go back to 6th April 2013? Has anyone here done that?

You need to read it again, back to 2006-07.  It may be that you are ineligible to pay back that far for some reason, which you should ask them to clarify if so, but it is not a general rule.

Sorry, I misread the regulation and MSE article is correct. Any idea where the "last six years only" from Pensions Office & HRMC comes from? If I'm ineligible does that mean there must be another regulation that makes me ineligible? I'll write to HMRC because this could save me thousands of pounds.