Guide discussion: Voluntary national insurance contributions

molerat

but that year is 2010/11 so she's only got until April 2025 to do it

As she was contracted out it is highly unlikely that a pre 2016 year would add anything to the pension, a totally wasted payment.

Which years has she purchased previously ? 

georgemorrison

Hello. I have 41 full pre-2016 NI years. I was opted out for about 25 of these years. I started getting state pension in Feb 2017 and now I am £55 pw below the max new state pension. I retired early so I have 6 "Year not full" years from 2007 to 2013. Can I buy these years to top up my pension. I called the pension service and they couldn't answer and told me to call HMRC who in turn told me to call the pension service, pension ping pong. After listening to Martin L again I was led to think that I am eligible buy extra years but I now have a letter from the pension service saying buying extra years will NOT add to my pension but without any explanation. I have asked for a formal explanation of the rules but so far I cannot get one. Can anyone here explain why buying the extra years may not add to my entitlement. Thanks for nay help.

molerat

You can only use a maximum of 35 pre 2016 years, if contracted out generally only 30.  As you already have 41 then you cannot add any more, you could only add to the pension with post 2016 years but are one of the unfortunate ones that hit retirement soon after the introduction of the new scheme so are limited to what you had earned under the old rules.

Nomis65

molerat said:

but that year is 2010/11 so she's only got until April 2025 to do it

As she was contracted out it is highly unlikely that a pre 2016 year would add anything to the pension, a totally wasted payment.

Which years has she purchased previously ? 

They don't make it easy do they! Looking back through the tax file it appears that she spoke to an advisor at HMRC before she paid for each additional year and was repeatedly told that years before 2016 don't count. They could make that clearer on the NI record. The 5 years that she paid for to get to where she is are 2016/17 to 2020/21, and she verified that it made the expected difference each time.

As Dazed_and_C0nfused has said, the 60p extra per week will be subject to tax, so it's only really worth 48p. She could pay £800.80 for 2021/22 to get it, but the numbers don't add up.

Anyone paying £824.20 for a year needs to see an extra 95p per week at least. Even then you're gambling on living 21 years before ending up in a care home.

Thanks for the input.

molerat

I tend to look at how long it would take to recoup the total cost of the multiple years rather than the individual years.  One i looked at only added an additional 20 weeks to get the whole amount back for buying a part value year.

Fifimum123

How do I find out what I owe for part years and how do I pay it? I have been online trying to do this since last year!!! Been online and tried phoning. Tried again 13/04/24.
All I get in relation to part years online is this message:
"We are checking this year to see if it counts towards your pension. We will update your record when this is finished, you do not need to do anything."  When will that happen? Why dont they give a resolution date?
The phone lines are useless. Either hours on hold or when you get through, they cant tell you and tell you to go online!!!! Aaaaarrrrgggghhhh
If anyone has advice I'd appreciate it.

molerat

The resolution date will be when they finalise your record prior to state retirement.  You will need to phone HMRC, that is the only way.  That message usually appears when you were self employed but did not pay class 2 - is that correct ?

flashbloke

Having worked, either employed or self-employed continuously since the age of 18, I now find with a year and a half to retirement I have 44 years of full contributions yet I still do not qualify for the full pension. I have two years in which contributions are not full and HMRC say: "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." This checking has been ongoing now for the last couple of years.

First, I cannot understand why some people get a full pension with 35 years contributions and I don't qualify with 44 years.

Second, HMRC provide no indication in my online account how much I would need to pay to cover the underpaid years. MSE says £800 per year but if this is the case, it would take me over 8 years to get the money back in pension payments - not taking into account the interest lost on the £1,600. Paying voluntarily will mean that I'll have at least 46 years of contributions. Having worked for so long, I can see no good reason why I should pay anymore into government coffers.

Third, HMRC warn that:  "You need to continue to contribute National Insurance to reach your forecast" In other words, with two tax years to go before retirement I will have to pay for another two years of contributions making 48 years in total by retirement.

Fourth, there is no guarantee that even if I, or anyone else for that matter in a similar situation with under-paid years, will get a full pension if the missing years are paid for.

I get the distinct impression I, and probably many other people, are being scammed by the State.

molerat

Voluntary NI generally repays gross in around 130 weeks, 2.5 years, without taking the annual uplift into account.  Obviously the payback net may be longer due to tax - maybe 217 weeks, 4.1 years, after 40% tax.  They are the equivalent of buying a 35%+ index linked single life annuity - now do they look good ?.

To have 44 years of contributions and not receive the full amount means you were in a contracted out pension paying lower NI so your April 2016 starting amount was limited to your entitlement under the old scheme and you will also have access to that contracted out pension.

There is no scam involved, paying voluntary contributions is excellent value for money.

As has been posted previously those "checking" years are most likely down to you being self employed and not paying class 2 NI.

Which years are they ?  If 2015-16 or earlier filling them will not add to your pension.

If you have gaps post 2016 it will be well worth filling them, if those checking years are post 2016 then contact HMRC and you may be able to fill them at class 2 rate, around £160 per year.

There is a guarantee that you will get a full pension provided you have the correct amount of full years, and filling the correct years if necessary, based on your personal circumstances.

Bering contracted out makes you a winner under the new rules and you should take advantage of that.

eastcorkram

I paid £824.20 on April 9th to buy a missing year, 2006-7. 

Today the forecast has updated, and in the meantime, 2023-24 has also been added. 

Now have total of 33 years. Forecast is now at £228.82 (£11,939.50 per year). This forecast cannot be improved. 

Reach 66 next year. Happy days. Just have to live long enough now.