Voluntary National Insurance....Class 2 or 3? 2 February at 1:56PM in Pensions, annuities & retirement planning 17 replies 472 views

balletdancer

Hi,

I wonder if anyone can help me?  I'm due to receive my SP later this year.  I will be approx. 3 years short and am trying to decide whether to pay them (before April this year) or not. It will increase my pension amount by approx. £22 per week. The missing years are pre 2016.   Looking at some earlier posts on here it seems there's an option to pay Class 2, but on my pension forecast it states £824 is due for Class 3.  Can anyone explain how I can pay Class 2 rather than Class 3? I have looked, but I've been unable to find out how to do this.

Many thanks in anticipation

Dazed_and_C0nfused

Class 2 is primarily for the self employed or people who have moved abroad to work.

https://www.gov.uk/pay-class-2-national-insurance

Do they apply?

Are you sure paying for 3 pre 2016 years will actually increase your forecast, never mind add £22/week???

If you post details of your forecast (in full) and NI record you will get plenty of help.

p00hsticks

balletdancer said:

Hi,

I wonder if anyone can help me?  I'm due to receive my SP later this year.  I will be approx. 3 years short and am trying to decide whether to pay them (before April this year) or not. It will increase my pension amount by approx. £22 per week. The missing years are pre 2016.   Looking at some earlier posts on here it seems there's an option to pay Class 2, but on my pension forecast it states £824 is due for Class 3.  Can anyone explain how I can pay Class 2 rather than Class 3? I have looked, but I've been unable to find out how to do this.

Many thanks in anticipation

You need to be self emplyed to pay class 2 which I think involves registering as self employed with HMRC and  completing a self assessment tax return for, I'm not sure if you can retrospectively apply to be self-emplyed and therefore be eligible to pay Class 2 for past years - certainly not as far back as you appear to need to go.

I also suspect your figures may be off somewhere. Each post 2016 year will currently add £5.29 to your forecast - so three extra years would increase your forecast by £15.87, not £22. You say your gaps are all pre-2016 - these I beleive would increase your forecast by the same, slightly less or nothing at all depending on your individual circumstances (and may not be available to purchase at all). I suggest you post the details of your forecast up so others here can confirm your thinking.

balletdancer

Thanks for your reply.

I'm currently self employed, have 31 years contributions and will be able to add another year once I file my SA later this year to make  32.  I've been paying Class 2 since 2016, so those years are already covered.  My forecast is £163.99 per week.

The missing years are pre 2016 and my understanding is I can pay Class 3 before the April deadline and these will count towards my pension.  The amount is £824 per year to pay Class 3, but only today, while trying to decide whether to pay or not (I will continue to work so will pay extra Income Tax, which may negate the benefit) I've come across an earlier post that seems to suggest it's possible to pay Class 2, rather than 3. 

molerat

balletdancer said:

Thanks for your reply.

I'm currently self employed, have 31 years contributions and will be able to add another year once I file my SA later this year to make  32.  I've been paying Class 2 since 2016, so those years are already covered.  My forecast is £163.99 per week.

The missing years are pre 2016 and my understanding is I can pay Class 3 before the April deadline and these will count towards my pension.  The amount is £824 per year to pay Class 3, but only today, while trying to decide whether to pay or not (I will continue to work so will pay extra Income Tax, which may negate the benefit) I've come across an earlier post that seems to suggest it's possible to pay Class 2, rather than 3. 

Is that the top line can achieve forecast figure or the up to April 2022 figure ?

The forecast may have up to 3 different figures on it.

How many post 2016 years do you have at the moment ?

What were you doing pre 2016 - employed or self employed ?

balletdancer

Estimate based on your National Insurance record up to 5 April 2022

£158.70 a week

Forecast if you contribute until 5 April 2023

£163.99 a week

You can improve your forecast

You have shortfalls in your National Insurance record that you can fill and make count towards your State Pension.

The most you can increase your forecast to is

£185.15 a week

molerat

So you have £158.70 up to April 2022

Adding 2022-23 will give you £163.99

Buying another 4 years prior to 2022 will give you £185.15.

As you only have 31 years (are you sure 31 as your current amount only equates to 30) with all post 2016 years to date filled that means that you only have around 25 pre 2016 years which leaves plenty of scope to buy more pre 2016 years.  Whether you can pay class 2 or 3 depends on your employment status during those years and that will be down to HMRC.  If you were self employed you should be able to pay class 2.

balletdancer

molerat said:

So you have £158.70 up to April 2022

Adding 2022-23 will give you £163.99

Buying another 4 years prior to 2022 will give you £185.15.

As you only have 31 years (are you sure 31 as your current amount only equates to 30) with all post 2016 years to date filled that means that you only have around 25 pre 2016 years which leaves plenty of scope to buy more pre 2016 years.  Whether you can pay class 2 or 3 depends on your employment status during those years and that will be down to HMRC.  If you were self employed you should be able to pay class 2.

Yes that's right I have 25 pre 2016 years and 1 partial year 2016/17, which I recently topped up, but is not yet showing on forecast and 1 more year to add (22-23), to give me 32 years

donglefan

balletdancer, i called the revenue this week and asked about topping up pre-2010 years.  i was registered self-employed for those years and asked if i could pay them at class 2, and was told no class 2's can be paid retrospectively further back than the tax year 2016-17.   anything before then is at class 3 rate, even if registered self-employed at the time.
as long as you are in good health and expect to live 3 years beyond retirement, it's a good investment even at £800.  ref. https://www.moneysavingexpert.com/news/2022/10/martin-lewis--how-to-boost-your-state-pension-if-you-re-aged-bet/

molerat

donglefan said:

balletdancer, i called the revenue this week and asked about topping up pre-2010 years.  i was registered self-employed for those years and asked if i could pay them at class 2, and was told no class 2's can be paid retrospectively further back than the tax year 2016-17.   anything before then is at class 3 rate, even if registered self-employed at the time.
as long as you are in good health and expect to live 3 years beyond retirement, it's a good investment even at £800.  ref. https://www.moneysavingexpert.com/news/2022/10/martin-lewis--how-to-boost-your-state-pension-if-you-re-aged-bet/

Something I posted earlier

That is not supported by the guidance https://www.gov.uk/government/publications/social-security-abroad-ni38/guidance-on-social-security-abroad-ni38  scroll down to "Special Provisions" which does not differentiate between classes 2 and 3 for payment timeline

which disagrees with that stance on class 2 payments.

Special provisions apply to make sure that the new State Pension does not disadvantage those who reach State Pension age on or after 6 April 2016. The government extended the time limits for paying voluntary National Insurance contributions for the tax years from 2006 to 2007 up to 2015 to 2016.

Contributors have until 5 April 2023 to pay them.

In addition, the higher rate provisions that apply to late payment of voluntary National Insurance contributions were disapplied. The 2012 to 2013 rate was payable until 5 April 2019 for voluntary Class 2 National Insurance contributions for the tax years 2006 to 2007 to 2010 to 2011 and for Class 3 National Insurance contributions for the tax years 2006 to 2007 to 2009 to 2010.

From 6 April 2019, the higher rate provisions are applied to tax years 2006 to 2007 to 2015 to 2016.

molerat

donglefan said:

balletdancer, i called the revenue this week and asked about topping up pre-2010 years.  i was registered self-employed for those years and asked if i could pay them at class 2, and was told no class 2's can be paid retrospectively further back than the tax year 2016-17.   anything before then is at class 3 rate, even if registered self-employed at the time.
as long as you are in good health and expect to live 3 years beyond retirement, it's a good investment even at £800.  ref. https://www.moneysavingexpert.com/news/2022/10/martin-lewis--how-to-boost-your-state-pension-if-you-re-aged-bet/

https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim72270

Due to the unavailability of pension statements for the new State Pension introduced by the Pensions Act 2014, HMRC introduced regulation 61B of the SSCR 2001 to extend the time limits for paying voluntary Class 2 National Insurance contributions (NICs) for the contribution years 2006 to 2007 to 2015 to 2016.

The time limit was extended to 5 April 2023 but this only applies to those who:

• reach State Pension age on or after 6 April 2016
• are entitled to pay Class 2 NICs
• had not paid the Class 2 NICs before 6 April 2013

And the relevant act

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

which is pretty much a copy and paste of the class 3 regulation

https://www.legislation.gov.uk/uksi/2001/1004/regulation/50C