State pension voluntary NIC Class 3 contributions

Hilly264

Dear Forum,
I'm trying to understand if it is possible to fill gaps in my NIC record, specifically the pre 2016 gaps and also potentially the post 2016 gaps. I'm 46 and my NIC record and pension forecast is as follows:

-15 years of full contributions (13 years pre 2016 and 2 years post 2016)

-15 years not contributed enough (Tax years ending - 1998,1999,2000 which are too old to make voluntary contributions. Tax years ending 2007,2008,2009,2010,2011,2012,2013 are all the pre 2016 gaps. Tax years ending 2019,2020,2021,2022,2023 are all the post 2016 gaps. 
 
-£100.80 estimated weekly pension based on NIC record up to April 2023. 

-£203.85 forecast weekly pension if contribute 18 years before April 2044 with 21 years in order to do so. 

- Never been contracted out. 

I'm not sure whether plugging the pre 2016 gaps would add to my estimated weekly pension or be wasted? Also, if I were to plug the pre 2016 gaps then how or whether this would impact my "starting amount" under the new system if I also decided to plug the post 2016 gaps?

I don't intend to work until the state retirement age and I'm looking to fill as many of these gaps as possible. 

Thank you 






 

molerat

If you have less than 30 pre 2016 years then filling any available gaps up to that amount cannot fail to add to your pension amount. If there are any part filled years then they may be easy wins.  Filling gaps when not strictly necessary is a bit of a gamble, if you don't live long enough to claim it is all wasted as your dependants get nothing.

I am away from my computer at the moment so cannot easily work out the exact effects.

p00hsticks

yes, with only 15 full years plugging the 2016 gaps will boost your pension - but you have enough spare years going forward to get to the maximum, so in your shoes I think rather than laying out a significant sum of money now to pay for all those back years (assuming that those gaps are completely empty rather than partially filled ?) , I'd personally be concentrating on  filling up current and future years instead.

This would keep more options open to you - you keep control of your money for longer and it's not wasted if your circumstances change or you die before reaching state pensino age. 
 
Without being too nosy, what are your current circumstances  
Are you working at all at present ? Employed or self employed ? Or on benefits that give you NI credits ?
 
If you aren't getting NI credits at present through either work or benefits, then you could perhaps consider putting the money you'd need to buy all those back years into a savings account and then dipping into it every so often to buy years going forward - you can pay for current years via monthly direct debit if you want, or wait five years and buy a year just before it becomes unavailable (after six years). 

 

Hilly264

Thank you Molerat. Yes, two of the pre 2016 gap years are part filled. 06/07 requires £301.15 top up and 12/13 requires £174.35 top up . Yes, I agree it is a bit of a gamble filling the gaps when it's not strictly necessary. It's more as a kind of insurance policy and peace of mind to know that those years would be banked and safe. Also, it's impossible to predict future pension rules which may change and result in me kicking myself in the future for not having paid those years when I had the chance. 

Thank you p00hsticks. Yes, the gaps mostly completely empty of contributions except 06/07, 12/13, and 20/21. I know it could all be a waste of money but as I mentioned above it's more for peace of mind. I gave up employment in 2018 to focus on managing my own small (very small) property portfolio so I've had rental income and completed self assessment for that but never made any NIC contributions and never claimed any benefits. I've sold up the rental properties now so will return to employment this year. I wouldn't like to continue working until I'm almost 70 though  

QrizB

Are any of your gaps already part-paid?

If not, and you're planning on returning to employment where you'll be earning enough to pay NI, there seems little point buying old years when you have plenty of time ahead of you.

Hilly264

Only 3 years of the gaps are part-paid, QrizB. I'm fully aware from my forecast that I can fill future years through employment or through paying voluntary contributions in the future. So I'm probably being overly cautious about wanting to plug the past gaps. However, I want to avoid having to rely on being in employment until I'm almost 70 in order to qualify for the full state pension, especially when the rules could possibly change in the future to make it more difficult for people to make voluntary contributions or increase the number of qualifying years contributions. The state pension seem to be a bit of a ticking fiscal time bomb so I'd be surprised if some changes like that aren't made so I'd rather get them paid up sooner rather than later. 

badmemory

I would have thought if you do not want to work too many years more then paying those which are already part paid before they are no longer available would be the way to go.  I think the people to contact are the pension service who will, once you know what you want to do, give you a code & it is very long which you can use to pay HMRC & they will know which years to put the payment against.  I did this for my son almost a year ago, over the phone, much easier than I expected.

Compare when you hope to stop work with the number of years you still need for a full state pension.  You say you need 18 years, well are you expecting to work another 18 years?

Hilly264

Thanks badmemory. I do intend to at the very least pay the years that are part paid. I was unsure whether paying the pre 2016 years would positively impact my pension pot and smart people on this forum have given me confidence that it will do. I don't want to work up to the state retirement age but I don't have a specific retirement age in mind. Once I've decided on the exact gap years to pay I'll get in touch with HMRC and get a payment code.  

molerat

Your 2016 starting amount is under the old scheme, and can not be switched to the new rules, so a pre 2016 year will only add £5.21 v £5.82 for a post 2016 year. Adding more than 3 pre 2016 years means you will need an extra year to reach the max (19 v current 18). 

Hilly264

Thank you very much molerat. That is very useful information for me. 

So if I pay all 12 gap years (7 pre 2016 and 5 post 2016) this will result in me having to pay a total of 19 years to reach the full state pension of £203.85. And if I pay all 12 gap years in one go there would only be 7 years of future contributions that I'd have to make. The cost of this (based on my NIC record) is a whopping £8,235.  

Alternatively I'm also thinking to maybe pay only the 2 part filled pre 2016 gap years and all 5 of the post 2016 gap years. I would have to pay 18 years in total to reach the full state pension of £203.85. If all 7 years are paid in one installment there would be 11 years of future contributions I'd have to make. This would cost (again based on my NIC record) £4,115. 

It's a good thing I have until Apr 2025 to decide. 

Thanks again for your brilliant help molerat. I couldn't find the detailed information you posted anywhere on the .gov website. You've bee super helpful.      

badmemory

The one thing that the pension service will be able to give you that HMRC & DWP cannot is whether a payment will benefit you.  But only you can know if you will need the extra years it will give you, which depends on either how many years more you expect to work OR whether you will be able to claim for eg looking after grandchildren whilst their parents work & earn NI contributions in their own right.