Voluntary NI contributions (Class III)

[Miro]

I usually subscribe to the view that if something appears to be too good to be true, then it is.
But:
Example - 24 years NI contributions paid, amounting to a state pension of approx £89 per week.
Pay 6 years voluntary contributions at £13.55 per week (approx £4,227) and get a full pension of approx £110 per week.
So, to get an extra £21 per week (or £1,092 per year) I need to "invest" just £4,227 - this represents a return of about 26% pa.
Apart from the obvious (that one may expire within 4 years and never recoup the initial outlay), this seems like a no-brainer to me. Even if you didn't have the 4K available, it would be worth getting a loan (not from Wonga) surely?
Am I missing something, or is this truly the best investment you're ever likely to come across?

[pete_l]

No, you're not missing anything. That IS how it works.
The only thing you need to consider about your NI "investment" is that the amount you have to pay in comes from earned pay, after tax. The corresponding extra amount you get in your pension could make other pensions / income taxable.

Regarding the "best investment". Consider student loans: the cheapest loan you'll ever, EVER get. It doesn't affect your credit rating and it's guaranteed to never be more than the rate of inflation.The absolute worst thing you can do is to pay it off early.

[Miro]

So...get a student loan, and use it to pay NI class III contributions. Warren Buffet, eat yer heart out!

[scampicat]

It IS the best investment you have ever come across.

When we came to Spain in 2004 aged 54 and 55, we each got a Pension Forecast from the UK.It said to get a full State Pension I needed another 2 years NI contributions and my husband another eight years. We decided to pay my two years first as my Pension age came first. We did that and in 2010 I got a full State Pension in my own right.

We never did have to do my husband's as the rules changed and he only needed thirty years of contributions - he already had 36. He becomes of State Pension age in January.

Well worth the money imho .

[Miro]

Best keep this quiet then - perhaps Osborne and co haven't realised yet! I routinely and ritually ignore any adverts/newsletters etc offering guaranteed returns of 8% or 6% etc, as they are obviously dodgy, and yet here we have our dear old government offering 26% with no strings attached. Incredible!

[Terry Tibbs]

I made voluntary NI contributions for several years and stopped a couple of years back when I reached the magic total of 30 years, which I was told entitled me to a full state pension (currently £110.15 per week). This is still the current 'official' situation, as the gov.uk site shows:

https://www.gov.uk/state-pension/overview

However now of course we have the proposed new single tier pension - Here's a link to a UK goverment produced fact sheet (pdf) for this:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/181237/single-tier-pension-fact-sheet.pdf

If this goes ahead, I'll need 35 years' worth of contributions to get the full pension, quoted as £144 per week in the white paper, although that is not guaranteed. I think that the additional voluntary NI contributions would be a good investment, although the proposed changes would also mean that my state pension age would go up again (it was 65 originally, now it's 66 and it would change to 67). This is the biggest concern I have - that the government will continue to tinker with pensions as the economic situation dictates (it's really just a big ponzi scheme IMO, as all the contributions I've made have already been spent) - so heaven knows what (if anything) I'll actually get in the end. Hence I'm endeavouring to have some additional sources of income in place, but the performance of my private pension policies up to now has been (to put it politely) disappointing.

The other thing I was wondering was whether making further voluntary NI contributions would help in any way in securing access to state healthcare in Spain (a whole different subject in its own right, of course).

[Terry Tibbs]

Another link with more info on the proposed changes:

http://www.ageuk.org.uk/money-matters/pensions/what-the-new-state-pension-reforms-mean-for-you/

[pensure1988]

Hi Terry

Would you possibly know if one retires in Dec 2016 and has paid Voluntary NI Contributions(Class 111) up until 2010/2011 Tax Year, whether any further Contributions are necesssary. Also do you know how the AutoCredits System works. I only have 7 Qualifying years at present to a Basic State Pension.

Many Thanks

[pete_l]

Best keep this quiet then - perhaps Osborne and co haven't realised yet! I routinely and ritually ignore any adverts/newsletters etc offering guaranteed returns of 8% or 6% etc, as they are obviously dodgy, and yet here we have our dear old government offering 26% with no strings attached. Incredible!

Apart from the minor "string" of living long enough to collect!

[fyfin]

We were going to do that for my wife as she retired at 50 with a small pension but not the 39 years required for a full state pension. We realised that class 2 were a lot cheaper with the same benefit so she set up as a jewellery maker and actually did make some but sold less that £100 in a year. A minor inconvenience of doing a tax return and accumulating years of state pension benefit and then the buggers changed the rules so she only needed 30 years.

However, I've just noticed something interesting on the pension advisory service website which seems to imply that you can pay class 2 if you're living abroad.
Paying voluntary NICs
The NICs that you can pay voluntarily are normally Class 3 contributions, but if you're self-employed or living abroad, you can pay Class 2 contributions instead.

Before deciding whether to pay voluntary NICs, you should make sure that:

•there are gaps in your NI record for which payment can be made
•you know how much you need to pay
•you understand the benefits of paying
If you are unsure, you should ring the DWP Future Pension Centre on 0191 218 3600.

[scampicat]

Hi Terry

Would you possibly know if one retires in Dec 2016 and has paid Voluntary NI Contributions(Class 111) up until 2010/2011 Tax Year, whether any further Contributions are necesssary. Also do you know how the AutoCredits System works. I only have 7 Qualifying years at present to a Basic State Pension.

Many Thanks

AFAIK the autocredit scheme is only applicable if you are UK resident. If you are talking about the credits men get between 60-65, that is definitely for UK residents and is being phased out, I think it finishes in 2015.

See link below for qualifying conditions:

http://www.hmrc.gov.uk/ni/intro/credits.htm

Who is eligible for National Insurance credits?
There are different circumstances in which you may be able to get credits. These are:
when you are unemployed, or unable to work because you are ill, and claiming certain benefits
If you were aged 16 to 18 before 6 April 2010, you were usually credited automatically with National Insurance credits. No new awards will be made from 6 April 2010.
if you are on an approved training course
when you are doing jury service
if you are getting Statutory Adoption Pay, Statutory Maternity Pay, Additional Statutory Paternity Pay, Statutory Sick Pay, Maternity Allowance or Working Tax Credit
if you have been wrongly put in prison
if you are a man approaching age 65 (however, from 6 April 2010 these credits are being phased out in line with the increase in women's State Pension age)
if you are caring for a child or for someone who is sick or disabled
if you are aged 16 or over and provided care for a child under 12, that you are related to and you lived in the UK for the period(s) of care
if your spouse or civil partner is a member of Her Majesty's forces and you are accompanying them on an assignment outside the UK
To check the conditions for when you might be able to get credits and what type you could get see the section 'National Insurance credits in different situations' below.
There are special arrangements for people who worked or were detained without pay in Iraq during the Gulf Crisis. If you think you might be affected by this, write to HM Revenue & Customs (HMRC) at:
HM Revenue & Customs
National Insurance Contributions & Employer Office
Benton Park View
Newcastle upon Tyne
NE98 1ZZ[/i]

[El Cid]

AFAIK the autocredit scheme is only applicable if you are UK resident.

That's correct - I had to pay the full five years that would normally have been credited.

It's just plain discrimination - I cannot understand their justification for doing this. At least I have made up for it with 15 years of WFA!

Sid

[gus-lopez]

If this goes ahead, I'll need 35 years' worth of contributions to get the full pension, quoted as £144 per week in the white paper, although that is not guaranteed. .

Even if you don'tpay in , 30/35ths still gets you more than the £110 under the present system.

[MartinEB]

However, I've just noticed something interesting on the pension advisory service website which seems to imply that you can pay class 2 if you're living abroad.
Paying voluntary NICs
The NICs that you can pay voluntarily are normally Class 3 contributions, but if you're self-employed or living abroad, you can pay Class 2 contributions instead.

I think you must have misread it? It actually says;

"Provided the earlier conditions are met you can pay voluntary Class 2 National Insurance contributions if you are employed or self-employed abroad

So not "self employed or living abroad", but employed or self employed abroad?



Source: http://www.hmrc.gov.uk/ni/volcontr/abroad.htm

[Miro]

Quick update: because I didn't learn about the deal on paying voluntary contributions until I actually started receiving my pension (my own fault I guess), the DWP are "applying" to HMRC for the calculation on how much I should pay. It's a simple calculation, since they've already told me exactly how many years I've got (obviously, since I'm already receiving my pension), and you can only pay up to 6 years extra (I've got exactly 24, so can pay the full 6 years). I know how much to pay, but have to wait for DWP to ask HMRC, HMRC to tell DWP, who will then tell me to pay HMRC. All correspondence goes via Maltapost, of course, and I've been told to expect to wait up to 3 months. I wrote direct to HMRC to ask if it's possible to speed it up, but they replied that because I'm already in receipt of my pension, I have to go through DWP. Ridiculous.
Moral of the story - check it out before you start taking your state pension! I'm (currently) losing out on the best investment ever because I didn't do my homework first.

[Miro]

Still no word from either HMRC or DWP about paying my voluntary contributions, but, surprise, I received a letter from DWP to say they have decided to pay me a "new" pension of about 100 quid a week - apparently I now have 27 years contributions rather than 24. I wonder how there can be any doubt? They've already paid me the new amount, plus a payment for the difference back-dated.
So now the voluntary contributions will be less - if they ever get back to me.

[scampicat]

It will be worth it in the end, Miro!

[Miro]

It will be worth it in the end, Miro!

Reminds me of a quote from that Marigold Hotel movie - "It will be alright in the end - and if it isn't alright, it's not the end".

So...5 months on, I have finally received a letter from the Pensions people (not HMRC) telling me that I can pay 3 years voluntary NI to bring me up to 30 (they got my 24 years contributions wrong before - it was 27), and the amount payable. That necessitated a phone call though, because they gave me the amounts payable for the last 6 years, and I had to check which 3 I should pay. They suggested the cheapest 3, which I won't argue with.
The enclosed a form to complete, in Parts One & Two, with instructions on how to complete parts A & B - for payment by cheque or bankers draft. They also enclosed a sheet from HMRC detailing how to make payments by CHAPS, BACS etc. This also necessitated a phone call, because it completely contradicts the instructions for payment found on their website, which clearly tells you to include your 18 character reference number which you'll find on the payslip sent to you by HMRC - except that they didn't send me anything, let alone a payslip or reference number. On the phone I was told to use my NI number, surname and initial plus "IC" (for International Case" apparently, then told to forget the IC but include the area code 056 or 14 (they didn't know which) - but of course banks only allow for up to 18 characters (coincidence) in the reference field when making a transfer online. NI numbers are 9, plus space and another between surname and initial - lucky my name is Miro, right? Except it's not, it's longer than that...
They're going to call me back tomorrow (I went into apoplexy when they suggested writing to me with instructions). All this to get an extra 10 quid a week - and I need to live at least four more years for it to be worth it at all. Do you think they're deliberately stressing me out?

[Chica56]

I get really confused about this. I am a few years short of UK contributions limit for full pension but have 9 years of spanish contributions so it is worth my while adding to UK contributions? I am definitely not 9 years short of UK contributions.........so what is the best option for me?

[scampicat]

Re: How to pay.

I just sent them a cheque and covering letter.......I suppose that won't work if you don't have a UK Bank Account though.