Paying voluntary NI contributions - pros v cons

[garjo]

There's been  publicity around paying voluntary contributions for those years where you have a shortfall. The scheme allows you to pay voluntary contributions which then helps to boost your state pension up to £185 (current rates). Looking at the pros and cons of this, okay so you pay around £800 (one off payment) for each year there is shortfall but you can get up to £250 year back ongoing. Has any pw members done this?

 

https://www.moneysavingexpert.com/savings/voluntary-national-insurance-contributions/

[TOPGUN749]

Luckily I have a record long enough for the full pension,starting in 15 months,paying for missed years is a gamble really,it would take several years to break even,yet if you lived for 30 years it sounds well worth it. How many years does £800 cover,if you gain only £250 a year out of the full amount you must be only 1 year short of the 30 and going to get about 98%!

[TOPGUN749]

1 minute ago, TOPGUN749 said:

Luckily I have a record long enough for the full pension,starting in 15 months,paying for missed years is a gamble really,it would take several years to break even,yet if you lived for 30 years it sounds well worth it. How many years does £800 cover,if you gain only £250 a year out of the full amount you must be only 1 year short of the 30 and going to get about 98%!

Just noticed it’s £800 for each year short! That is a lot,I wouldn’t do it myself.For example if someone needed 5 years that’s £4,000 and at £250 a year that would take 16 years to regain,and inflation would take away much of the £4,000.

1 minute ago, TOPGUN749 said:

Just noticed it’s £800 for each year short! That is a lot,I wouldn’t do it myself.For example if someone needed 5 years that’s £4,000 and at £250 a year that would take 16 years to regain,and inflation would take away much of the £4,000.

Better to take the smaller pension and claim pension credit to top it up a bit if you qualify,then get other benefits like reduced council tax,and government handouts for heating etc!

[Dave at kelton]

Did that for my wife years ago so she has tetired on full state pension. Seemed to represent a good return on the investment at the time but then they moved her retirement age out from 60-66🤬

Edited June 26, 2022 by Dave at kelton

[TIGHTCHOKE]

Should have paid in over the years. Lucky to be able to top up.

[steve_b_wales]

I checked my contributions from when I started work (1973) and found that there were a few years missing. These were around 1976 /77. I was told that it would be too late to replay these, but luckily, I have built up enough to get the full rate, due to start April 2023.

[Paul5tag]

Can anyone enlighten me on this subject. How many years do you have to contribute to receive full state pension. I was on the understanding that it was 35 full years , however having checked my records on the government gateway I have 40 yrs paid up yet still have to contribute 2 more years to get the full pension.

[oldypigeonpopper]

Hello, I payed N I  from 16 to 65 which I believe is more than enough years but it made no difference to the pension, yet I know people who never paid their full years and there better off with DWP entitlements  

2 hours ago, Dave at kelton said:

Did that for my wife years ago so she has tetired on full state pension. Seemed to represent a good return on the investment at the time but then they moved her retirement age out from 60-66🤬

Hello, another hit from David Cameroon's government, did he not say , if you live longer , you pay longer  🤔

Edited June 26, 2022 by oldypigeonpopper

[Down South]

I took my state pension last year. Even though I made full contributions through my working life I still couldn’t get a full state pension. Reason; my employers reduced their contributions and diverted the funds to the company pension scheme the idea being the return would be greater. Hmmmmm! If you have been long term employed with a company pension you may have a surprise come retirement.

[JohnfromUK]

1 hour ago, steve_b_wales said:

I checked my contributions from when I started work (1973) and found that there were a few years missing. These were around 1976 /77. I was told that it would be too late to replay these, but luckily, I have built up enough to get the full rate, due to start April 2023.

My situation is identical;

• Few years missing - a long time ago when I was a student - but did a holiday job on PAYE, so did pay some contributions which seemed to have cancelled my student status.  Should have received credit as a full time student, but it didn't happen and is now too long ago to put right (I only discovered it when I retired).
• However, I do still have enough built up for full pension
• Also due to start April 2023

2 minutes ago, Down South said:

I took my state pension last year. Even though I made full contributions through my working life I still couldn’t get a full state pension. Reason; my employers reduced their contributions and diverted the funds to the company pension scheme the idea being the return would be greater. Hmmmmm! If you have been long term employed with a company pension you may have a surprise come retirement.

I was also 'contracted out' for a few years - but still have enough full qualifying years.  My pensions from the two companies that I worked for - one of whom 'contracted me out' for part of my time employed by them pay a pension which started at 65 (not 66) and between them add almost as much as a full state pension - so it has worked out well for me.

[Down South]

10 minutes ago, JohnfromUK said:

I was also 'contracted out' for a few years - but still have enough full qualifying years.  My pensions from the two companies that I worked for - one of whom 'contracted me out' for part of my time employed by them pay a pension which started at 65 (not 66) and between them add almost as much as a full state pension - so it has worked out well for me.

👍👍. I employed a financial adviser leading up to retirement. I don’t do too bad. 😊

[Mr.T]

 

2 hours ago, Paul5tag said:

Can anyone enlighten me on this subject. How many years do you have to contribute to receive full state pension. I was on the understanding that it was 35 full years , however having checked my records on the government gateway I have 40 yrs paid up yet still have to contribute 2 more years to get the full pension.

Same with me, apparently one of my jobs I was opted out of SERP’s so had a shortfall . Reckon that £800 gives extra £10 per week pension so providing you draw your pension for 18 months you get your money back from then on your on a winner👍

[loriusgarrulus]

I retired early in 2012 with 38 years contributions, so decided it wasn't worth topping up my NI contributions as I had a private pension from age 57 and savings which topped up my private pension till my government pension kicked in. My government pension started last year.

My company did a retirement planning seminar before I retired. One thing mentioned was that self employed NI was a lot cheaper normally than employed payments. There was a way of using that to make up a shortfall in a few cases. As it was 10 years ago I can't remember what was involved, but it might be worth looking into.

One I remember was if one of a couple was self employed and the partner wasn't working the Self employed, employed the stay at home partner as a self employed admin assistant  etc on a nominal wage and payed minimum SE stamp for them. You would have to find out the way to do it if you still can.

https://www.gov.uk/self-employed-national-insurance-rates

 

 

[benbobailey]

6 hours ago, garjo said:

There's been  publicity around paying voluntary contributions for those years where you have a shortfall. The scheme allows you to pay voluntary contributions which then helps to boost your state pension up to £185 (current rates). Looking at the pros and cons of this, okay so you pay around £800 (one off payment) for each year there is shortfall but you can get up to £250 year back ongoing. Has any pw members done this?

 

https://www.moneysavingexpert.com/savings/voluntary-national-insurance-contributions/

Garjo, this is a fantastic offer. If you can get £250 appx per annum for the rest of your life, for a one off payment of £800 appx, after just over 3 years you are in vast profit thereafter. I did this several years ago prior to retirement ( it was even cheaper then!) for both myself and wife and now reap the benefit for evermore. Check with the Future Pensions Dept, to see what years to pay that will qualify for the extra pension. I too worked continuously from aged 15 until age 65 and was still short of maximum state pension, as for many years I was contracted out of the scheme and paid into a company pension. National insurance contributions pay towards a large amount of benefits and NHS etc, so I have no problems with paying my share. It's great that I could top up State Pension to maximum. Regards 

Edited June 26, 2022 by benbobailey

[harrycatcat1]

6 hours ago, Paul5tag said:

Can anyone enlighten me on this subject. How many years do you have to contribute to receive full state pension. I was on the understanding that it was 35 full years , however having checked my records on the government gateway I have 40 yrs paid up yet still have to contribute 2 more years to get the full pension.

Think yourself lucky,  I've got 45 years fully paid up but because I finished at 60 they want me to pay £800 per year x 6 years to get £185. At the moment I will get £168 (forecast) so won't be topping up

[JohnfromUK]

21 minutes ago, harrycatcat1 said:

Think yourself lucky,  I've got 45 years fully paid up but because I finished at 60 they want me to pay £800 per year x 6 years to get £185. At the moment I will get £168 (forecast) so won't be topping up

It may be worth you browsing this as "in general" it is a worthwhile thing to do.  Of course you may well not be in the "in general" category!

https://www.moneysavingexpert.com/savings/voluntary-national-insurance-contributions/

 

[benbobailey]

20 minutes ago, harrycatcat1 said:

Think yourself lucky,  I've got 45 years fully paid up but because I finished at 60 they want me to pay £800 per year x 6 years to get £185. At the moment I will get £168 (forecast) so won't be topping up

Hello harrycatcat1, you should really carefully reconsider your decision. In return for your £4800 one off payment, you have stated you will receive an extra £17 pounds per week state pension (£890 per year appx).After appx 5 years the extra is all profit, and don't forget it will have increased in amount annually. Regards 

[Rim Fire]

I was lucky i done this through the steel works llanwern i took out 8 yrs i was on my 5yr when we got made redundant  but in the the contract as long as you had been paying for 5 yrs and over they had to honor the full 8 😉

Edited June 26, 2022 by Rim Fire

[garjo]

Thanks for feedback. I think for me it's worth paying the £800. When I reach retirement age it should pay itself back after a few years (assuming I don't die before) and as others have said if it's linked with triple lock increases I should benefit by the annual increases. As I see it, it's better than having £800 in a bank a/c earning very little interest. 

[scolopax]

I think I have 14 years to catch up on, not that you can pay 14 years NI arrears, I think it is six years? Scary amount of money to pay out in a lump sum.

[benbobailey]

6 minutes ago, scolopax said:

I think I have 14 years to catch up on, not that you can pay 14 years NI arrears, I think it is six years? Scary amount of money to pay out in a lump sum.

Scolipax, yes there is a maximum number of years voluntary NI contributions that can be paid to qualify for the increase in State Pension. It does appear a considerable amount to pay, but you do not have to purchase back all of the years.  If you are short 14 years , you were possibly  contributing to a company/private pension, benefitting from smaller NI payments. You may be a big winner, if you have company/private pension and are given the chance to top up to max state pension. It's a very profitable opportunity, albeit with a cash outlay and several years before large gain. Regards

PS for those with the outlook 'may be run over by bus etc' , why bother buying anything you will not use immediately!

[oowee]

5 hours ago, benbobailey said:

Garjo, this is a fantastic offer. If you can get £250 appx per annum for the rest of your life, for a one off payment of £800 appx, after just over 3 years you are in vast profit thereafter. I did this several years ago prior to retirement ( it was even cheaper then!) for both myself and wife and now reap the benefit for evermore. Check with the Future Pensions Dept, to see what years to pay that will qualify for the extra pension. I too worked continuously from aged 15 until age 65 and was still short of maximum state pension, as for many years I was contracted out of the scheme and paid into a company pension. National insurance contributions pay towards a large amount of benefits and NHS etc, so I have no problems with paying my share. It's great that I could top up State Pension to maximum. Regards 

This if your healthy. They get more expensive to buy as you get nearer to drawing. Make sure to buy any years that may be part paid first. The revenue won't do this automatically. 

More of a quandary if you can buy extra years in employee pension scheme with tax relief on the contributions. Even then it's very unlikely to be better. 

[benbobailey]

11 hours ago, TOPGUN749 said:

Just noticed it’s £800 for each year short! That is a lot,I wouldn’t do it myself.For example if someone needed 5 years that’s £4,000 and at £250 a year that would take 16 years to regain,and inflation would take away much of the £4,000.

Better to take the smaller pension and claim pension credit to top it up a bit if you qualify,then get other benefits like reduced council tax,and government handouts for heating etc!

Your calculations, maths are way out. £250 per year x 5 = £1250. Therefore the outlay would be recovered in just over 3 yrs ( not 16 as you claim)

Edited June 26, 2022 by benbobailey

[Lloyd90]

22 minutes ago, benbobailey said:

Your calculations, maths are way out. £250 per year x 5 = £1250. Therefore the outlay would be recovered in just over 3 yrs ( not 16 as you claim)

Huh? I thought his maths was right. 
 

He owes 5 years of NI payment, the payment costs £800 per year that was missed.  
 

5 years x £800 = £4000 payment. 
 

You need to pay out this £4,000 to get an increase or £250 per year in pension. 
 

£4000 divided by the £250 you benefit by = 16 years to recover the initial outlay of the £4,000. 
 

 

[Newbie to this]

13 minutes ago, Lloyd90 said:

Huh? I thought his maths was right. 
 

He owes 5 years of NI payment, the payment costs £800 per year that was missed.  
 

5 years x £800 = £4000 payment. 
 

You need to pay out this £4,000 to get an increase or £250 per year in pension. 
 

£4000 divided by the £250 you benefit by = 16 years to recover the initial outlay of the £4,000.