Is it worth paying UK voluntary National Insurance contributions?

[emkay 10,192]

@GaryC, thanks so much for your reply.  I really hoped you would as our TT expert.  Your reply is a lot to unpack too 😉. I’ll have to try to comprehend fully later. I guessed my simple calculations wouldn’t suffice. Since I paid additionally since August 2017 to reach 35 years of contributions (I’ll stop calling it AVCs), the pension forecasts haven’t stated the number of fully qualifying years as they did before. I’ll request a new pension forecast tomorrow. Many thanks again Gary. 

[GaryC 378]

Get a copy on your NI record too.  When you have both of those you should be able to answer all of your state pension questions...

[emkay 10,192]

22 minutes ago, GaryC said:

Get a copy on your NI record too.  When you have both of those you should be able to answer all of your state pension questions...

Thanks for that tip.  As I no longer have online access, I usually phone every year to ask for a pension forecast. Can the same department also send a copy of my NI record? 

[GaryC 378]

No, DWP Future Pensions gives the forecast and HMRC NI Team deals with all things NI.  At the moment the lines are hideously busy and you are highly unlikely to get through.  It might quieten down a little as the 5 April deadline has been extended until 31 July but not to put too fine a point on it, those who have been sitting on their hands (for reasons that matter not) for a decade are now waking up and panicking.

 

National Insurance: general enquiries - GOV.UK (www.gov.uk)

Contact the Future Pension Centre - GOV.UK (www.gov.uk)

 

The rules about how to verify for a GOV UK ID have changed recently and I think you can now get one with a biometric passport only.  I am not sure of the process and I think you need to start from scratch, not try to re-invigorate an old one.  But I cannot check/try it out, so we need someone to test the system, lol... 

[emkay 10,192]

Just in case this helps anyone else, I  just phoned to request a NI statement, tel 0044 1912037010. The statements go up to tax year ending 2021. I was transferred to the CNR team and told that any missing contributions can’t be paid for years prior to 2006. 

As I live abroad, they can’t post me a statement. I have to fill in a form CA3916 that requested a statement and post it to them. https://www.gov.uk/government/publications/national-insurance-statement-of-national-insurance-contributions-ca3916.  I was in hold for over an hour to learn of this so this should save anyone else’s time. 
 

I tried to register for online services that seemed quite simple until identity verification. It can either be done using an app though my iPhone is too old. Alternatively, it can be done by verification of other documents. However, 2 from 3 options needed to be selected. UK passport, UK driving licence or UK credit reference info ie date credit card issued, telephone contract taken out etc.  I have none of these. I was then promoted to call them for help. The advisor believes the service isn’t available from abroad although the application accepted a DE mobile number and I was sent access codes.  Maybe it would work with a newer mobile phone. 
 

Requesting and state pension forecast was easy. The new forecasts should show some level of detail regarding incomplete years. 
 

Thanks again @GaryC. I’ll check through the rest of your much appreciated advice. 

 

[GaryC 378]

emkay, don't you mean tax year ending 2022?  That is what your records should show at the moment.  2023 will be added/updated by late summer 2023 (usually). It is correct that you can currently fill any years 2006/07 to 2016/17 (until 31 July 2023) and 20171/8 according to the normal "6 years in arrears" rule.

 

Re GOV ID, I have heard others say that old phones can be an issue but it is definitely doable since 2023 while not resident in the UK

[emkay 10,192]

41 minutes ago, GaryC said:

emkay, don't you mean tax year ending 2022?  That is what your records should show at the moment.  2023 will be added/updated by late summer 2023 (usually). It is correct that you can currently fill any years 2006/07 to 2016/17 (until 31 July 2023) and 20171/8 according to the normal "6 years in arrears" rule.

 

Re GOV ID, I have heard others say that old phones can be an issue but it is definitely doable since 2023 while not resident in the UK

For the NI record, I was definitely told up to the year ending 2021. The pension forecast, year ending 2022. I’ve just tried to fill in the CA3916 form. It’s not very clear. I’ve found an old version of the form to complete by hand. This might be easier. 

 

[GaryC 378]

I don't know why you got put through to the CNR as all you want is to "Check your National Insurance record".  That is no different than I would do if I called, rather than doing it online... Out of interest, did you ask for a "statement of your contributions" or a "copy of your NI record"? 

 

I am not sure you need to complete a CA3916.  On the GOV UK page for the form itself, it says,

"You can ask HMRC to send you a statement of your UK National Insurance contributions if you’ve lived or worked in the UK and are making a benefit claim in the EU, Norway, Iceland, Switzerland or Liechtenstein"

 

But you aren't making a benefit claim in the EU and when it comes time to claim your pension(s), then DWP uses form CFP901 to gather information about contributions in EU MS. So I think wires may have got crossed - not the first time in the last couple of days that people calling HMRC from abroad appear to have been given very strange advice or requirements.  The other day, someone was told they could not submit a CF83 because they had not "properly emigrated" when they left the UK, so also had to fill in an obscure form.  

 

Anyway, if you follow the link on the CA3916 page and look at the shaded box "Read the National Insurance for workers from the UK working in the EU, Norway, Iceland, Switzerland or Liechtenstein from 1 January 2021 guide to find out if you need to complete this form.", then it does not read to me as though you would need to complete the form in circumstances like yours where you just want a copy of your NI record.

 

I would try calling again - maybe use the 0300 number, so +44 300 200 3500, and ask for a copy of your NI record, adding, if necessary, that all you want to do is identify any gaps from 2006/07 onwards so that you can go though the CF83 process...

 

If you still have no luck then we can work with your new forecast when it arrives, plus the info you already have to enable you to complete the CF83 knowing broadly what the outcome should be... 

[emkay 10,192]

@GaryC, thanks again for your advice. Sorry, if I’m repeating any of this…,When I started paying voluntary contributions in 2017, my previous pension forecast stated I already had 29 qualifying years. Was it correct that I was given the choice of either paying the missing years in arrears (2011-2016), or pay for another x number of years to fulfil the required number of qualifying years? Maybe I should just pay the arrears and be done?
 

If qualifying years were stated in a previous pension forecast, does this actually mean that those are full? If so, I shouldn’t worry about any gaps. Probably stupid question though just out of interest…..does full mean 12 months of contributions or an overall annual minimum? 
 

I’m just going through the middle bit of your reply yesterday, re transition, nSP, qualifying years etc.

I’ll try to phone again…probably send the form off too. I just asked for a record or statement of my NI contributions to check for pension purposes. 

 

Many thanks again.

[GaryC 378]

The crux of the matter, and what makes it complicated, is the change from the old to the new rules in 2016.  As I mentioned, the old basic state pension was based on a max of 30 full NI years. Even if you had 50 years on your record at pension age, only 30 would be used to calculate your basic pension and for transition, only 35 would be used to calculate using the nSP rules.  From 2016/17 onwards all bets are off in terms of years (as long as you have 10+) and you simply add £5.29 (2022/23 rates) to your starting amount for each year you accumulate, until you reach SPA or the £ max.

 

As the transition "starting amount" at 6 April 2016 was the higher of what the old rules would have given you compared to what the new rules would, with the complexities around additional pension and contracting out, the rule of thumb is that it is not usually worth having more than 30 pre-2016/17 years, so paying more than 1 pre 2016/17 year would probably be a waste of money. 

 

An exception to that could be where you had, say, 35+ pre-2016/17 years, were not contracted out and had only a small amount of additional pension because you were not in highly-paid work during the relevant years.  In that case, I think it is mathematically possible that you could end up with a starting amount based on the new rules, so 35/35 x £max nSP but whether that would actually transpire is a good question (I don't understand the old SERPS/S2P rules to be able to fathom that out).  And, one would need to look at the pension forecast to begin to fathom that.

 

As all empty years cost the same to fill (apart from the immediately preceding year for Class 2 (2021/22) and two preceding years for Class 3, (2020/21 and 2021/22) it doesn't really matter from a cost perspective which ones you chose...  The important thing is to ensure that they actually benefit your pension.

 

A "qualifying year" is broadly one where you have made at least 52 payments of the minimum amount, or been credited with 52 weeks.  This is where the £824.20 or £163.80 come in as they are 52 times the weekly voluntary amount.  If you got credits for, say, 26 weeks (maybe the final 26 weeks claiming child benefit?) and then paid NI for the rest of the year, you would pay 26 x £min voluntarily, or, if in employment, 26 x X% of your salary.  But from your perspective a full year is 52 x £weekly Class 2 (or Class 3).

 

If a year is showing as full on your NI record and therefore flows through to a forecast amount of pension based on your record to 5 April 20XX, then those years are cast in stone.  The only thing that would change that is if they discovered some massive error when they did the actual calculation of your pension at pension age and that is pretty much unheard of.  The pension forecast is therefore a good indication of what you will get based on the rates for the year it was produced (currently 2022/23 rates).

 

Perhaps we should do some sums based on your 2016 forecast?  What does it say you would get based on your NI record to 5 April 2016? What other amounts does it show? E.g. the amount you will get if you contribute X years before year Y.  And possibly a note saying you can improve it further by filling gaps?  Does it show an amount for COPE (I think it was on page 2 of the paper version, though things have changed in terms of layout since 2016...

 

Do you know in your own mind which years are empty (or part-full) for 2006/07 to 2015/16, and for 2016/17 to 2022/23 (I think you mentioned some of this already)?

 

Armed with the above, we should be able to see what you can do and whether there is any rush to meet the now 31 July extended deadline.  As I mentioned, 2016/17 is already part-filled, so paying that before 31 July is a must.

 

[murphaph 9,814]

On 18/12/2022, 19:03:53, GaryC said:

The payback for topping up those 4 years (4 x £5.29 = £21.16) is about 8 months assuming you can pay Class 2 voluntary NIC (£165 per year at the moment), or about 3 years if you have to pay Class 3 at £825 for each year.  So as long as you expect to live at least 8 months/3 years into claiming your UK state pension it is essentially cheap money. If you have a terminal illness, then spend your money elsewhere as your state pension stops at death. 

I am just reading back through these threads again as a lot of it crosses over with Ireland. I just wonder is the above strictly correct? (It may well be as I have no real understanding of UK pensions, but the statement jumped out at me somewhat)....

 

In Ireland the state pension does not necessarily stop at death if there is a surviving spouse. A survivor's pension (previously called a widow's pension) will be due to a surviving spouse of a person who themselves was eligible to receive or in receipt of a contributory old age pension (COAP) at the time of their death. The rate of survivor's pension depends on the contributions made by the COAP recipient or would be recipient. It is  paid at almost the full rate of the COAP itself (€240 pw instead of €265.30). The survivor's pension is payable for life as long as the survivor does not cohabit with a new partner (though quite how the Irish Department of Social Protection would ever ascertain that my widow had moved in with my replacement I do not know!). There's a bit of a loophole in the Irish legislation...the survivor's pension is payable as long as the survivor is not themselves in receipt of a COAP that is of the same or higher value. So for example when my father died aged 63, my mother started receiving a survivor's pension immediately while she was aged just 60 (3 and 6 years short of actual retirement age in Ireland!). When her own COAP started being paid out from age 66 the survivor's pension stopped, but that would never happen in my wife's case as she has never paid into the Irish social welfare system and likely never will. The legislation does not care about survivor's receiving foreign pensions, even if they are state pensions. It is a loophole, but probably a fairly rarely used one.

[Gambatte 925]

@murphaph, the UK does not pay a widow pension.

[murphaph 9,814]

Wow that's pretty tough if you were (even partially) relying on another breadwinner and they pass away. I assumed there would be something. The German one is not all that generous but at least it exists. Thanks for setting me straight. Not the answer I was expecting as you can probably detect!

[GaryC 378]

I need say no more. Thanks Gambatte

 

[xaple 2]

Hello. I'm following this thread with great interest - the topic of state pensions is hugely complex.

 

I'm trying to work out my own situation and I'm hoping someone could tell me if my thinking is correct or not.

 

I've been living in Germany since August 2019 and have been paying mandatory contributions as an employee since then without any gaps. I'm ordinarily resident in Germany and I have no plans to move back to the UK - at least for the foreseeable future.

 

I was born and raised in the UK. Before moving to Germany, I was studying without a full-time job. I was casually employed and paying national insurance contributions for some weeks, but I never managed to fill a whole year. After I graduated, I claimed universal credit until I found a job abroad.

 

I noticed on my HMRC account that I am able to backpay contributions from 2012 until 2023, but I'm a little confused by the brochure when it comes to paying Class 2 or Class 3 contributions. Since I'm living and working abroad and spent my whole life in the UK pre-Germany, does that make me eligible to pay Class 2 contributions for 2019 onwards? And for the years where I lived in the UK (2012-2019), would I pay Class 3 contributions? Or would I be eligible to retroactively pay Class 2 contributions for all years?

 

I applied to the DRV already to recognise 2012-2019 as periods of study (Ausbildungszeiten), which they approved. If I were to backpay national insurance for those years, how does DRV factor that into its calculation of the German state pension?

 

If I were to pay Class 3 contributions for 2012-2019, that would amount to £6.500 (roughly). As far as I'm aware, this amount is tax deductible in Germany, so I would at least get some tax relief from the Finanzamt, but I'm not so sure if it's worth it. I would be much more willing to pay if it were Class 2 contributions, but I'm not even sure if I'm eligible to pay in the first place, considering I have never filled a full national insurance year.

[GaryC 378]

In terms of Class 2, I think you would need to see what HMRC say (this is why they require non-residents to send form CF83).  You would appear to meet criterion 1(a) "You’ve lived in the UK for a continuous 3-year period at any time before the period for which National Insurance contributions are to be paid" but it is not clear that you would meet criterion 2 "...immediately before going abroad, have been ordinarily an employed or self-employed earner in the UK".

 

Leaving that to one side, any years that are fillable from 2012 to 2019 (were you 16 in 2012?) would be Class 3.  However, it is possible that some of those years are part-filled by reason of your employments and that some are full by reason of NI credits through claiming UC.  You say you have access to your NI record.  What does it show?  How many years are full up to 2015/16, how many are empty and how many are part-filled.  And what is the the position for 2016/17 onwards in terms of filled, not filled and part-filled?  

 

What does your pension forecast show you would get based on your NI record to 5 April 2022, if you continue paying NI until 5 April before you reach state pension age (which tax year would that be?) and does it make reference to being able to improve your lot by paying those old years?

 

Although you are also in the transitional phase because you have an NI record that pre-dates 6 April 2016, it seems likely (given your age and lack of employment history before 2016/17) that you will actually need 35 full NI years to receive a full pension.  Those can be any 35 years from the tax year in which you turned 16 until the tax year that ends immediately before you reach pension age. 

 

The earlier you pay, the cheaper it will be because the price goes up by the same % as the state pension each year, but there is always a risk that you don't make it to pension age, so paying more, later, may be a wise decision...  You may also end up back in the UK at some point ... Personal choice.

 

In today's terms (2022/23 rates), each year you add to your NI record costs about £165 Class 2 or about £824 Class 3 and adds £275 per year to your pension, so, even without a tax deduction in Germany the investment is worthwhile.

 

As a next step, I would send a CF83 to HMRC, ticking box 25, not completing the direct debit details for now and adding a covering letter to say you are happy with Class 3 if you cannot have Class 2.  You could also give details of your work/non-work history before you left the UK, though they should be able to see that from your records anyway.  As long as HMRC has that before 31 July 2023 your options remain open and any years 2006/07 to 2016/17 remain open and available.  If you do not do that, they all go out of date and cannot be paid...2017/18 onwards remain in date for 6 years after the respective year.

 

The EU regulations on the coordination of social security systems require each country to do 2 calculations and to award you the higher amount as your pension.  The only way these impact on the UK system is to help you get past the minimum 10 years requirement, so whatever number of UK years you end up with, you will get a pension based on those years divided by 35 times the £max in the year of claim.

 

Germany will run through the full calculations:

1. an "innerstaatliche Berechnung" - the amount you would get based solely on your German contributions (Beiträge) and periods (Wartezeit).  This will include those study years you have had recognised by DRV.

 

2. a "zwischenstaatliche Berechnung" - a "theoretical amount" assuming all of your contribution periods were in Germany (but counting overlapping periods only once, and using averages for contribution amounts based on contributions in Germany).  This is then pro-rated based on your actual contribution periods in Germany, including those recognised study years.

 

The German rules work on months, where a single day in a month makes the month count.  The UK system actually works on weeks, though a week doesn't count unless the tax year to which it relates is full of weeks.  The outcome can be interesting in that if a UK year is not full but there are, say, 5 weeks of NI paid and those 5 weeks span 3 calendar months, the German system would recognise 3 months.  This is all set out in great detail in your Rentenauskunft, once you have asked DRV to produce it including your UK years.

 

If you are really interested in this stuff and suffer from insomnia, get you eyes around Homepage | Über- und zwischenstaatliches Recht, Auslandsrenten | Deutsche Rentenversicherung (deutsche-rentenversicherung.de) - down the PDF Studientext Nr. 30. The top of page 40 is interesting as it makes clear that the calculation under 2. above can be significantly higher than that under 1.

 

My gut feeling is that paying any partly-filled old years may be worth it, but otherwise paying as you go over the requisite number of years of your remaining working life may be the better option.  Who knows, you might end up back in the UK, paying mandatory NIC as an employee or self-employed...  Anyway, have a read of the above and we can then try to work out the options.

[Gambatte 925]

Very loosely related but maybe this is still the right place...

 

I have been paying voluntary class 2 National Insurance contribution since moving UK -> DE in 2013 and I want to continue. Pity my UK bank is closing my account. I called HMRC and asked how do I make the payment from my German account. They answered to send form CF83, and this is exactly what I'm doing right now.

But looking at form CF83, the form seems suited specifically for UK banks (it's of course written in English, and asks for sorts code and acc. number, whereas here in DE we have IBAN). It also asks my "current" UK address (last time I had a UK address was when I left, over 10yr ago). And it asks the UK address of my employer (guess what, my employer never had a UK address, and never will).

 

So I wonder if the answer I got, send form CF83, was correct. I'm doing it but I'd have a much better feeling if someone here says "yep, that's exactly what I did last year or whatever and it worked all good".

 

Anyone has done this recently?

Thanks,

 

Alberto

 

[snowingagain 5,354]

I think I did this once, but not recently.   INS13 Paying National Insurance contributions from abroad (hmrc.gov.uk)

 

[Gambatte 925]

@snowingagain

Thanks a lot. This worries me, it makes me suspect even more that perhaps the instructions I got are wrong. I will send CF83 anyway, worst case they will write back ...

Anyone else...?

[snowingagain 5,354]

Just now, Gambatte said:

@snowingagain

Thanks a lot. This worries me, it makes me suspect even more that perhaps the instructions I got are wrong. I will send CF83 anyway, worst case they will write back ...Anyone else...?

I understand completely!  There is some old UK gov stuff still online that is out of date.