State Pension: deadline extended for making NI payments to cover missing years

[chas49]

Written ministerial statement here:

From April 2013, the Government permitted individuals to retrospectively build their April 2006 to April 2016 National Insurance (NICs) record through voluntary contributions as part of transitional arrangements introduced alongside the new State Pension. The deadline for voluntary contributions was set for 5 April 2023.

HMRC and DWP have experienced a recent surge in customer contact. To ensure customers do not miss out, the Government intends to extend the 5 April deadline to pay voluntary NICs to 31 July this year. This applies to years that would otherwise have been out of time to pay after 5 April, up to and including the 2016/17 tax year. All voluntary NICs payments will be accepted at the existing 2022/23 rates until the 31 July.

[AJC5001]

So how many eligible people will think "I don't need to pay by April 5th any more, I can leave the payment in the bank earning interest until 31st
July"

Thus moving the "surge" from now until July.

Would this prompt a further announcement about the action they are taking in July to extend the deadline by a further 3 months?

Adrian

[Tedx]

So if your in your 50's (say), State Pension due at 66, 3 years missing since 2006, planning working at least part time earning more than the lower earnings limit until 65 (ish), there's no need to buy the years because you'll get the required number of years anyway (35?).

Right?

Thanks

[mc2fool]

So if your in your 50's (say), State Pension due at 66, 3 years missing since 2006, planning working at least part time earning more than the lower earnings limit until 65 (ish), there's no need to buy the years because you'll get the required number of years anyway (35?).

Right?

Maybe, maybe not. Depends on how many you've got already, with how many were before and how many after 2016, what your COPE is and how much (if any) additional state pension you had on 5-Apr-2016.

And, as I keep on reiterating on this board, "35 years to get a full state pension" is only (necessarily) true for anyone getting their first year from 2016 onwards. For those who have some pre-2016 years some may get the full pension with less than 35, some may need more than 35, and some may never get enough (even if they have more than 35) before they reach state pension age.

I must say, I was looking forward to the 6th of April ... sigh.

[elkay]

I was rather disappointed to find that despite 45 full years, I require 2 further years to get a full state pension.

My COPE estimate is £96.49 pw,

I'm assuming that the COPE is the reason that 2 further years are required,

[zico]

Can anyone tell me if the government website is correct, and we really do need to make lump sum extra NI contributions in order to get the full maximum New State Pension?

I've been totally confused by this., because I assumed my 40 full year of NI contributions would give me the full state pension when I turned 66. (35 years is minimum number of full contributions to get a full pension).

It seems (underlined because I'm not really sure) that because my works pensions might have been contracted out, that for the New State Pension (which kicked in from 2016) I won't get the full £185 per week.
Although - the gov website (link below) tells me my Contracted Out Pension Equivalent (COPE) is £117 per week, and this will not affect my State Pension Forecast.

Link below is how to check your expected pension
https://www.gov.uk/check-state-pension

However (and slightly bizarrely) the above website tells me I'll be short of the maximum figure because although I've got 40 years of full contributions, but I also need to make NI contributions for the next 2 years, and there are 8 previous years when I didn't contribute enough.
Years are -
1977/78 - No NI contributions (when I was still at university)
1978/79 - Partial NI contributions (the year I started work)
2016/17 - Year I retired
2017/18 to 2021/22 - All retirement years.

I can (sort of) understand the point that because previously I might have been partially contracted out by my employer, I'd need to make a lump sum contribution to get the full New State Pension, even though the gov website seems to say that isn't a factor.

However, I don't really understand why I'm apparently expected to make NI payments every year after I retired and before I reach State Pension Age.
It seems a major change from 35 NI years gets you a full State Pension, to saying you need 48 NI years.

[ursaminortaur]

Can anyone tell me if the government website is correct, and we really do need to make lump sum extra NI contributions in order to get the full maximum New State Pension?

I've been totally confused by this., because I assumed my 40 full year of NI contributions would give me the full state pension when I turned 66. (35 years is minimum number of full contributions to get a full pension).

It seems (underlined because I'm not really sure) that because my works pensions might have been contracted out, that for the New State Pension (which kicked in from 2016) I won't get the full £185 per week.
Although - the gov website (link below) tells me my Contracted Out Pension Equivalent (COPE) is £117 per week, and this will not affect my State Pension Forecast.

Link below is how to check your expected pension
https://www.gov.uk/check-state-pension

However (and slightly bizarrely) the above website tells me I'll be short of the maximum figure because although I've got 40 years of full contributions, but I also need to make NI contributions for the next 2 years, and there are 8 previous years when I didn't contribute enough.
Years are -
1977/78 - No NI contributions (when I was still at university)
1978/79 - Partial NI contributions (the year I started work)
2016/17 - Year I retired
2017/18 to 2021/22 - All retirement years.

I can (sort of) understand the point that because previously I might have been partially contracted out by my employer, I'd need to make a lump sum contribution to get the full New State Pension, even though the gov website seems to say that isn't a factor.

However, I don't really understand why I'm apparently expected to make NI payments every year after I retired and before I reach State Pension Age.
It seems a major change from 35 NI years gets you a full State Pension, to saying you need 48 NI years.

In 2016 the government combined two existing state pensions to create the new state pension.
The first of these was the old basic state pension and the second was an earnings related state pension which overtime went by a few different names SERPS or S2P. However people had been allowed to contract out of this second pension so some people would have contributed to this second pension throughout their working life whilst others might have contributed to it only for a few years and others not at all.

When contracted out your private pension was supposed to provide you with a GMP (guaranteed minimum pension if it was a DB scheme) or protected pension ( if it was a DC scheme) which was at least as large as the SERPS/S2P pension you had contracted out of (most reckoned that you would usually get more by contracting out than staying in SERPS/S2P).

Thus when the government created the new state pension they needed to take this is into account They couldn't just give everyone who was contracted out the same new state pension as those who had stayed contracted in since those people would then end up getting more since their private pension included an element equivalent to SERPS/S2P. To deal with this they gave each person a starting amount in 2016 which was the larger of what they had earned under the old system or what they would have earned if the new system had always been in place (but with a deduction for all the years they were contracted out) - this meant that the were no worse off than they would have been under the old system (eg if you had always been contracted out then you would have got no SERPS/S2P pension and just received the basic old state pension that you had earned then the calculation of your 2016 starting amount would result in it being just the basic old state pension you had earned. But you wouldn't have lost out as an element of your private pension makes up for having been contracted out). However the government also allowed people to continue to pay NI contributions post 2016 even if they had reached the normal maximum number of NI years which allows those who were contracted out to increase their lower starting amount back up towards the full new state pension (which means that after making these extra NI payments they will be getting both the full new state pension and the private pension element which compensated for contracting out - making them better off than under the old system). The government also allowed payment of missed NI years going back to 2006, rather than the usual restriction on of only being able to pay for the last 6 years, so as to allow the 2016 starting amount to be increased that way - though whether that would work is more complicated since it only increases the amount of the old basic state pension you were entitled to rather than the SERPS/S2P element.

So with your contracted out private pension you should be no worse off than if the new state pension had not been.introduced in 2016 and if you make extra NI contributions may be better off.

[AF62]

So with your contracted out private pension you should be no worse off than if the new state pension had not been.introduced in 2016 and if you make extra NI contributions may be better off.

To add, this is a key point for those saying ‘I have more than 35 years of NI contributions so why am I not going to get a full New State Pension’.

For those contracted in to SERPS/S2P, their 2016 starting amount might have resulted in them being over the NSP amount, and thus for them any post 2016 NI contributions do not increase the amount of NSP they will receive at all.

However as explained in detail, those contracted out are no worse off with the change to the NSP AND their post-2016 NI contributions now increase their 2016 starting amount up to the NSP amount.

Thus for those who were contracted out and continued to pay NI contributions after 2016 through work or voluntarily it is a ‘win win’ - they get at least what they would have received in the past plus their post 2016 NI contributions increase that amount (and they get the benefit from the contracted out DB or DC pension).

Whereas for those contracted into SERPS/S2P with a 2016 starting point over the NSP, they are in a worse position as although they will get what they always would have got, their NI contributions after 2016 earn them nothing.

And so if someone sees that although they have made more than 35 years of NI contributions that they need to pay more to receive a full NSP then it is cause for celebration not despondency.

[Tedx]

So when I log on to Government Gateway it says

'You can get your State Pension on XXX (many years from now!)

'Your forecast is £185.15 a week'

£185.15 is the most you can get

You cannot improve your forecast any more.

That's it? I've done enough (under current rules) to get my maximum state pension?

[swill453]

So when I log on to Government Gateway it says

'You can get your State Pension on XXX (many years from now!)

'Your forecast is £185.15 a week'

£185.15 is the most you can get

You cannot improve your forecast any more.

That's it? I've done enough (under current rules) to get my maximum state pension?

That's right. Mine says the same.

Scott.

[mc2fool]

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

However (and slightly bizarrely) the above website tells me I'll be short of the maximum figure because although I've got 40 years of full contributions, but I also need to make NI contributions for the next 2 years, and there are 8 previous years when I didn't contribute enough.
Years are -
1977/78 - No NI contributions (when I was still at university)
1978/79 - Partial NI contributions (the year I started work)
2016/17 - Year I retired
2017/18 to 2021/22 - All retirement years.

I can (sort of) understand the point that because previously I might have been partially contracted out by my employer, I'd need to make a lump sum contribution to get the full New State Pension, even though the gov website seems to say that isn't a factor.

However, I don't really understand why I'm apparently expected to make NI payments every year after I retired and before I reach State Pension Age.
It seems a major change from 35 NI years gets you a full State Pension, to saying you need 48 NI years.

Folks above have, I think, explained the situation looking backwards to the transition to the new state pension clearly enough. As you (a) don't have any 2006/7-2015/6 gaps (it's too late to fill the 70s gaps) and anyway (b) obviously had more than 35 years on 5-Apr-2016, there is no practical purpose in running through your "starting amount" calculation, so I'll just focus on your post-2016 situation. If you're curious and would like to do the calculation yourself there's a recent example of one at viewtopic.php?p=572898#p572898.

It's not clear how you get to thinking you need 48 years from your description above and I suspect that the information you've seen may have confused you a little, so, three questions:

In the website you refer to it will say (below the big headline figure): "Estimate based on your National Insurance record up to 5 April 202X" and give a £ per week amount.

What is the "X" (hopefully "2")?
What is the £ per week amount?
In which tax year will you reach state pension age?

From that we can work out how many more years you actually need, whether you need to fill any since-2016 gaps, and the best strategy for getting you to a full new state pension.

[zico]

It's not clear how you get to thinking you need 48 years from your description above and I suspect that the information you've seen may have confused you a little, so, three questions:

In the website you refer to it will say (below the big headline figure): "Estimate based on your National Insurance record up to 5 April 202X" and give a £ per week amount.

What is the "X" (hopefully "2")?
What is the £ per week amount?
In which tax year will you reach state pension age?

From that we can work out how many more years you actually need, whether you need to fill any since-2016 gaps, and the best strategy for getting you to a full new state pension.

Many thanks to you and to ursaminotaur for your helpful replies.

To answer your questions -

Estimate based on NI record up to 5th April 2022 = £142.81
Forecast if I contribute until 5th April 2024 = £153.39
The most you can increase your forecast to = £185.13

I can claim my state pension from 4th July 2024.

When I use the State Pension Summary gov.uk page to show "View gaps in my NI contributions and cost of filling them" it gives me a figure for each year. I'm assuming that if I were to pay the amount required for each year, and also to pay some (as yet unknown) levels of NI in 22/23 and 23/24, then I'll get the £185.13 pension.

If the gov.uk calculation is accurate for me, it's a no-brainer to pay it, because the lump sum required is earned back after 3-4 years of higher pension rate.
My concern is whether the gov.uk site information is accurate, as I don't want to pay quite large lump sums if they won't make a difference to my state pension.

The reason I thought that 48 years of NI contributions are required is because the State Pension Summary tells me I have 40 years of NI contributions, but since 2016/17 I've not been paying NI contributions, and that I need to pay another 8 years (2016-2024) in order to get a full pension.

Tedx and swill453 - I suspect that if you're a lot younger, then your estimate assumes you'll have been paying the appropriate rate of NI for enough years to qualify for full pension. (However, that's just a guess from me).

[swill453]

Tedx and swill453 - I suspect that if you're a lot younger, then your estimate assumes you'll have been paying the appropriate rate of NI for enough years to qualify for full pension. (However, that's just a guess from me).

I retired at 53, 9 years ago. When I got my pension "starting amount" statement in 2016 I was a few pounds short of the maximum. Two years "self employment" sorted that at minimal cost.

Scott.

[mc2fool]

Estimate based on NI record up to 5th April 2022 = £142.81
Forecast if I contribute until 5th April 2024 = £153.39
The most you can increase your forecast to = £185.13

I can claim my state pension from 4th July 2024.

When I use the State Pension Summary gov.uk page to show "View gaps in my NI contributions and cost of filling them" it gives me a figure for each year. I'm assuming that if I were to pay the amount required for each year, and also to pay some (as yet unknown) levels of NI in 22/23 and 23/24, then I'll get the £185.13 pension.

If the gov.uk calculation is accurate for me, it's a no-brainer to pay it, because the lump sum required is earned back after 3-4 years of higher pension rate.
My concern is whether the gov.uk site information is accurate, as I don't want to pay quite large lump sums if they won't make a difference to my state pension.

The reason I thought that 48 years of NI contributions are required is because the State Pension Summary tells me I have 40 years of NI contributions, but since 2016/17 I've not been paying NI contributions, and that I need to pay another 8 years (2016-2024) in order to get a full pension.

Ok, yes, that now is clear and all makes sense. Sorry to tell you but you can't get the full new state pension -- that's £185.15/wk and the most you can get is, indeed, £185.13/wk, so you'll end up 2p/wk short of the full amount!

(The good news flip side of that is it means your final NI contribution will be fully utilised and there'll only the tiniest amount of left-over.)

Each additional 2016-onwards year gets an additional £185.15/35 = £5.29pw onto your pension (up to the max of £185.15 or the tax year before your state pension age, whichever comes first), and 8 * £5.29 = £42.32 which added onto your current £142.81 indeed comes to £185.13.

So, the question now is how best to make those contributions. The OP announcement notwithstanding I would recommend getting the 2016/17 NIC in ASAP, as with this last minute extension, well, I just think it'd be better to get it in before the original deadline, just to reduce the chances for cockups at their end.

And you should also get the 2020/21 one in before the 5th of April too, as class 3 voluntary NICs stay frozen in price for two years (at their original cost) and then go up to the current year's price. That means that up to this 5th of April the class 3 NIC for 2020/21 will cost you 52*£15.30 = £795.60 (ref) but as of the 6th of April will cost 52*£17.45 = £907.40 (ref).

Of course, you may want to just pay all of the 2016/17 to 2021/22 NICs in one go, but if you do decide to spread them out and keep earning a few % in your bank account in the interim, just remember that (a) you have 6 years to make up a year, (b) the cost goes up after 2 years and (c) the increase applied in the next tax year is by the prior September's CPI figure.

Now, that's all for past years, and if you thought those class 3 NICs were a "no brainer", well for 2022/23 and 2023/24 do I have a deal for you! You can declare yourself self employed, at some "toy" job, and pay voluntary class 2 NICs at just (currently) £163.80pa! See the second half of viewtopic.php?p=573065#p573065.

[mc2fool]

Estimate based on NI record up to 5th April 2022 = £142.81

BTW, I said, as there was no practical upshot, I wouldn't do your 2016 "starting amount" calculation, but actually your case is quite simple (a) 'cos you've not had any years since then and (b) 'cos of your large COPE it's self evident (trust me!) that your starting amount was based on your old state pension entitlement, it being the better of the two.

Now, the current full (30 years) old Basic State Pension, for folks under that scheme, is £141.85, which means that your 2016 starting amount was essentially the full 30 years BSP plus a smidgen, less than a £, of additional state pension for a pretty short (or low paid) period when you weren't contracted out. That seems consistent with what you said in your first post, but if that doesn't sound right ... well, I hope you've saved all your P60s......!

[zico]

Estimate based on NI record up to 5th April 2022 = £142.81

BTW, I said, as there was no practical upshot, I wouldn't do your 2016 "starting amount" calculation, but actually your case is quite simple (a) 'cos you've not had any years since then and (b) 'cos of your large COPE it's self evident (trust me!) that your starting amount was based on your old state pension entitlement, it being the better of the two.

Now, the current full (30 years) old Basic State Pension, for folks under that scheme, is £141.85, which means that your 2016 starting amount was essentially the full 30 years BSP plus a smidgen, less than a £, of additional state pension for a pretty short (or low paid) period when you weren't contracted out. That seems consistent with what you said in your first post, but if that doesn't sound right ... well, I hope you've saved all your P60s......!

Thanks for the advice, particularly on the self-employed wheeze!
I wondered whether it's Class 3 NIs I need to pay. I looked at govt guidance, and suppose I'm actually "Unemployed and not claiming benefits". Although I prefer to think of myself as retired.

Next question is how to find my Class 3 NI reference number, which is required to make a payment. Below is what the govt website says.

This is 18 characters and begins with 60. For example 603490017829614130. You’ll find it on your bill.

What bill?

To get your Class 3 NI ref no, doing an internet search, it seems you have to first contact DWP, to ensure you're picking the right option.
Then, you've got to contact HMRC to make the payment, and they need to confirm you have contacted DWP.
Apparently, it's very difficult to get through to DWP on the phones, and also very difficult to get through to HMRC.

It seems I can just send a cheque to HMRC - is that the best and simplest option? Especially as I now know what years I want to make NI contributions for.

[mc2fool]

Thanks for the advice, particularly on the self-employed wheeze!
I wondered whether it's Class 3 NIs I need to pay. I looked at govt guidance, and suppose I'm actually "Unemployed and not claiming benefits". Although I prefer to think of myself as retired.

Yes, that's basically what you fall under if (a) none of the others apply and (b) it's true! The rules don't care that you decided to voluntarily goof off umm retire umm become unemployed.

BTW, if you're going to register as self-employed you have to do so by the 5th of October in the 2nd year of your "business". So, if you're going to declare you started on 6-Apr-2022 (to get the 2022/23 year) then you must do so by 5-Oct-2023. You must also register for self-assessment, which is a small faff if you aren't doing SA already.

It seems I can just send a cheque to HMRC - is that the best and simplest option? Especially as I now know what years I want to make NI contributions for.

That's what I always did when I paid class 3 NICs (I never had a reference number. Class 2 is paid through self-assessment). As well as the cover letter noted here I always wrote my NI number and "Class 3 NICs for yyyy, yyyy ... & yyyy" on the back of the cheque too.

[AF62]

Now, that's all for past years, and if you thought those class 3 NICs were a "no brainer", well for 2022/23 and 2023/24 do I have a deal for you! You can declare yourself self employed, at some "toy" job, and pay voluntary class 2 NICs at just (currently) £163.80pa! See the second half of viewtopic.php?p=573065#p573065.

Or alternatively given the nature of this forum and the people here - viewtopic.php?f=49&t=32121

[mc2fool]

Now, that's all for past years, and if you thought those class 3 NICs were a "no brainer", well for 2022/23 and 2023/24 do I have a deal for you! You can declare yourself self employed, at some "toy" job, and pay voluntary class 2 NICs at just (currently) £163.80pa! See the second half of viewtopic.php?p=573065#p573065.

Or alternatively given the nature of this forum and the people here - viewtopic.php?f=49&t=32121

Which was daisy chained off of the post I linked to.

[ursaminortaur]

Thanks for the advice, particularly on the self-employed wheeze!
I wondered whether it's Class 3 NIs I need to pay. I looked at govt guidance, and suppose I'm actually "Unemployed and not claiming benefits". Although I prefer to think of myself as retired.

Yes, that's basically what you fall under if (a) none of the others apply and (b) it's true! The rules don't care that you decided to voluntarily goof off umm retire umm become unemployed.

BTW, if you're going to register as self-employed you have to do so by the 5th of October in the 2nd year of your "business". So, if you're going to declare you started on 6-Apr-2022 (to get the 2022/23 year) then you must do so by 5-Oct-2023. You must also register for self-assessment, which is a small faff if you aren't doing SA already.

It seems I can just send a cheque to HMRC - is that the best and simplest option? Especially as I now know what years I want to make NI contributions for.

That's what I always did when I paid class 3 NICs (I never had a reference number. Class 2 is paid through self-assessment). As well as the cover letter noted here I always wrote my NI number and "Class 3 NICs for yyyy, yyyy ... & yyyy" on the back of the cheque too.

They stopped you being able to pay by cheque because of COVID and I'm not sure whether they are allowing it again now.
If not then ring them up and explain that you want to pay NICs for missed years and they should give you a reference number and details of the account to pay into which you can do through a bank transfer. (I found that ringing up as early as possible pretty much when they opened allowed me to get through without too much of a problem when I did this a couple of years ago - ringing later in the day would result in you waiting for ever).