Voluntary Contributions
If you have an incomplete National Insurance (NI) record, this can reduce the amount of state pension you receive at retirement. However, in some circumstances, you can make good any gaps by paying Voluntary (Class 3) NI contributions, thereby helping you qualify for, or improve your entitlement.
Voluntary contributions can be paid for any tax year in which you were over 16 and not liable to pay class 1 and/or 2 contributions. In some circumstances, you can also pay Voluntary contributions whilst living abroad. You cannot pay Voluntary contributions if you are a woman who has elected to pay the reduced rate contribution for the whole of a tax year.
The payment of Voluntary contributions helps towards:
- The basic state pension
- Widowed parent's allowance
- Bereavement payment
- Bereavement allowance
- Child's special allowance
To improve your basic state pension entitlement, Voluntary contributions need to be paid before the end of the sixth year tax following the one in which they were due.
Important Note
Missing NI Contributions – tax years 1996/7 to 2001/2
Who can benefit and how
This is mainly an issue affecting women (but where this says ‘woman’ it can also mean ‘man’).
- Woman who reached SPA before 24 October 2004,
and had no entitlement to any state pension (basic state pension/graduated retirement pension/SERPS)
- She realises that if she pays NICs for some of the years 1996/7 to 2001/2 she will now have paid at least the minimum qualifying years (1/4 of her ‘working life’) and be entitled to some pension.
- She will now be entitled to 25% (or more) of the basic state pension from the date she pays the NICs AND she will get the pension she was due from her SPA paid to her.
- Also, she does not have to actually pay anything, the Pension Service should just pay her the balance of what they owe her after deducting what she owes them.
- She will have until 5 April 2010 to claim the extra pension.
- Woman who reached SPA on/after 24 October 2004,
and had no entitlement to any state pension (basic state pension/graduated retirement pension/SERPS)
- She realises that if she pays NICs for some of the years 1996/7 to 2001/2 she will now have paid at least the minimum qualifying years (1/4 of her ‘working life’) and be entitled to some pension.
- She will now be entitled to 25% (or more) of the basic state pension from the date she pays the NICs AND she will get the pension she was due from her SPA paid to her.
- She will have to actually pay her Class 3 contributions before she can get any extra pension.
- She will have until 5 April 2009 to pay the extra contributions and claim the pension.
- Woman who reached SPA before 24 October 2004, and claimed some pension at SPA
- She realises she can get some extra pension because she has some missing years.
- She can boost her pension all the way back to her SPA by the extra portion she has bought.
- Also, she does not have to actually pay anything, the Pension Service should just pay her the balance of what they owe her after deducting what she owes them.
- Woman who reached SPA on/after 24 October 2004, and claimed some pension at SP
- She realises she can get some extra pension because she has some missing years.
- She can boost her pension all the way back to her SPA by the extra portion she has bought.
- She will have to actually pay her Class 3 contributions before she can get any extra pension.
- Woman who has reached SPA but has
not taken her pension (includes someone entitled only to graduated pension and/or to SERPS)
- She realises she can get some extra pension because she has some missing years.
- She cannot backdate her pension to her SPA. However, any additional entitlement will raise the level of her pension going forward, and mean that her deferred payments (interest or lump sum) will be higher as well.
- Special Considerations
- If she is married and is not going to be able to boost her pension beyond 60% of her husband’s entitlement she will only qualify for extra pension up to point she claimed on her husband’s record.
- Married Women’s stamp – you cannot pay voluntary contributions if at that time you were assessed as paying the reduced NI contribution.
nb.
Currently, the full rate of BSP is payable if you have qualifying years of about 90% of the years in your working life. This is currently 39 years for a woman and 44 years for a man.
Under a recent Government change, those reaching SPA on or after 6 April 2010 will only require 30 qualifying years to claim the full BSP. So, if you will reach your SPA on or after that date and already have or are expecting to have 30 qualifying years, it may not be in your best interests to pay voluntary NI contributions.
Q & As
- How do I find out if I should pay?
To decide whether paying Voluntary contributions will be of benefit you should first obtain a state pension forecast. This will tell you how much pension you can expect and whether the payment of Voluntary contributions will improve your entitlement.
A state pension forecast can be obtained by ringing 0845 3000168 or visiting the Pension Service website at www.thepensionservice.gov.uk.
See also our section on Home Responsibilities Protection.
- How much do Voluntary Contributions costs?
-
Voluntary contributions are calculated on a weekly flat rate. For the tax year 2008/09 the weekly rate is £8.10.
- What are the time limits?
There is a time limit of 6 years starting from the end of the tax year in which they were due. However, for the years 1996/97 to 2001/02 the time limit was extended to 5 April 2009.
- Can I pay by instalments?
Normally Class 3 voluntary contributions cannot be paid by instalments.
However, Voluntary contributions there are special arrangements for the tax year from 1996-1997 to 2001-2002, whereby you may be able to pay by instalments.To discuss, either ring 0845 915 5996, or write to:
HM Revenue & Customs
National Insurance Contributions Office
Benton Park View
Newcastle upon Tyne
NE98 1NG- If I change my mind, can I have a refund?
Not normally, the circumstances are very limited. Usually, only if you have not paid enough in a particular tax year for that year to count towards entitlement.
- I reach my SPA in 2009 but only have 32 years on my record. If I defer taking my pension until after 6 April 2010, will I be able to claim a full pension based on the new 30-year rule?
Unfortunately not. The new rules giving a full basic state pension based on only 30 qualifying years is only effective for those reaching SPA on or after 6 April 2010. As you will reach yours before then, you will be covered by the existing rules. You will still need 39 (for a female) or 44 (for a male) qualifying years for the full amount.
