Voluntary national insurance

Paying the Government monies voluntarily may not be as foolish as you think!

Quite simply, if you are not working (employed or self employed) then you will not be paying national insurance. If you are not paying national insurance, then you may not be eligible for a full state pension when you reach your retirement age.

It is therefore worthwhile giving consideration to paying voluntary Class 3 national insurance.

You should be aware that if you are self employed your weekly Class 2 national insurance contributions count towards your state pension entitlement but the payment of Class 4 national insurance contributions (on profits) does not count towards any state benefits.

There have been instances where individuals who are self employed or a partner in a partnership have not been paying Class 2 national insurance so if you are self employed or a partner, you should ensure that you are paying Class 2 national insurance, which is usually paid monthly by direct debit.


How do I get a full state pension?

Under the current rules, you are required to pay national insurance for thirty (30) qualifying years to receive a full state pension at retirement.

However this only applies where you reach your “State Pension age” before 6 April 2016. If you are due to reach State Pension age after 6 April 2016, you will need thirty five (35) qualifying years.

If you only have 21 qualifying years when you reach State Pension age (assuming this is after 6 April 2016), then your pension entitlement is pro-rated so you will receive 3/5ths (21/35) of the full basic state pension.

Although you will need at least 10 qualifying years to get any state pension at all.


How do I check my State Pension age?

The Government have provided a simple calculator at https://www.gov.uk/calculate-state-pension which will help you understand when you will reach your state pension age.


How do I know how many qualifying years I have already?

If you apply for a state pension statement / forecast, then The Pension Service will advise of the number of qualifying years on your national insurance record.


How do I get a state pension statement or forecast?

You can apply for this using the link https://www.gov.uk/state-pension-statement or alternatively we can complete the form on your behalf.


What if I have enough qualifying years – can I stop paying national insurance?

Unfortunately not. You will only stop paying national insurance on earnings once you have reached state pension age.

Even then, Class 4 national insurance is still payable for the full tax year in which you reach state pension age.


Who might this apply to?

This could apply to:

1.       Housewives or househusbands.

2.       Expatriates.

3.       Some carers.

However, there are national insurance credits available in certain situations such as if you are a parent caring for child under 12 for who you claim child benefit.

Some further situations where credits may be available are listed at https://www.gov.uk/national-insurance-credits/eligibility but please bear in mind that not all of these are automatic.


How much is voluntary national insurance?

The current rate (for 2014/15) of Class 3 national insurance is £13.90 a week. This is usually subject to an annual increase.


I wish I’d know this earlier as I am receiving my state pension....

It was announced in the last Budget that those currently receiving state pension may be able to top up their state pension by paying a new voluntary Class 3A national insurance. This is expected to be available from October 2015.

This is only expected to be available for a limited time until April 2017.

Further details are available at https://www.gov.uk/state-pension-topup


If you have any queries on national insurance or any other financial issues, please do not hesitate to call our private client tax team.