HMRC State Pension Contributions

My wife found out (Government Gateway) that although she has enough qualifying years for a full state pension she could make a payment to maximize her voluntary contributions. The payback would only take 4 to 5 years or so, a no brainer. She made the payment but every time she checked on the Government Gateway her payment had not been processed. After a couple of months she read that HMRC had a processing problem and she rang them and it was processed the next day.

Sorry for all this blurb but I thought that this financial no brainer may not widely known and if you make this payment you will probably need to call HMRC to get it processed.

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My wife maximised her state pension a long while back.
She did it in two stages (no idea why, something about an HMRC reset)
The first stage took 3 years, the second was just over 18 months.
But yes it’s really worthwhile and well worth looking into.

Im going through this process now, living overseas for the past 16 years, I can still contribute class 2 for 9 years between 2007 and 2017 - cost is about 150 pounds per year and payback is very short time frame- as you say no brainer
It takes a bit of to and fro between State pensions and HMRC to get it all sorted - took me about 6 months

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Would you mind clarifying, please? I thought the state pension was simply a matter of if you have full qualifying years, that gives you the full state pension. I knew that if someone had missed years, they could make additional contributions to top that up, which my wife has been doing, but I was totally unaware of being able to add additional contributions to get something over and above the standard full “new state pension” of £185pw. Is that what you are saying you can do? Or is this the additional state pension for men born before 1951 and women before 1953? If the latter, people are already over state pension age - are you saying that they can still pay in (I thought you couldn’t pay in any more once you reached state pension age)?

Buying additional years on UK state pension should only be done after first calling the UK pensions service on this number 0800 731 0469.

It can be a minefield and some can effectively throw away money if you buy the wrong years. My own projected state pension fell short of the full amount due to some years having been ‘contracted out’ in the past.

I was going to buy some of the missing years but a call to the pension service first told me not to contribute to years prior to 2016 ( after 2016 ‘new state pension kicked in, and a larger pension than those who retired at state pension age prior to this date). Although retired I am not due my state pension until next year. Have happily bought 6/7 years of annual contributions covering period after 2016.

Obviously everyone will have different circumstances so please call the pension service before you do anything else. Who knows it may help pay for an upgrade!

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On a similar note this may be of interest to those looking into their state pension.

It’s possible to top up any missed previous years NI contributions (although not in all circumstances) but I was reading the rules are changing and shortening how far you can go back. According to the article you can currently fill any contribution gaps by buying voluntary NI credits for years back to 2006/7 financial year and after April it will be limited to only six years.

The article was by Money Week if anyone wants to read any more about it.

Check your own position carefully though as @ChifChaf notes above while I was writing this topping up NI credits may not suit every situtaion

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Hi IB

It is in two parts. First, the number of NI contribution years to get a full state pension. This has changed but I think it is 35 years. Second, voluntary contributions (was called SERPS). Many people contracted out through their employer. If you go to the Government Gateway you can see what is your projected pension payment. It will show your maximum and what you are going to get. Even if you have the full NI years there can be an extra amount if you maximize the voluntary contributions. Eg It might say your maximum pension is say £185 pw but you will currently get £178. It might say if you pay a further £1600 as a lump sum you will get the extra £7pw. IE in my example a simple payback in just over 4 years. These are just very rough examples. Topping up to the maximum voluntary contributions will not suit everyone because of health or financial circumstances but I think it will be beneficial for most people.

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I would caution.

My wife had/has some years of missing contributions.

Some years do not contribute to state pension and DWP can tell you those. Therefore only pay for the years that do increase the pension.

The last payment we made last year showed up within a month of making the paymemt, however she was told she may have to ring after 10 weeks if they hadn’t shown up.

My mate thought he was short on contributions but did as you said and rang up.
He didn’t need to pay anything at all. :slightly_smiling_face:

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As I understand things, it’s no longer 35 years to become fully paid-up. I think this was part of the various changes made a few years back.

I’ve got to look at all of this within the next few weeks and assess what value I would get from buying some years (won’t expand why here).

Another way to skin the cat (if you don’t want to make up years), is to defer taking the pension. I have a friend who has a SIPP and he’s looking at all his options around IHT/the current LTA treatment at age 75, and how to manage his income tax profile at this time of life – obviously, a scenario so full of assumptions!!

Yeh, good luck with trying to get through to them - tried for a couple of hours yesterday. But yes, you are right

@RWC I am about to make a payment to complete a partially funded year (2020-21), and I called them yesterday. They said it would take up to 6 weeks for the payment to show up on the website.

The govt website on the new state pension says it’s 35 years required. V interesting to see that this issue arises for people who were contracted out and had their new state pension restricted as a result. I was contracted out for part of my history but also had state second pension for another part and the forecaster says for me I have entitlement to the full pension.

I think if full years are missing you have to pay voluntary class 3 contributions (more expensive) rather than class 2 as has been quoted further up the thread in the context of receipts being reduced due to contracting out

So complicated!

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I’ve been ‘contracted out’ for > 30 years (not that I knew what that meant when young!), and it’s showing I’m only entitled to ~60% of full level, with each year cited to cost ~£900.

As you say, it’s complicated and I don’t entirely trust HMRC’s 'sites for detailed guidance – and quite often I’ve found the staff unable to help with matters of detail.

I’m also negatively conditioned, as my late dad told me he did SERPS but died before he reached 65.

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There is definitely a problem at HMRC. With my wife’s additional voluntary contributions (not extra NI years as she had the full 35) she found out that unless you rang them the payments were not getting processed. After she rang the advisor said it would be processed after ‘manual intervention’. Possibly the same is happening with NI extra years contributions.

Thanks RWC, my figures for state pension shortfall is very similar to the one you quoted! Yes, it was due to having been contracted out of SERPS at some point. But there was nothing indicating that I could make it up – and although I deferred my state pension until I finished working, I am now taking it.

I think there is a 6 year time limit for topping up NI contributions.

IE. You can top up 2020, but not 2010.

Oh Lord.

Okay, let’s start at the beginning. If you want accurate advice on this you should not go to either the HMRC or gov.uk web sites. The former is convoluted. The latter is simplistic and veers between misleading, insufficiently detailed or just plain wrong. Similarly phone calls to either organisation are a waste of time.

Firstly they are sufficiently understaffed that the average wait time is something like 35 minutes for an average 8 minute call duration. These are averages. The general experience is that you either give up or are waiting around 65 minutes. The recommendation is to ring between 9:30am and midday. In my experience that can make a difference but it’s generally a small one.

Secondly, the majority of calls are now outsourced. The call handlers have a set number of scripts and if your query veers even slightly off script then you get what I call “call centre crack” as in “crack cocaine”. This is characterised by the inability to use the phrase “I am sorry. I do not know.” matched only by the equal desire to say “something” in order to appear credible and in order to record a stat saying you have answered the query no matter how much BS then comes out of your mouth. It’s really important to understand that these conversations can be incredibly detailed and credible… but absolute total BS.

In this context it’s important to note that neither HMRC nor DWP have an advice function i.e. technical staff with training on the law, guidance and current case law and an obligation or duty of care to provide accurate advice. Neither are advice services and if you are daft enough to rely upon anything said by them then it’s very much at your own risk.

The most important thing to note here is that you can top up to the basic SRP (State Retirement Pension) amount if you are short but if you are currently entitled to that amount then there is no further top up available. There was previously a scheme which opened in 2015 and closed in 2017 but at present the only gain in making voluntary contributions is if you have an actual deficit or if you think it likely you will need to rely upon other contribution based benefits for a period. There is now only contribution based JSA or ESA and, frankly, the circumstances in which the amount of money you’d need to pay voluntary contributions to get those potentially relatively short and very low entitlements means that the circumstances in which it would be worthwhile are very limited.

The number of instances I have come across in work over the years of people who have made voluntary contributions only to discover they have depleted their capital for zero gain beggars belief. To reiterate, this is worth it (possibly) if you have a shortfall but it is anything but a “no-brainer”. If you already have your years in and an entitlement to the maximum pension then you are essentially throwing money away.

You may well ask why neither HMRC nor DWP will stop you doing this. Essentially you’re giving them money so they won’t say “please don’t” but also they will take the view, without examining it in detail, that you could be filling in gaps in order to qualify for contribution based JSA or ESA. The third reason is of course that the staff are now so unqualified that they have neither the ability nor inclination to say “actually you simply don’t need to do that”. It’s a thoroughly dispiriting state of affairs.

If you think there is a reason to do this I strongly recommend you get a pension forecast; get a breakdown of your NI record (what you think it is can often be miles away from what records suggest it is) and then seek advice from Citizens Advice, your local authority welfare rights service or an independent advice centre such as an Unemployed Workers Centre or a Law Centre. Literally the only places likely to have the expertise you need to understand your options and make an informed decision.

@Fatcat you are correct re: the 6 year limit but there is an exception to this which allows gaps between 06 and 16 to be filled if you’re a man born after the 5th of April 1951 or the 5th of April 1953 if you’re a woman. Again though it may not be automatically the best thing to do so… get advice.

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Class 2 contributions are ok in some circumstances, such as if you live abroad.

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Getting a pension forecast is a good idea and do it in advance of retirement.

My brother in law was on Universal Credit for a number of years and should have received pension credits (NI credits against his state pension)

When we got his forecast those credits had not been made and so his forecast was short by 3 years.

It took several months trying to sort, it is now, but would have been harder had we not checked.

On a separate note, we were told by the NI helpline not to pay certain years of shortfall as it would not increase the pension amount for my wife. Which was helpful.

It can be difficult with HMRC and the DWP. My friend and I both delayed our state pensions by 5+ years and had taken out the maximum top up pension for those people getting to 65 before 6th April 2016. I calculated the amounts I was due and was very close to the eventual actual figure (DWP was a few pounds more than I was expecting).
This was after calling them because their original pension forecast had omitted the top up amount. I did receive the correct total state pension amount backdated to my requested start date. My friend applied a bit later than me and couldn’t get responses from DWP and for several months he was in limbo. I suggested he contacted his local MP about this. A day after contacting his MP the DWP rang him and his correct delayed pension and top up was paid shortly afterwards.