tdrinker

Although if you don't make any voluntary NI contributions you have the capital and the income from the resulting investment, if you make voluntary NI payments do you only have the income (pension).

For most people it's a good investment, and an excellent one if you pay Class 2.

durham_lad

That is why we said above that Class 3 is still an excellent investment within 10 years of starting your pension. 10 years of contributions is only going to get you £9k worth of investments whereas it will buy you £3k/year for life at the end of those 10 years.

Pulaski

Those are all valid factors to consider in a detailed investment analysis, however my observation is that the return on even Class 3 late in your career is so great that all the other factors are just noise. ... Also consider that the return is virtually risk-free, which outside of investing in short-dated US Treasuries, is impossible to achieve.

There are many ways to analyze and evaluate the investment value of voluntary NI contributions, often requiring several estimates and/or assumptions, but Class 3 contributions are effectively a deferred, indexed (subject to where you're living when you receive payments) annuity paying approximately 30%. For Class 2 it's approximately 150%!
That's long been my view, and also regarding the cost and payback issue - Class 2 is cheap as chips, and if I need the state pension I'll be glad to have it, but if my income in retirement is so high that state pension payments are taxed heavily or means tested so I get little or nothing, I won't be unduly concerned as it cost me so little anyway.

Lion in Winter

Oy. I need an Idiot's Guide to Pensions to read.

I did work in the UK prior to leaving, as did husband. In my case I had a short spell in a shoe shop, in an office, and a full year in a pub where we were paid in cash in little brown envelopes It was all legal and NI was paid. I am also paying NI now from the business, although have not yet had to file a return.

That's a lot of years I would have to make up, if allowed. I can't meet the six years of living in the UK recently though. I grew up in the UK, but that's another matter.

OH's existing contributions may well be a better bet but he can't meet the six year thing either. We'll have to look those up.

tdrinker

Agree with this.

If I need the pension, it'll be a godsend which will materially increase my quality of life. If I don't receive it (all), it's probably because it's means tested or heavily taxed due to having a good other income, or I've died. The benefit is much greater than the risk. Knowing I will get a pension brings peace of mind.

Pulaski

I was paid in cash too when I was a student, which probably ages me. . My employer at that time wouldn't put temporary staff on the direct credit system, so I used to take my pay packet directly to the Halifax branch to deposit it. On one occasion the wad of cash still had the staple through it that they put through the entire envelope and contents, and the teller asked me why it was stapled. When I told her that it was my pay, she said I could have my employer credit my account directly. She seemed a little surprised given the amount of cash she was holding (probably around £200) when I explained that I was only a temp and my employer wouldn't do direct transfers for temps.
There is no "six years living in the UK recently" rule. ... You could be living in the US, or elsewhere, and still be permitted to make voluntary contributions under the rules, either for Class 2 or Class 3.

tdrinker

You don't have to have been in the UK for 6 years. The 6 years is how many backlog years you can normally buy (temporarily until July, you can buy more which is why you need to contact HMRC soonest) and is unrelated to where you live.

I suggest you to compile your employment record and speak to HMRC soonest, so you find out what your options are and the cost. The phone lines are likely to become busier and the delay in answering them longer as the July deadline approaches, and you need to give yourself some spare time lest they ask for something you need time to dig out.

Lion in Winter

Thanks. I have no way to get any employment records that far back though. I got cash pay packets. HMRC knows about them though, since I can see I was credited for that time.

And yes, I see a lot of phone time in my future.

Lion in Winter

Thanks. I will have to call them although I suspect that I can't afford to do much really. OH may have more years than I in credit, so we'll check him too.

tdrinker

Getting credited by HMRC is a big plus, because it proves you were working before moving overseas, so should qualify for Class 2 provided you were also working after moving overseas. And you might get lucky, and get through without a long delay. But even if you have to hang on the phone for an hour or two, it'll be so worth it.

Pulaski

As someone else noted getting both of you up to 10 years should be your first priority if that is financially possible, as that will get you both 10/35ths of a pension. When it comes to the state pension 9/35ths = 0!

Glasgow Girl

Lion In Winter here is the simple guide as it applies to you:

If you are employed or self employed abroad, AND you lived in the UK for a continuous 3-year period at any time before the period for which voluntary National Insurance contributions are to be paid, AND immediately before going abroad you were ordinarily an employed or self-employed earner in the UK then you qualify for Class 2.

You were self employed in the US so you can check that box. It sounds like you lived in the UK for 3 years or more before leaving so you can check that box. If your work in the shoe shop/office/pub was shortly before you left the UK then you can probably check the box requiring that you earned in the Uk immediately before leaving as well. It does not matter how you were paid, cash, cheque, whatever, all that matters is that NI was paid.

So it probably hinges upon how long it was between that last time you paid NI in the UK from earnings and when you left the UK. The term ‘immediately” is used in the official description. That is vague but I believe it means if you paid NI in the year in which you the left the UK, possibly the prior year depending upon circumstances.

In any case they will let you know and it is what it is. But whether Class 2 or Class 3 it will be financially beneficial to make those contributions at least up to 10 years to get a portion of the state pension, and the more years the better.

Lion in Winter

Thank you, that's very kind.

I'll just pick a quiet work day (for me) and prepare to sit on hold.

Lion in Winter

Thanks both.

It can't be worse than calling the bank...

tht

Class 2 NIC “invoice” arrived today for 2022/23… sent with Malta Post PLC.. April 8th…so almost 1 month to arrive..

GBP163.80

Anyone have luck getting it to credit automatically? Have had to call every year.

Will send from a UK HSBC account….