Should I make voluntary contributions to national insurance?
 

Hi all, I grew up in England and went to university there, worked a few minor jobs over the summers. Immediately after uni I left for the US. I'm 42 now and wondering if I should be making voluntary contributions to national insurance? I did get a call from a government entity in 2009 asking if I wanted to make voluntary contributions but seeing as I was a struggling grad student at the time, I didn't have a dime to spare. Any thoughts on this from this insightful group? My wife mentioned a British expat friend of ours who has been dutifully making voluntary contributions and posed the question of whether I should be doing it too.

Re: Should I make voluntary contributions to national insurance?
 

Unless you have made three years of actual contributions (not deemed years) then you can't make voluntary contributions, so unless your "few minor jobs" are sufficient to accrue three years of contributions, then paying voluntary contributions isn't even an option for you.

It is probably worth giving the DWP pensions international desk a call just to make sure though, because if you are eligible for the Class 2 contribution rate it is the most insanely good "zero risk investment" ever imagined. Each year of Class 2 contributions is paid back after you retire in only about 7½ months of increased retirement pension.

Re: Should I make voluntary contributions to national insurance?
 

Or if you don’t want to hold on the phone and you have the details needed create a login here you can look at your record.

https://www.gov.uk/check-national-insurance-record

Open up a “Full year” if it has a GBP amount it from earnings.. it it has “Credits 52 or 53 weeks” it’s not from earnings.

As noted below if you qualify to make voluntary contributions it can be a great ROI… but even then you are limited to 6 years or so of back payments so you wound need to see if you will be able to make enough years and also look at US SS and see if you will get hit by WEP etc.

I was lucky to stumble on a thread here years ago and was able to get myself filled in on all but 3 years since I was 16.

Re: Should I make voluntary contributions to national insurance?
 

Thanks for all this info. I agree it seems unlikely but worth checking into. I'll get the account and take a look. Congrats on your contribution history, tht. Sometimes all this putzing around in online forums actually pays off!

Re: Should I make voluntary contributions to national insurance?
 

It can be longer than that, depending on age….but only until next year, and then that option goes away. https://www.gov.uk/voluntary-nationa...ions/deadlines

OP, I agree with the above, if you can make voluntary contributions it's an amazing investment and a bit of a no brainer tbh.

Re: Should I make voluntary contributions to national insurance?
 

I agree. I paid voluntary contributions for a several years, after not considering it for decades. (As OP indicates, when you’re younger or struggling financially, it’s often not an option.) Then, I delayed taking my British pension till I was 68. Now, my state pension is really a significant contribution to my income. And, it comes every four weeks - 13 payments every year! Much better than monthly!!

Re: Should I make voluntary contributions to national insurance?
 

Check both the NI contributions and “Your State Pension Summary” page

Looking at mine now I need 10 more years voluntary contributions . That will increase mine by about GBP 53 a week… that’s GBP 2750 a year for what is going to be about GBP 1600 total or so assuming the annual amount does not increase to much from the GBP 153 now… that means those extra 10 years of payments will be paid back in 7 or 8 months…

My own situation is probably a corner case but I have a handful of years that are full/max from paid employment in the UK for NI and SS in the US because I was commuting and paid the max NI and SS on the same income. I still don’t know how that will be viewed from a WEP perspective…

Re: Should I make voluntary contributions to national insurance?
 

You may not meet the criteria to make contributions if you haven't paid in for three years (if memory serves) so you'll need to check with them first what your status is, which can be done over the phone or on the website.

Keep in mind UK State pensions do not keep up with the real rate of inflation (I have written about this) - it might be a useful top up to existing retirement plans at best these days, but I wouldn't view the State pension as something to rely on if you're able to make your own plans - which at 42 you would still have two decades to grow your hard earned money assuming you retire post 60 like most people do.

N.

Re: Should I make voluntary contributions to national insurance?
 

We are also just looking into this. My husband will retire soon and will claim UK pension in August 2024 when he will be 66. Our latest forecast shows that his pension is worth about 90GBP per week and the maximum it could be is around $179 (we assumed by paying voluntary contributions). Am I right in thinking that the cost for these is 3.15 GBP per week or 163 pa? Even if he paid for an extra 25 years, that would only be 4075 gbp, to effectively double his pension. Something must be wrong with my math here? Can you pay all of this in one lump sum? He will only have about 21 years employment in the US, so will that further reduce his SS? I thought SS was only calculated on the years you worked anyway with zeros for the other years, so SS is already pro rated. Why would we have some kind of WEP liability? I can't made head nor tail of the information I've found on WEP. We will have pension income from UK, Canada, and US. (I am 4 years younger and also hoping to boost my pension with NI contributions - can I back pay some, and then pay the rest as I progress towards full retirement age?) We can't get our info on line bc we don't have the necessary documents to prove ID, so everything is done either by snail mail, or long phone calls :)

Re: Should I make voluntary contributions to national insurance?
 

since he is living in the USA he may qualify for the cheap rate of contributions, Class 2, in which case yes, it is as good as it seems. However, under normal circumstances you can only backpay the current year plus 6 earlier years so if he does it before April 6 next year he can pay at least 7 years. For more details see below.

https://www.gov.uk/voluntary-nationa...-contributions

You say that “we” will have pension income from multiple sources but when it comes to WEP it only applies to your husband’s pensions. If he has other pensions from work that did not pay into SS then those pensions will reduce his SS since he only has 21 years of contributions. The portion of his OAP due to his work contributions is counted as part of the WEP calculation, OAP income from voluntary contributions is not counted. It is easy to calculate what portion of his OAP was from earnings since a full statement from DWP will show this. OAP is a straight line calculation since full OAP comes from 35 years of contributions, each year of contributions being 1/35th of full OAP (currently around £179/week as you say).

Re: Should I make voluntary contributions to national insurance?
 

Yes, it really is that good! :thumbsup:At the moment (until March 2023, perhaps April 5, 2023?) it is possible, IIRC, to pay back to 2006, so as many as 17 years.

Re: Should I make voluntary contributions to national insurance?
 

Hopefully we will get this sorted while we can take advantage of the maximum number of years! I'm seeing conflicting numbers on this thread. Is the payback 7 or 8 months for one year of voluntary contributions, or is it actually for 10 years? 10 years seems more likely. 1,638 GBP? Perhaps it will make up for the reduced SS due to WEP I've just learned about :)

Is the increased pension also included in the WEP calculation, or excluded bc it was due to voluntary contributions? Is a contracted out SERPS pension included then?

We both have UK state pensions, and he also has Canadian CPP and OAS. I guess it's better to know now that these will affect our US SS rather than after we've retired.

Re: Should I make voluntary contributions to national insurance?
 

The amount you pay for one year of contributions, currently about £160, is repaid to you after retirement in about 7.5 months of increased pension - about £5/wk for 33 weeks = £160-ish.

I know that seems unbelievable, but that is how the maths works out. :nod:

Re: Should I make voluntary contributions to national insurance?
 

If his current OAP is £90/week and he doubles it to £180/week with voluntary contributions then only £90/week is used in the WEP calculation.

There is a maximum reduction in WEP of about $500/month and depending on his other foreign pensions he may hit that limit. From 20 years of SS contributions the amount of WEP declines until it is zero after 30 years. Each year he works after 20 years he will increase his SS benefit and decrease the WEP reduction.

Re: Should I make voluntary contributions to national insurance?
 

That makes it all the more reason to make the voluntary contributions! As it stands, he will have 22 years of substantial earnings. The WEP will reduce his monthly income by about $300 according to the SS calculator. Perhaps I'll have to find him a part time job! I understand the rationale, but it's still a bit of a bummer to learn this. Appreciate all the info!