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!

Re: Should I make voluntary contributions to national insurance?
 

Greetings all. I was wondering if anyone could comment on whether either making voluntary NI contributions or taking a UK state pension as an expat could in any way impact maintaining a non-UK domicile of choice (and thus avoiding any issues with UK inheritence taxes down the road)?

Re: Should I make voluntary contributions to national insurance?
 

Without knowing all your circumstances I would not know the significance of taking OAP but making voluntary contributions certainly won’t affect the situation. Have you walked yourself through the Domicile test?

https://www.gov.uk/government/public...-test-srt-rdr3

Re: Should I make voluntary contributions to national insurance?
 

Thanks for the reply. There is no question I am a non UK resident (I’ve lived in the US for over 30 years, only visiting the UK for vacations for less than 2 weeks every few years on average). I am also certain (as anyone can be) that I have clearly established a domicile of choice in the US, displacing my UK domicile of origin. I have spent the last few weeks researching the concepts of UK residency and domicile, and which I’ve learned are two distinctly different things, I think I’m going to start a new post on the subject to not hijack this one. I searched the forum for prior discussions ref. domicile, and there have been some related posts, but having learned what I have recently, I think it could be of interest (and concern) to any expats who think they are safe from UK inheritance tax because they’ve lived abroad for years. Cheers.

Re: Should I make voluntary contributions to national insurance?
 

Good idea to start a new thread, it should be very interesting.

Re: Should I make voluntary contributions to national insurance?
 

For those wondering how long a voluntary contribution for NICS takes to show on your online account….
I made a two year voluntary class three contribution on 27th April and it was finally posted on my account today 22nd August.
Therefore a little under four months without me phoning or requesting any updates.
31 years paid now ….. Almost done !!!!

Re: Should I make voluntary contributions to national insurance?
 

Have not called yet, but, I moved from the UK after my PhD (stipend, not taxed and no NI taken). I dont have any other income accruing the three years. Assume im fubar'd re: class 2?

Re: Should I make voluntary contributions to national insurance?
 

Or Class 3.

Sounds like it as I believe the minimum requirement for a persisting NI "account" is three years of actual (not deemed) contributions. .... Personally I'd still call to check/ confirm, straight from the horses mouth.

Re: Should I make voluntary contributions to national insurance?
 

Hello all,
This thread is really helpful. My situation; I have been abroad for 20 years, and I have been making Class 2 contributions for all but 9 of those years. I need another 16 years of contributions for full pension; conveniently, I have 16 years to go before I reach pension age and I am heading back to UK next year.

Firstly, is it worth paying some of those missing years as class 2 while I can? Won't I still have to pay class 3 contributions when I get back anyway? (If it's relevant, I probably won't be working as such; just living off investment and rental income. I assume I still have to pay NI and that it will be Class 3.) If I pay missing years now, won't I just end up paying for more than 35 years worth of NI?

Secondly, if it IS worth paying the missing years, how do you actually pay it? We have been in touch several times with HMRC and they keep telling us to fill in the form to apply for Class 2 payments. We are already paying them; we are trying to pay previous years, but they don't seem to acknowledge this and tell us how to do it. (And last time we sent the form, it took six months to get the official answer!) Like, do we need explicit permission to pay certain years or can we just send an appropriate payment to the account we currently make our Class 2 payments to and assume it will get credited to previous years?

And help hugely appreciated - this has been going on for ages now and it's driving us crazy!

Re: Should I make voluntary contributions to national insurance?
 

Our experience for my wife and I is that we applied for and received the letter stating exactly how many missing years we could pay and exactly how much that would cost. We then used that letter reference when paying. This was a few years ago for my wife after we were back in the UK, I applied by letter some years before that from the USA.

If you can pay Class 2 missing years it will be hundreds less per year than paying Class 3 so stick at it.

Re: Should I make voluntary contributions to national insurance?
 

NIs are only paid through earned income, or voluntary contributions. If you are not working when you return to the UK you won’t be making any NI contributions on rental income or investment income. Therefore you will need to make voluntary contributions to fill in the required 16 years. If you are sure you will not work again in the UK I would be inclined to fill in as many back years as I can because they could change the rules, or cost, of 2 voluntary NICs at any time. Class 2 NICs are an extremely generous benefit which they tried to eliminate a few years ago and with all the cost saving measures I would not be surprised to see them try that again, or limit who is eligible, perhaps by increasing the number of years required or cutting out those who live abroad. All speculation, but a bird in the hand and all that.

With regard to making the back payments, fill in form CF83 (even though you are already making payments) and check box 25, that should trigger them to get the ball moving on the back years. I would do it without delay. If any of your back years are pre 2016 that door closes in April 2023 and it likely will take them some time to process your application. I might also send them a separate letter asking them to identify which years you can backfill and how to do it, that should also trigger them to send you the official information. I think they do better in writing than with verbal communication because there is official documentation of all communication.

Re: Should I make voluntary contributions to national insurance?
 

Thanks - helpful to know that there is an 'official' letter which we need to secure.

Re: Should I make voluntary contributions to national insurance?
 

THanks you for this - really clear and helpful, especially with regard to NI payments. We'll fill in the form again and see what happens this time!

Re: Should I make voluntary contributions to national insurance?
 

How do you actually make the payments if you don't have access to a UK bank account? The direct debit information on the form doesn't seem to accommodate US bank info.

Re: Should I make voluntary contributions to national insurance?
 

You can open a Wise account from the USA denominated in GBP with a UK bank sort code and account number. Easy to transfer USD to that account to pay NI contributions.

Re: Should I make voluntary contributions to national insurance?
 

Excellent! I hadn't heard of that. Thanks!

Re: Should I make voluntary contributions to national insurance?
 

You may not need a Wise account, you might be able to send £ from your USA $ account. I can send a specified $ amount from my UK £ bank account, and the bank will deduct the appropriate £ from my account. I'm sure the exchange rate is worse than Wise would give, so it depends on how much is being transferred as to whether it makes a material difference.

Re: Should I make voluntary contributions to national insurance?
 

Thanks! We are currently awaiting further instructions. We gave HMRC a call this morning (got through to a representative really quickly). They confirmed they have received our forms, that the current turnaround time is about 16 weeks, and after that we should receive a letter telling us what we can pay and how much it will cost. We may need to make some future payments later, to catch up completely. At least Wise is an option if we need to pay by direct debit for future years.

Re: Should I make voluntary contributions to national insurance?
 

16 weeks to answer a letter. What can you say?

Re: Should I make voluntary contributions to national insurance?
 

lol! The wheels of government turn very slowly indeed!

Re: Should I make voluntary contributions to national insurance?
 

Which form do you use to make voluntary payments? I just received my pension forecast, currently 108.79. There seem to be several forms but NI38 seems to be the correct one. We are planning on visiting the UK in June but I don't want to wait that long as I reach 66 in August. Or is it better to do it via phone? I can't create an online account as they can't verify my address even though they have sent this forecast. Just read the title of page and its leaving the UK, so this isn't the correct form.

Re: Should I make voluntary contributions to national insurance?
 

NI38 is not a form, but CF38 attached to the end is:
https://assets.publishing.service.go...NI38_12_20.pdf

No idea if you are to late or meet the criteria listed on page 9 for class 2 or maybe class 3 NIC, but if you look at item 9 of CF38 it has the question in past tense:

“On what date did or will you leave the UK? DD MM YYYY”

I would be very surprised if you could do it by phone and it is likely to take months to process so you should do it ASAP.

Re: Should I make voluntary contributions to national insurance?
 

Thanks, Yes, I am straight on it!

Re: Should I make voluntary contributions to national insurance?
 

After seeing this thread I started looking into it myself. I have 9 years of ni contributions according to the website I have

• 9 years of full contributions
• 32 years to contribute before 5 April 2053
• 11 years when you did not contribute enough

I worked in the USA for about 4 years when I arrived but haven’t worked in the last 8 years and don’t plan on going back to work. I’m currently 37 years old.

looks like I would have to pay class 3 NI and it would be around $20k total. Am I right in thinking that would take about 3 years of retirement to break even? Around age 71? I’d like to live into my 70s but not sure about getting $20k on it.

Re: Should I make voluntary contributions to national insurance?
 

You need 10 years' contributions to get a pension, so it's worth paying for at least one year to reach this milestone and become eligible for a pro rata pension.

When calculating the payback period, remember the pension is taxable so calculate using the net (after tax) pension not the gross (before tax).

You might be able to pay 4 years at class 2, which is a bargain if it's applicable and you can go back that far - generally you can only go back 6 years to fill NI gaps, but temporarily people can (could?) go back further. The best option is to explain your work record to HMRC and ask what years you can pay for and at what cost, then decide.

Re: Should I make voluntary contributions to national insurance?
 

If you have to pay Class 3 then the payback period is about 3 1/2 years. You are unlikely to ever find an investment opportunity that provides the return that voluntary NI’s provide, coupled with relatively low risk. They are not risk free because the government could change the rules whenever they like, but they are unlikely to change the rules enough to make it a bad investment. Perhaps it becomes just good versus great in the future. Anyway you are investing about $1,000 per year at Class 3 rates, and if you invest in anything, or simply save that amount per year, you cannot do better then voluntary NI’s. You need 26 more years to get the full pension, and plenty of time to make those contributions, so why not start them, and if the rules change in a detrimental way then you can stop whenever you want to.