Topping Up My NICs

[chrissa1]

I've received a letter from the IR saying that I am £500 down on my NI contributions. I've received a small lump sum payment from a Teacher's Pension I earned from teaching in the 70's. My question is, would it be more beneficial to use some of this to top up my NICs so that I could receive a better Old Age Pension or would it be better to not break into this small nest egg?
Any advice would be gratefully received.

[ubasses]

general advice seen in the financial pages is that it is better to invest in your state pension as the return on the money for the average life in retirement in far greater than you will get elsewhere. Make sure though that you will not be likely to make your contributions up to 30 years before retirement though.

[factor-fiction]

Have HMRC said you are down just for a single year, or are they saying you haven't paid enough over your working life. If the former, it may not matter if you have already paid enough years' contributions over your working life.
You can apply for a pension forecast- this will tell you whether you'll get the full state pension

[chrissa1]

Over my working life factor30.
I don't really understand your post ubasses.

[Buenchico]

As long as you've got 30 'qualifying years' of National Insurance contributions, you'll get the full State Pension anyway.

You might also get at least some State Second Pension because (unless you went against the advice of all the teaching unions, and 'contracted out', you'll have paid into 'SERPS' if you were in teaching after 6 April 1978).

Chris

[chrissa1]

I left teaching in1979 to start my family. I can't remember what I did that far back. I was only 29 and the age of 60 didn't exist in my psyche then. Guess what I'm telling my children to do now?

[boxtops]

Chrissa, it's very easy to apply for a forecast, I had one a couple of weeks ago. Here's the link http://www.direct.gov.../DoItOnline/DG_189931

[chrissa1]

Thanks boxtops, but it says you can't get a forecast if you are widowed and I am.

[gingejbee]

Chrissa, you have misunderstood. You can still get a state pension forecast by post or phone but not on-line if you are a widow. It is well-worth doing this as it may be possible to use some of your late husband's NI contributions to boost your own pension entitlement.

[chrissa1]

Oh right ginge. Thanks

[boxtops]

Sorry, chrissa, I didn't realise - apologies.

[ubasses]

Sorry Chrissa I have only just come back on. Lots more information on here now and good suggestions. What I was trying to say was that if you had a chance of reaching 30 years contributions it would not be of benefit to pay some of your lump sum in. However if you put the £700 in a savings account at say 3% per annum you would get £21 before tax but if you buy a years national insurance contributions it can amount to approx an extra £107 per year for the rest of your life plus the annual increases. A much better rate of return. Hope this is a bit clearer for you.

[chrissa1]

Ah, that's starting to make sense ubasses. My thoughts are not about extra interest a sum on deposit could make but whether it was worth using some of it. I kinda like the idea of having this "war chest" safely tucked away but if it would add to my OAP then I would do it.

[Buenchico]

Chrissa1:
When you get a pension estimate it's worth remembering that, even if it's very low, your TOTAL weekly income after you become eligible for your State Pension (including any earnings or private income you might have) is guaranteed at a certain minimum level (currently £137.35) through Pension Credit:
http://www.direct.gov...ionCredit/DG_10018692

[themas]

Without knowing your financial circumstances it's not possible to say with any certainty whether paying this money is a good idea.

In principle, if you will have no income other than your state pension & have relatively little savings then - as Chris says - pension credit (a means tested benefit) will top your income up & increasing the size of your state pension a little is pretty pointless.

On the other hand, if your total income will be above the £137 pension credit limit it could be worthwhile making the payment.

I don't understand why IR have told you it is down over your working life. Unless they have radically changed the system recently, each year is treated separately & your extra payment would buy one (or more) year's contributions. You should ask IR to explain.

[chrissa1]

Themas, Hi. The letter says: Period from 9/1/11 to 9/4/11 = £31.20. Arrears owed prior to 9/1/11 = £508.80. Total amount due - £540.00

Non Payment can affect entitlement to Contributory Benefit sand your State Pension.

[themas]

I think they are probably referring to voluntary contributions for the 2010-11 tax year, but the figures do not reconcile properly with the published rate. This is £12.05 per week for Class 3 voluntary contributions - £626.60 for the year. However, they are quoting only £31.20 for the 13 weeks from 9.1.11. Do you know where this figure comes from? Were you working & paying either Class 1 (if an employee) or Class 2 (if self-employed) for these weeks?

I suggest you ring them & ask them to clarify what you will get if you make the payment. My guess is that it will be just that you will have one extra year (i.e. 10-11) added to your entitlement. But in any case don't pay until you have a pension forecast (as already suggested) because you may already have paid for the necessary 30 years.

[chrissa1]

Will do themas. As ever, thank you. Chrissa1.