National Insurance contributions and state pension

[people]

During this tax year I have made a major life change and moved from a job where I was a top-rate tax payer to one where I earn very little. This means that WEF from next month I am a non-tax payer and (I think) won't pay NI either. What does this mean for my pension entitlement? I have 23.5 years of contributions prior to this. Should I/can I make arrangements to pay the NI anyway?

I'm not in receipt of any benefits, except child benefit.

There's a link here to an HMRC page entitled Do You Need To Top Up Your NI Contributions? If you earn below a certain amount they won't be deducted from your wages. You have the option then to make voluntary contributions. You need 30 years contributions in total to qualify. HTH

Ah thank you, I looked at that site too! DS2 is 8, so it looks like I'll get credits until he's 12 anyway and then if nothing changes, have to make up another 3/4 years

are you self employed or working for a company?
If you are employed earning below the Lower earnings limit £102 per week you may need want to pay voluntary Class 3. If you are earning over £102 but below the primary contribution threshold £139 you will not pay NI but you will be credited for it.

If you are self employed you should consider paying the Class 2 contribution of £2.50 per week regardless of whether your earnings are at the payment threshold.

So what should you consider? NI can earn you the right to certain benefits and these are based on your payment record. However the biggest of those is the state pension. You now need only 30 years of NI payments (other benefits require more) to achieve a full pension. Depending on your age/financial situation/likelihood of future payments, I would judge if it is worth it to you.

Currently 1 year of voluntary payments will cost £655.20 per year and this buys you 1/30th of the state pension. This is very good value. You will have 6 years to make good any gaps in your contributions and after that you miss the chance.

Not convinced by voluntary contributions -depends on circumstances and there is also a minimum income for pensioners who rely on the state pension

Thanks yeah. I am employed, but only very part-time and my earnings will fall in the the £102-£139 bracket.

I thought the fact that I am getting child benefit for DS2 (8yo) meant that I get credits until he's 12 in any case?

Assuming that's so (and nothing else changes) I'll be around 4 years short of the 30 years. I'm 42, so have some time yet! Does that mean I either need to pay 4 years' voluntary contributions, or have a job where I pay NI for 4years between DS2 being 12 and my reaching age 65?

Should I need other benefits in the future, will that be affected by my having a break in contributions? (hadn't though of that )

Thanks yeah. I am employed, but only very part-time and my earnings will fall in the the £102-£139 bracket.

Then you are getting full credit for the Basic State Pension because it is the Lower Earnings Limit of £102 per week that counts, not the point at which you actually start paying NI. Note that the LEL goes up to £107pw from 6 April 2012, and of course if your employer is breaking the law by not completing PAYE returns for you then you won't get the credit.

I thought the fact that I am getting child benefit for DS2 (8yo) meant that I get credits until he's 12 in any case?

Yes you do, so for the next 4 years you will be OK anyway.

Assuming that's so (and nothing else changes) I'll be around 4 years short of the 30 years. I'm 42, so have some time yet! Does that mean I either need to pay 4 years' voluntary contributions, or have a job where I pay NI for 4years between DS2 being 12 and my reaching age 65?

If you keep earning over the LEL you will be fine and the rules could easily change over the next 18 years, so don't do anything yet.

Should I need other benefits in the future, will that be affected by my having a break in contributions? (hadn't though of that shock )

You do need to keep earning more than the Lower Earnings Limit to qualify for Contributory Benefits, but purchased years or voluntary contributions only count towards pension anyway.

When exactly is the cut off for the NI credit from CB?

Is it the last day before the DC turns 12 or is it tied to the September when the school year begins, and it's transition to secondary for most?