Paying voluntary Class 3 contributions
Voluntary National Insurance contributions can be paid to plug gaps in your contributions record.
To receive the full single-tier pension (which is payable to individuals who reach state pension age on or after 6 April 2016), an individual needs 35 qualifying years. Where a person does not have the requisite 35 qualifying years, they will receive a reduced state pension, as long as they have a minimum of 10 qualifying years. A person who has less than 10 qualifying years will not receive a single-tier state pension.
Where a person does not have the full 35 years, they may wish to pay voluntary contributions to boost their pension entitlement. People with some qualifying years, but less than 10, may want to make voluntary contributions to bring their contribution record up to the minimum of 10 years needed for a reduced pension.
Nature of Class 3 contributions
Class 3 National Insurance contributions are voluntary contributions. For 2018/19, Class 3 contributions are payable at a weekly rate of £14.65.
Checking your National Insurance record
Before making voluntary contributions, it is sensible to check your National Insurance record. This can be done online on the Gov.uk website at www.gov.uk/check-national-insurance-record. This will enable you to see what you have paid up to the start of the current tax year (so for 2017/18 and earlier years), any National Insurance credits you have received, and gaps in your record (i.e. years that are not qualifying years). Where there are gaps, you may want to consider paying voluntary contributions to plug the gap – however, if you already have 35 qualifying years or will do by the time you reach state pension age, it will not be worthwhile.
National Insurance credits
National Insurance credits are available in certain situations where people are not working and, therefore, not paying National Insurance credit. Credits are available to those looking for work, who are ill, sick or disabled, caring for someone or registered for child benefit for a child under the age of 12. Where credits are received for a tax year, it will not be possible (or necessary) to make voluntary contributions for that year.
Class 3 contributions must normally be paid within six years of the end of the tax year to which they relate. A later deadline applies in certain circumstances.
Class 2 rather than Class 3
A person whose income from self-employment is below the small profits threshold (£6,250 for 2018/19 and £6,025 for 2017/18) is eligible but not required to pay Class 2 contributions. At £2.95 per week for 2018/19, Class 2 contributions are significantly cheaper than Class 3 contributions. Where it is possible to pay Class 2 voluntarily, this is a much cheaper option than paying Class 3 – saving £608.40 for 2018/19.
However, Class 2 contributions are to be abolished from 6 April 2019, so 2018/19 is the last year for which this option is available.