There are various reasons as to why gaps may arise in an individual's national insurance contributions (NIC) record. For example, because that person has been on low earnings for several years, they have been living abroad, or because they have been unemployed and have not been claiming benefits.
In certain circumstances therefore, it may be possible, and beneficial, to pay voluntary Class 3 National Insurance Contributions (NICs) as this can safeguard entitlement to a future state retirement pension and certain other state benefits.
Broadly, voluntary contributions may be paid for any tax year in which the individual is aged over 16 and is:
An individual may get national insurance credits if there are unable to work, entitled to certain benefits, or in other specific circumstances. For example, being on an approved training course or attending jury service. In addition, someone who cares for a child, or a sick or disabled person, payment of Home Responsibilities Protection (HRP) may cover gaps in a NIC record.
Class 3 NICs are voluntary, so if a gap in contributions is discovered, the choice of whether to make good the shortfall is entirely up to the individual concerned. However, if the individual wishes to obtain full entitlement to benefits such as the state pension, contributions should be topped up in good time.
Voluntary contributions are payable at the rate of £14.25 per week for 2017/18. There are two main ways of paying Class 3 NICs:
Generally, the shortfall must be made up within six years. For example, Class 3 contributions for the 2011/12 year would need to be paid by 5 April 2018. Whilst the contributions do not need to be made until that date, the rate may increase, so it may be cheaper to do it sooner rather than later.
A self-employed individual may be exempt from paying Class 2 contributions because their income is below the small profits threshold (£6,025 for 2017/18), but he or she can currently pay voluntary Class 2 contributions to maintain their NIC record. These amounts are considerably cheaper than Class 3 contributions (the rate for 2017/18 is £2.85 per week) and they protect entitlement to more benefits. Class 2 NICs will be abolished from April 2018, so it may be worth checking NIC records before then.
In certain circumstances it is possible to pay up to an additional six years of voluntary Class 3 NICs to enhance entitlement to a basic state retirement pension. This is over and above those allowed under the usual time limits outlined above. See the GOV.uk website for further details.
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