Shortfall in your National Insurance accounts and the payment of voluntary National Insurance contributions

Contents

What is this letter?

We have sent you this letter as your National Insurance record shows that you have not paid or been credited with enough National Insurance contributions in the tax year(s) shown on the letter. The tax year(s) shown may not be qualifying years for benefit or basic State Pension purposes.

It gives you the opportunity to tell us if you think your record is wrong so that we can correct it.

The letter also shows you how much voluntary Class 3 contributions you would need to pay if you want the year(s) to count as qualifying for basic State Pension and bereavement benefit purposes.

Is this letter a demand for payment or a bill?

No. It is not a demand for payment or a bill. It is a letter notifying you that a particular tax year(s) does not qualify for benefit purposes, because not enough National Insurance contributions were paid or credits awarded. Whether you pay voluntary contributions to make this year qualifying is up to you.

How much are voluntary Class 3 National Insurance contributions?

You can find the latest information on our rates and allowances pages.

I have received a letter this year but what about previous tax years?

Each year we carry out an exercise like this so we would have contacted you at the time if previous years were not qualifying for benefit purposes.

I was in full-time employment for a period where no National Insurance contributions are recorded on my National Insurance account?

There may be several reasons why the letter has been sent to you, for example:

  • no contributions were deducted
  • the contributions have not been recorded on your National Insurance record
  • National Insurance contributions have been deducted by the employer but not sent to HM Revenue & Customs

Please either telephone us on 0845 915 5996 lines open Monday – Friday 8am – 8pm and Saturday 8am – 4pm, or write to us, or complete the ‘Additional Information’ that was enclosed with the letter and send it to:

HM Revenue & Customs
National Insurance Contributions Office
Benton Park View
Newcastle upon Tyne
NE98 1ZZ

If possible, send us a copy of your P60 for the relevant tax year.

I was receiving benefit for a period where no National Insurance contributions or Credits are recorded on my National Insurance account?

Please either telephone us on 0845 915 5996 lines open Monday – Friday 8am – 8pm and Saturday 8am – 4pm, or write to us, or complete the Additional Information that was enclosed with the letter and send it to:

HM Revenue & Customs
National Insurance Contributions Office
Benton Park View
Newcastle upon Tyne
NE98 1ZZ

Or if your query is about one of the following benefits:

  • Incapacity Benefit
  • Industrial Injuries , and only where this includes an Unemployability Supplement;
  • Jobseekers Allowance
  • Maternity Allowance
  • Severe Disablement Allowance.

Please contact the Jobcentre plus office.

I was not working because I was looking after a child or a sick or a disabled person?

If you reach State Pension age before 06/04/2010 and you have cared for a child or a sick or a disabled person or you were a registered Foster Carer during the year(s) covered by the letter, you may be entitled to Home Responsibilities Protection (HRP). HRP can reduce the number of qualifying years you need for a full basic State Pension by up to 50%. This means that you probably will not need to pay voluntary National Insurance contributions for years covered by HRP.

If you reach State Pension age on or after 06/04/2010, HRP will be replaced by a new system of weekly contribution credits from April 2010. Further information on the changes to HRP can be found on The Pension Service website under the “Parents and carers” section.

Any periods of HRP recorded on your NI account before 6 April 2010 for years that are not qualifying will be converted (whole tax years only) into Class 3 credits to make the year(s) qualifying (maximum of 22 years). The date of this conversion exercise has yet to be determined. As a result of this a decision has been made not to issue a letter about any shortfall to customers reaching state pension age on or after 6 April 2010 who have a period of HRP on their record as we cannot estimate their “qualifying years” accurately in advance of HRP conversion. If you should have received a shortfall letter for the 2005/06 year we will inform you of your position at a later date.

Was I covered by HRP for the year(s) on my letter?

If your letter is for the 2004/05 tax year or prior, the tax year(s) marked with an ‘*’ symbol will be covered by HRP.

If your letter is for the 2005/06 tax year and you reach State Pension age prior to 06/04/2010, the tax year marked with a ‘*’ symbol will be covered by HRP.

I cannot afford to pay this all at once. Can I pay by instalments?

Normally Class 3 voluntary contributions cannot be paid by instalments.

However if the shortfall is for a tax year from 1996-1997 to 2001-2002, special arrangements mean that you may be able to pay by instalments. To make arrangements either phone us on 0845 915 5996 lines open Monday – Friday 8am – 8pm and Saturday 8am – 4pm, or write to:

HM Revenue & Customs
National Insurance Contributions Office
Benton Park View
Newcastle upon Tyne
NE98 1ZZ

I would like to pay but not right now. How long do I have?

You can make back payments of Class 3 National Insurance contributions for previous years, but you need to pay before the end of the sixth tax year following the one in which they were due. If you pay after six years, any payments made will not count, for benefit purposes unless the payment is for one or more of the following tax years 1996/07 – 2001/02 when you have until:

  • 5 April 2009 to pay if you reached State Pension age on or after 24 October 2004
  • 5 April 2010 to pay if you reached State Pension age between 06 April 1998 and 24 October 2004.

No higher rate charge will apply for the tax years 1996/97 to 2001/02 if contributions are paid within these time limits.

For the tax years 2002-2003 onwards, the normal time limits for the payment of voluntary contributions apply. This means you must pay within six years of the end of the tax year in which voluntary contributions were due. The payment date for the:

  • 2002-2003 tax year is 5 April 2009
  • 2003-2004 tax year is 5 April 2010
  • 2004-2005 tax year is 5 April 2011
  • 2005-2006 tax year is 5 April 2012

If you want to pay voluntary contributions from 06/04/2002 – 05/04/2005, you should not delay as you may have to pay at a higher rate. The voluntary contribution payment rate can increase after the end of the second tax year following the tax year in which the voluntary contributions were due. If you want to pay after this date please get in touch with us first. This means if the shortfall/gap is for the 2004-2005 tax year the voluntary contribution rate changed from the 6 April 2007.

If you reach State Pension age on or after 06/04/2010 and want to pay voluntary contributions for the 2005-2006 tax year, it has been agreed that the higher rate charge will not be applied and contributions will be able to be paid at the original rate. The normal time limit for payment still applies.

I am retired now but I think I may have gaps in my National Insurance record. Will I get a letter?

If you reached State Pension age on or between 6 April 1998 and 24 October 2004, The Pension Service will have written to you if

  • you were not in receipt of a full basic State Pension in your own right, or
  • you were not in receipt of a basic State Pension; and you:
  • had gaps in your National Insurance record in any of the tax years 1996-1997 to 2001-2002; and
  • you would have benefited by paying National Insurance contributions in one or all of the deficient years above; and
  • you would have received a Deficiency letter under the existing rules.

If you retired after the 24 October 2004, and you are not in receipt of a full basic State Pension the Pension Service should have checked your National Insurance record at the time you made your claim to State Retirement Pension. If you could have benefited from paying Class 3 contributions they should have advised you. If you have any queries, please contact the Pension Service helpline on 0845 6060265.

What if I pay and then change my mind. Can I have my money back?

Not necessarily. The circumstances in which we can give you back your money are limited; there is no automatic right to refund. More information can be found at Refund of Voluntary Contributions pages.

Also, it is important that you consider carefully before deciding to pay. If you reach State Pension age before 06/04/2010, it would be beneficial to obtain a State Pension forecast to help you decide whether or not to pay. Please access The Pension Service website.

If you reach State Pension age on or after 06/04/2010, the Pensions reform changes introduced as part of the Pensions Act 2007 could impact your decision on whether to pay. You may wish to find out more about these changes at The Pensions Services website.

If I don’t pay, will I be taken to Court, or have a bad credit rating against me?

No. The letter is not a demand for payment, and no follow up action will be taken.

Should I pay the amount shown on the letter as I am due to retire within the next few months?

You should contact your local DWP office, or the Pension Service helpline on 0845 6060265 and they will be able to advise you whether to pay or not, and how it will affect your pension.

I have received a letter advising that I have a shortfall for the 2005-06 tax year. My employer has advised me that he has sent his 2005-06 Employer Annual Return to HMRC. Why are my contributions not recorded on my National Insurance account?

National Insurance details from some 2005-2006 employer returns are still in the process of being recorded on individual accounts. When your National Insurance contributions are recorded on your account HMRC, dependant on the earnings and NI recorded, will issue a letter to tell you that the 2005-06 tax year is now a qualifying year for benefit purposes. If you do not want to wait for this letter, or you are unsure about your NI position, you can send a copy of your 2005-2006 P60 to the address shown on the letter you have received and we will investigate.

I want to start paying Class 3 contributions, how do I do this?

If you would like to start paying voluntary contributions you can find further information on the HMRC website. The information on this link will help you decide whether or not you are entitled to pay. If you feel that you meet the criteria, please complete the application form under “How to pay Class 3 National Insurance contributions, which can also be found on the link provided.