UK State Pensions 6

Not this again

You may remember our fun series about UK state pensions, mainly focusing on voluntary contributions from abroad. If you are deemed eligible to do this it is currently one of the best investments I know of*

*assuming future governments do not drastically change the rules. Still, for the small amounts of money involved and the potential high returns, I personally think it is worth taking the risk.

Background

I learned about voluntary contributions to the UK state pension, finally understood what a great deal this currently is, and successfully applied to start paying them (at the more expensive Class Three level -still a good deal but not as good as the frankly too good to be true Class Two).

Everything was working, Direct Debits were coming out of my UK account regularly, and my pension contributions were being updated on the government website.

Then I applied to backpay the years I was missing, and after a lot of faffing around transferred the money to HMRC. Then nothing happened. I eventurally called them up and it turns out they had received the money but decided to just ignore it until I followed up. After a chat they promised to apply it to my account.

Then the Direct Debits stopped, and after over a year of phone calls and enquiries I finally found out that the lump sum backpayment had stopped the Direct Debits (because they assumed it was for payments going forwards? I have no idea).

I asked them several times to restart the Direct Debits, and sent in the forms twice, but nothing happened.

Until yesterday.

The letters

Yes, letters. As in three, all arriving at the same time. Ruh-roh.

Letter #1 (dated 5th September 2019):
Voluntary Class 3 National Insurance contributions

This letter is asking me to pay voluntary NI contributions by cheque. I have no idea where the numbers below came from. Maybe my maths is bad, but surely the total amount should be 60 (unless reduction means increase in HMRC-speak). Needless to say, there were no details on the reverse 😉

Letter #2 (dated 6th September 2019):
Confirmation of the set-up of your Direct Debit instruction

Seems legit, apart from the letter sent the day before asking me to pay by cheque 😉

Letter #3 (dated 10th September 2019):
Voluntary National Insurance contributions you can pay

These are the ones that weren’t paid because HMRC stopped taking my money.

What I am going to do

Well, I am going to see if they start taking the monthly payment from my UK bank by Direct Debit. If that happens, I will then wait and make sure those payments are showing up in my online record.

Clearly, trying to pay by cheque is a trap. If I attempt to do so it will screw things up again.

Backpaying is what caused the problem last time, so I am reluctant to try that again. I already have 14 years paid in, and need another 21 for a full State Pension. I’m guessing I’ll get there or very close to there by just paying in from now on. I won’t tempt fate (or the HMRC goblins) by trying to backpay this time.

Why bother

You may be wondering why I bothered persisting with this. Well, it is still an amazingly good deal. Even my more expensive Class 3 contributions are an incredible investment. If you are deemed eligible to make Class 2 contributions, it’s basically free money.

The UK State Pension is currently much more generous than the Japanese kokumin nenkin, and under current rules is increasing every year.

If you’re a UK expat and not currently paying into this, it is definitely a good idea to take a look at it (even if it may take a lot of back and forth to get things running smoothly).

12 Responses

  1. It’s possibly more efficient to defer the pension than to pay off a missed year (especially given the hassle).
    The pension payments are increased by 1% for every 9 weeks deferred (https://www.gov.uk/deferring-state-pension/what-you-get).
    My maths may be a bit off, but I worked out that a six-month deferral gains you slightly more (by a few pence) than paying off a missed year.

    1. Good point! I’m certainly not going to try my luck with this 😉

      Currently planning to defer all our pensions as much as possible.

  2. Hilarious in a way.

    They’ve not asked me to make my payment this year, despite me sending them three postal letters about it. I suspect it’s because I changed my address two years ago and they didn’t update it when I told them (both times).

    I’m going to wait until next year and send them another letter, and include copies of the old ones, by recorded delivery.

    I do start to wonder if they’ll also screw up the payment of the pension when you’re old and frail and don’t have the energy or ability to fight the incompetence.

    1. That’s a bit of a worry, but I suspect a lot of the problems we are seeing are knock on effects of Brexit and hopefully will be less pronounced in a few decades 😉

  3. Ben,
    I had a similar thing happen when I sent them a cheque to pay for missed years -i.e. the regular direct debit I had set up to pay the regular payment suddenly stopped. I rang them up to sort it out but actually they had already worked out what was going on and sure enough a large direct debit then went out (to cover the couple of months when no payment had been taken) and then from the following month it went back to regular payments. Thus what has happened is perhaps standard practice -i.e. when they receive a cheque they stop the direct debits until (perhaps another person in HMRC) then works out what is going on, or the
    person contacts them. I decided to pay all the missing years which were available since even doing so would still leave me a few years short of a full pension, and I was paying on the class 2 level, which I am always afraid whether that particular deal will be stopped at some time. I am obliged to the comment from Anthony above, I didn’t know about the deferral possibility, I may well use that.
    A few additional points / guidance :
    1) Check the letter they send you detailing the possible missing year payments you can make, ideally ring them up to double check.
    Why I say this is that I don’t think these letters are algorithmically generated, i.e. it is someone actually types them in. In my letter one of the years had a mistaken amount, I can see in your 10th Sep letter someone has typed two pound signs (not a problem in itself, but indicative that it was human prepared rather than automatically generated).
    2) Then when you send them a cheque, be sure to include a letter that clearly lists which years and which amounts you are paying in a table similar to the letter they send you (whose amounts you checked in step 1 above).
    I concluded my letter with a sentence saying something like ‘this cheque
    makes a full and complete payment for the years ……’
    3) Finally remember that you can check online what you status is , i.e. whether the payment really has been entered correctly on your record.

    1. Glad to know it’s not just me!

      I don’t think I am going to tempt fate again by trying to make the 14 months of backpayments.

      The whole thing makes me appreciate Japanese public servants more 😉

  4. The same thing just happened to my wife. She was two years short of being eligible for the maximum payout if we were to keep up the voluntary contributions (sure!). She called them and made the manual payment, and it still stopped the direct debit. However, we then called them back to ask why and they sorted it over the phone. They have just taken two payments this month and she’s now back on track. Fingers crossed.

      1. Same thing happened to me – when I paid the back payment they stopped my direct debit. A few phone calls later and I managed to get it sorted but it is astonishing how incompetent they can be.

        1. Huh. Took me over a year to get mine sorted, and I had to send in all the forms again… twice! Guess I was just unlucky 😉

  5. I paid voluntary contributions and now enjoying a full state pension which is a considerable amount. Goid investment indeed. However,, unless I’m wrong for overseas recipients the amount is frozen and increases paid to UK citizens will not be applied. I guess a Brexit disaster or high inflation could be problematic in that case….

    1. Yes, once you reach pensionable age (and either defer or start claiming your pension) the amount will be set for residents of Japan and no future increases will apply.

      This could be a problem over decades of claiming the pension. If you move back to the UK however, your pension will be reset to the latest amount and you will receive future increases as long as you are living there.