Class 3A Voluntary National Insurance
29 January 2014
Last month in the Autumn Statement, it was announced that the government intend to introduce a scheme to allow pensioners to top up their Additional State Pension by paying a new class of voluntary NICs, Class 3A.
The scheme will open in October 2015 and will be available to all pensioners who reach State Pension age before the introduction of the single tier pension in April 2016.
Class 3A will give pensioners an option to top up their pension in a way that will protect them from inflation and offer protection to surviving spouses. In particular, it could help women, and those who have been self-employed, who tend to have low Additional Pension entitlement.
Further detail is to be published at a later date but the government has published the policy details known so far. Some of the key details include:
- Pricing, which will reflect the age an individual takes up class 3A. Prices will be lower for older pensioners because on average they will have a shorter life in retirement at the point they take up Class 3A. The government intends to publish a list showing prices of a unit by age.
- Class 3A will not replace the existing Class 3 Voluntary National Insurance Contributions, rather it will sit alongside.
- HMRC will handle applications and collect payments.
- The intention is to deliver these changes as far as possible within the existing National Insurance and benefit framework to keep administrative costs to a minimum.
- Primary legislation will be required to introduce the new arrangements and the government has tabled an amendment to the current Pensions Bill, which is being scrutinised by the House of Lords.
- The government intends to discuss the details of the policy and the detailed design of the scheme with key stakeholders before secondary legislation.
The nine page policy document is available to read through the link below.