I've now had a reply to my second letter to the Pension Service about what what happens to unused National Insurance Contributions - see What's happened to my eight years? on 10 March. I had put the matter to them thus:
Mrs A Dixon
FFC Specialist Team
International, Future & Specialist Pension Centre
The Pension Service 9
Mail Handling Site A
My National Insurance Number: XX XX XX XX X
Dear Mrs Dixon
National Insurance Contributions not needed for a full State Pension - what happens to them?
Thank you for your letter of 5 March, in response to mine of 15 February. Yes, I do see that you are not able to comment on pension changes that are only proposed and not yet law.
Staying therefore with current legislation, could you please still give me a clear answer on my particular case, where, as you say, I am entitled to a full State Pension from 6 November 2014 based on 30 qualifying years, but have in fact already built up 38 years. What is done with the 8 years not needed for the full State Pension?
I am not married, nor in a relationship, nor plan to be, and have no dependants. No bereavement benefits will be required. Nor do I think those 8 years are needed for any other kind of benefit that I could possibly now qualify for. So far as I can see, the 8 years are surplus. So: under present law, am I entitled to claim a refund of their current value? Or am I in some way ‘in credit’ for a certain amount that might at some future point let me buy additional benefits, if the law changes?
I think this is worth enquiring about. I see from my P60s that in the eight final full years of employment up to 2004/05 I paid over £17,000 in Employee Contributions. I don’t know what this would be currently worth, but clearly not a small amount. Surely you don’t simply retain it.
If your answer is that I cannot claim a refund, and there is no credit balance on hand, then please at least specify which statutory provision denies this to me. I can then take the matter up with a pension lobby group, or an MP who champions pension issues.
Miss Lucy Melford
And this is what was waiting for me when I returned from my holiday, in a letter dated 18 March:
Dear Miss Melford
About your correspondence
Thank you for your letter dated 11 March 2014.
National insurance (NI) contributions
Class 1 NI contributions must be paid up until you are State Pension age if you work for an employer and earn more than the employee's primary threshold.
NI contributions not only go towards your State pension, they also give you entitlement to certain benefits along with the National Health Service.
The State Pension is a 'pay as you go' scheme, so that today's contributors and taxpayers are paying for today's pensions and other benefits and those who paid contributions in the past were paying for the benefits and pensions of that time. In other words, individuals do not accumulate an entitlement to a pension fund, based on actual monies they have paid. Instead, the payment of contributions entitles people to the range of benefits which are available based upon the rules applicable at the time of the claim or when there is a relevant change of circumstances.
You would not be entitled to a refund of the 8 years of NI contributions paid.
Where to get more information
If you require more information about this letter you can contact our call centre on the above telephone number.
Mrs L Noble
Well, she didn't actually quote the underlying statutory provisions for possible further research, but I think this answer is clear enough, mainly because I now see that I was under a misapprehension. I thought I had a 'personal contributions account' with a definite built-up value to it - a personal benefits pot, if you like - but all I really had was a current entitlement based on rules that change all the time. Now that I understand that, I shan't take this further.
I had long suspected that NI Contributions weren't directly connected to anything actuarial - that is, related to life expectancy - but were simply general taxation under another name, albeit to create a fund that was going to be spent nationally on health and benefits for the entire population. The £17,000 or so that I personally paid in NI Contributions, but isn't needed for my State Pension, is therefore lost and gone. Unless, that is, I somehow fall on evil times and find myself having to apply for a welfare benefit of some kind - which, given the future level of my Civil Service Pension and the State Pension combined, is unlikely.
And yet I'm glad to have an answer like this: it's good to know how you stand, even if there's a sense that you've been diddled out of something.
So what now? The government has just published its proposals for purchasing extra State Pension in the six months from October 2015 with special Class 3A Contributions. This affects people like me, who start to receive their State Pension, under old rules, before the much better new replacement scheme begins. The detail (so far as yet decided) is at https://www.gov.uk/government/publications/additional-state-pension-top-up. It reveals that I would have to stump up £934 for every extra £1 per week of extra pension. So if I really had £17,000 by way of credit to set against the cost, I could get myself £17,000 divided by £934 = £18 per week more State Pension. That's £72 more every four weeks. Hmmm, that would be useful!
It's a pity that I haven't got an existing credit of £17,000 to throw at this. I certainly haven't got the real cash, and there's no way I can save enough cash up before October 2015. For me, as with many others no doubt, this is out of reach.