Forum Home → Discussion → Other benefit issues → Thread
Class 3 NI credits
I am trying to find out how exactly class 3 credits (e.g. from Carers Credit) help to protect State Pension entitlement. I found that it does fill gaps in the NI record, but I need more information on that please. What kind of length of gap are we talking about? Does it cover a 3 month gap, or a 9 month gap, or even a gap of 14 months? Would appreciate if someone could explain to me what the exact benefits of class 3 credits are. Or more specifically, what advantage does someone get from applying for Carers Credit (assuming they are entitled)?
Thank you for providing that link but the page doesn’t really answer my question. It just says “both Class 1 and Class 3 credits count towards the state pension”. Yes, but how do they count towards State Pension? That is my question, please.
I’m not sure your query is drafted as clearly as it needs to be.
A National Insurance (NI) credit is paid automatically for each week you receive Carer’s Allowance (class 1) or claim a Carer’s Credit (class 3) and this is the equivalent to paying one week’s NI contribution towards your State Pension entitlement.
That is a different thing to paying a voluntary class 3 NIC to try to fill in gaps from your past NI record, which it looks like what you’re actually asking here? See section 12.4 of our State Pension factsheet which tried to explain these rules.
There is also this on gov.uk Pay voluntary Class 3 National Insurance and this Moneyhelper article is also good Voluntary National Insurance contributions and the State Pension
You need to get a copy of the NI record to understand if there are gaps and for which financial years (as there are time limits for paying voluntary contributions) and also look at their overall finances (because an increase in State Penson might reduce other MTB’s in payment). Contact the Future Pension Centre for guidance.
Okay, I see. I’m not making myself clear enough. Let’s try again. What is the difference between class 1 (e.g. from Carers Allowance) and class 3 (e.g. from Carers Credit) National Insurance credits in how they count towards State Pension entitlement. They are clearly not the same (?). E.g. getting paid Carers Allowance for 35 years would entitle the carer to the maximum amount of State Pension. I strongly doubt this would be the same just getting Carers Credit for 35 years. So how are they different and what do class 3 credits do? Many thanks.
Class 3 credits will count towards the State Pension but you will need Class 1 credits to also qualify for New Style ESA and Contribution Based JSA. See https://www.gov.uk/national-insurance/what-national-insurance-is-for
Okay, I see. I’m not making myself clear enough. Let’s try again. What is the difference between class 1 (e.g. from Carers Allowance) and class 3 (e.g. from Carers Credit) National Insurance credits in how they count towards State Pension entitlement. They are clearly not the same (?). E.g. getting paid Carers Allowance for 35 years would entitle the carer to the maximum amount of State Pension. I strongly doubt this would be the same just getting Carers Credit for 35 years. So how are they different and what do class 3 credits do? Many thanks.
‘What are National Insurance credits?
National Insurance credits are a way of maintaining your National Insurance record when you are not making National Insurance contributions.
They help to build up ‘qualifying years’, which count towards your entitlement for basic state pension, and other benefits’.
‘There are two types of credits: Class 3 credits count towards your State Pension and bereavement benefits, and Class 1 covers these as well as other benefits (like Jobseeker’s Allowance or Employment Support Allowance).
Some credits are allocated to your record automatically, while you’ll need to apply for others’.
https://www.which.co.uk/money/tax/national-insurance/national-insurance-credits-ahULz7u8a4tS
So are you all saying there is no difference between class 1 and class 3 NI credits when just looking at State Pension entitlement? If there is one, which I believe, then please explain the difference with a focus on how class 3 credits support State Pension entitlement, please.
As others have written, there is no difference. What makes you think there is a difference?
You are entitled to a maximum amount of State Pension after making class 1 contributions/ getting class 1 credits for 35 years (equally to the minimum amount when doing that for 10 years). Class 1 contributions/ credits come from earnings (above threshold) or earnings replacement benefits (e.g. Carers Allowance) or Child Benefit. Correct?
Being on Universal Credit or Carers Credit gives class 3 NI credits. I now strongly doubt that someone on UC or Carers Credit for 35 years will be entitled to the maximum amount of State Pension. And if my doubt is justified, there must be a difference between class 1 and class 3 NI credits. Correct? Many thanks in advance.
Your first paragraph is correct, except that Child Benefit also only gives Class 3 credits.
Your second paragraph is wrong. 35 years of Class 3 credits would be sufficient to get the full state pension. Why do you “strongly doubt” it?
Okay, so the only difference between class 1 and class 3 credits is the benefits they entitle to.
If only looking at State Pension entitlement they do exactly the same, i.e. 35 years of class 1 credits = 35 years of class 3 credits?
Thanks
Correct.
Can buying back years enable someone to qualify for NS ESA?
Thank you
“Buying back years” is literally paying Class 3 NICs - so no, unfortunately it doesn’t help with ESA.